Institutional demand for perpetual futures remains limited, and the products are largely viewed as speculative trading instruments rather than viable substitutes for traditional derivatives, according to a Monday report from Wall Street bank JPMorgan.
Based on conversations with clients and market participants, the bank said institutional interest in perpetuals has been muted. While the contracts offer 24/7 trading and eliminate futures turnover costs, most activity is driven by traders seeking leveraged directional exposure rather than producers, consumers or other participants hedging underlying market risk.
“Our due diligence within JP Morgan suggests there is no or limited institutional demand that our desks are seeing,” the bank’s analysts said in Monday’s report.
“The consensus view appears to be that the criminal activity is more like speculative use cases by traders than hedging by producers/consumers or those actors with real exposure to the underlying,” the analysts added.
The report argues that perpetual securities offer few additional benefits over legacy derivatives for institutional investors. On-chain perpetuals are unlikely to appeal to US institutions because they lack traditional compensation protections, while off-chain products reduce the risk of reversal but retain other structural drawbacks.
