JPMorgan sees limited institutional demand for perpetual futures

Institutional demand for perpetual futures remains limited, with the products largely viewed as speculative trading instruments rather than viable replacements for traditional derivatives, according to a Monday report by 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 roll 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 J.P. Morgan suggests that there is no/limited institutional demand that our desks are seeing," the bank's analysts said in the Monday report

"The consensus opinion seems to be that perps activity is more akin to speculative use cases by traders versus hedging by producers/consumers or those players with real exposure to the underlying," the analysts added.

The report argued that perpetuals offer few incremental benefits over legacy derivatives for institutional investors. On-chain perpetuals are unlikely to appeal to U.S. institutions because they lack traditional clearing protections, while off-chain products reduce roll risk but retain other structural drawbacks.

Perpetual futures, or "perps," have become the dominant product in crypto derivatives markets because they allow traders to take leveraged long or short positions without an expiration date.

Instead of settling on a fixed date like traditional futures, perpetuals use a funding-rate mechanism to keep contract prices aligned with the underlying spot market.

The products account for roughly 90% of crypto derivatives trading and often generate significantly more volume than spot markets, making them a key driver of price discovery and market liquidity.

The bank also highlighted several features it believes limit institutional adoption of perps, including unbounded basis risk, the absence of a forward term structure and, in many cases, a lack of physical delivery. Those characteristics make perpetuals less useful for commercial hedgers and benchmarked asset managers that require contracts tied closely to regulated indexes and forward pricing curves.

The report also pointed to concentration within offshore perpetual markets as another obstacle. Citing public Hyperliquid data, the bank said trading activity is dominated by a relatively small number of large participants, with roughly half of perpetuals volume funded by just 12 wallets. The concentration raises questions about market depth and the products' ability to support broader institutional adoption.