Crisis and Revival of Perpetual Swaps according to BitMex

The year 2025 will be remembered as the year when the crypto perpetual swaps market underwent its deepest structural crisis, marking a pivotal turning point for the entire digital derivatives sector.

The latest “State of Crypto Perpetual Swaps 2025” report by BitMEX provides a detailed analysis of twelve months dominated by liquidation cascades, a collapse in funding rates, a crisis of confidence, and profound transformations in the business models of trading platforms. A period that exposed systemic vulnerabilities and redefined the rules of the game, separating truly resilient markets from those destined to succumb.

The October ADL Crisis: A Structural Failure, Not a Price Issue

The October 11 Crash and the End of Delta-Neutral Strategies

The true turning point of 2025 was the crash on October 11, which triggered a record-breaking liquidation cascade: approximately 20 billion dollars were wiped out in a matter of hours, marking the largest wave of liquidations in the history of cryptocurrencies. Unlike previous crashes, which primarily affected retail traders, this time the highest price was paid by professional market makers.

The Auto-Deleveraging (ADL) mechanism, designed to protect the system, instead triggered a devastating domino effect: delta-neutral strategies—historically considered safe—were dismantled by the platforms’ own risk engines. Market makers, stripped of their short hedges, found themselves exposed to free-falling spot positions, forced to withdraw liquidity and leaving the order books at their thinnest levels since 2022.

Systemic Implications and Liquidity Withdrawal

This crisis has undermined confidence in the risk management infrastructures of exchanges, forcing major liquidity providers to drastically scale back their presence. The result? A suddenly illiquid market, where order depth has plummeted to historic lows, calling into question the very solidity of trading platforms.

The Saturation of Arbitrage on Funding Rates: The End of the Easy Returns Era

From Ethena’s Gold to Yield Compression

If 2024 witnessed the rise of products like Ethena (USDe), capable of turning arbitrage on funding rates into a goldmine of double-digit returns, 2025 marked the end of this era. Institutional adoption and the launch of native margined assets by major exchanges – such as Binance’s BFUSD and its clones – have saturated the market with automated short positions.

The supply of shorts has far exceeded the organic demand for longs, compressing the funding rates well below historical levels. For the first time in a bull cycle, yields have steadily fallen below 0.01% every 8 hours (approximately 11% APY), reaching as low as 4% mid-year, often even lower than U.S. Treasury Bills.

The End of “Free Money” and the New Competition

The most evident consequence has been the disappearance of double-digit passive returns on stablecoins: arbitrage has been “closed” by the massive participation of institutional investors and integration at the exchange level. The crypto derivatives market has thus become more efficient, but also much more competitive and less generous for those seeking easy profits.

Crisis of Trust and Predatory Models: Where and How Trading Matters

The Rift Between Transparent Exchanges and Predatory B-Books

The year 2025 also highlighted a clear divide between exchanges operating with transparent matching and those adopting so-called B-Book models. Several operators invoked “abnormal trading” clauses to cancel profitable trades, effectively confiscating users’ gains. Instances of perp squeeze on low-liquidity assets demonstrated how some platforms directly profit from traders’ losses.

In this scenario, transparency and fairness in matching mechanisms have become fundamental distinguishing elements. More sophisticated traders have begun to favor peer-to-peer venues where the risk of manipulation is minimized.

Rise of Perp DEX and New Vulnerabilities

Decentralization: Unprecedented Opportunities and Risks

The growth of decentralized perpetual exchanges (Perp DEX) has been one of the most intriguing trends of the year. However, increased transparency has introduced new attack vectors: the public visibility of liquidation levels has enabled targeted attacks, especially on pre-TGE tokens with weak oracles. Several incidents have demonstrated that decentralization alone does not eliminate platform risks; robust accountability and risk controls are still essential.

Innovation in Derivatives: Equity Perps and Trading on Funding Rates

Convergence between Crypto and Traditional Markets

With the decline of traditional strategies, traders have shifted their focus to new derivative products. Equity perpetuals have enabled 24/7 trading of U.S. stocks like Nvidia and Tesla, while the funding rates themselves have become tradable instruments. These innovations mark a growing convergence between the crypto world and the traditional financial sector, with derivative infrastructures increasingly serving both ecosystems.

The Future of Crypto Derivatives: Integrity and Resilience as New Standards

The year 2025 marked a maturation point for the crypto derivatives market. Transparency, fairness, and resilient infrastructures are no longer optional but essential prerequisites for survival and growth. With the end of speculative excesses, only exchanges that prioritize market integrity will be able to lead the next phase of the sector’s evolution.

The BitMEX report, based on proprietary data and in-depth analysis of both centralized and decentralized market dynamics, provides a valuable compass for navigating a rapidly evolving landscape, where trust and the robustness of platforms will become increasingly decisive.