What Are Perpetual Futures?
Perpetual futures (“perps”) are one of the most widely traded derivatives in the digital asset markets. Unlike traditional futures contracts, they do not expire. Instead, they use a funding rate mechanism, a periodic payment between longs and shorts, to keep contract prices anchored to the spot market.
This innovation, first introduced by BitMEX in 2016, now drives billions in daily trading volume across exchanges like Binance, Bybit, OKX, and CME. For hedge fund managers, perpetual futures offer deep liquidity, 24/7 trading, and new avenues for strategy deployment.
Perpetuals allow funds holding crypto assets to hedge downside risk without selling their underlying positions. For example, a long BTC spot allocation can be hedged by shorting BTC perpetual futures, locking in dollar value and reducing volatility exposure.
The funding rate mechanism creates a predictable flow of payments between longs and shorts. Hedge funds can capture basis spreads by arbitraging differences between spot, futures, and perps across venues. These market-neutral trades can generate consistent returns independent of price direction.
Perpetual futures enable managers to take leveraged positions without tying up large amounts of collateral. This improves capital efficiency and makes it easier to implement high-frequency or relative-value strategies.
Price and funding rate discrepancies across exchanges create opportunities for arbitrage. Managers with robust execution infrastructure can capture spreads across global venues, a strategy well-suited for multi-exchange trading or prime broker integration.
With CME Group offering Bitcoin and Ethereum perpetual contracts regulated in the U.S., institutional allocators increasingly recognize perps as part of a credible trading toolkit. This alignment with traditional futures markets strengthens their role in regulated hedge fund portfolios.
While the opportunities are significant, hedge fund managers must also address:
Allocators expect robust risk management frameworks, clear counterparty due diligence, and independent fund administration to monitor exposures.
Launching a crypto hedge fund with CV5 Capital gives managers the ability to trade perpetual futures in an institutional-grade framework. Through our Cayman fund platform, we provide:
Perpetual futures are no longer niche instruments—they are at the center of digital asset trading. For hedge fund managers, they open up opportunities in hedging, arbitrage, leverage, and cross-exchange strategies.
By combining perpetual futures with a Cayman-regulated fund structure, managers can scale strategies that meet both institutional standards and investor appetite for digital asset exposure.
Contact CV5 Capital at [email protected] to learn how we can help you launch or expand your Cayman crypto hedge fund to capture the opportunities in perpetual futures.