Author: Danny Source: X, @agintender The 2025 crypto bull market may have arrived, but the way it roars will be very different from previous ones. If you're still focusing on spot trading volume to gauge market enthusiasm, you're probably only seeing the tip of the iceberg. The true protagonist of this bull market is perpetual swaps—a massive, highly leveraged PVP arena driven by intense competition between long and short positions. Liquidity, narratives, and wealth effects here are defining the entire market like never before. This article explores why liquidity is unprecedentedly concentrated in the futures market, using a numerical example to reveal how "short margin calls" become rocket fuel, driving the core mechanism of spiraling asset prices. Disclaimer: This article is entirely fabricated. Any resemblance is purely coincidental.
Entertainment Disclaimer: This is just for fun, don't take it too seriously
Argumentative Disclaimer: If you think I'm wrong, then you're right.
I. Data Perspective: When the Tail Starts to Wag the Dog
Phenomenon is the best proof of theory. Let's first use data to verify a startling fact: perpetual swap trading volume has completely crushed the spot market.
Trading Volume Comparison: According to data from data platforms such as TokenInsight in the second quarter of 2025, the trading volume of crypto derivatives (primarily perpetual swaps) on mainstream exchanges is typically 10 to 15 times that of spot trading volume. This means that when the spot market has a $10 billion trading volume, the futures market's trading volume may have already reached $100 billion to $150 billion. Open Interest: Observing the open interest of mainstream cryptocurrencies like BTC and ETH, as well as popular new coins, we see that their size far exceeds the spot inventory of these currencies on exchanges. This indicates that the vast majority of market participants' risk exposure and capital are deployed in derivatives. Funding Rate: For much of this bull market, funding rates have remained positive and high. This has attracted a large number of "arbitrageurs" who seek to earn stable funding rates by shorting perpetual swaps and buying an equal amount of spot contracts. This further drains liquidity from the spot market and locks it up in hedging positions. Conclusion: The data clearly demonstrates a structural shift in market capital, attention, and focus. Perpetual swaps are no longer a subsidiary of spot trading; instead, they have become the core battlefield driving short-term price fluctuations. The market has shifted from "spot trading driving contracts" to "contract trading driving spot trading." "At this moment, spot trading has become a 'subordinate.'" II. Core Mechanism Revealed: How did the "Short Margin Crash Rocket" launch? The market's "strange phenomenon"—price increases—did not originate from spot buying, but were driven by clearing houses on the contract side. This is the core mechanism behind this "Perps bull market." Let's use a simplified numerical example to illustrate this process. Case Study: New Coin "RocketCoin" (RKT) Background: RKT is a hot new project with an extremely low initial circulation of only 1 million (1/10) RKT. (Assuming a total circulation of 10 million) RKT's U-margined perpetual contract has been launched on an exchange. Current Spot Price: $10. Due to the consensus that "new coins should be shorted," the contract market has accumulated a large number of short positions. Assume there's $10 million worth of short positions (300,000 RKT) waiting to be liquidated between $11 and $15. Launch Process: Initial Ignition: A whale or project owner invests a small amount of capital in the spot market, for example, $200,000 to buy 20,000 RKT, forcing the spot price from $10 to $11. Because the spot market has low liquidity (a shallow market cap), the cost of this price manipulation is extremely low. Stage 1 Rocket Drops (First Round of Liquidations): When the RKT price hits $11, the first short positions with stop-loss orders set at this price are forcibly liquidated (i.e., liquidated). Assume these positions are worth $1 million.
Liquidation Mechanism: The operation of "closing a short position" is "buying". The liquidation engine needs to immediately purchase $1 million worth of RKT contracts in the market.
Market Maker Hedging: When the market maker providing liquidity to the liquidation engine sells the contract, in order to avoid its own naked short risk, it will immediately buy an equal amount of RKT spot in the spot market to hedge.
Price Feedback: This spot buy order from the market maker further pushes up the already thin spot price, for example, from 11 to 12.
Second-stage rocket ignites (chain liquidation): The spot price reaches $12, triggering a new, larger wave of short positions to be liquidated. This process perfectly repeats step two: contract liquidation -> market makers buy spot to hedge -> spot price rises further.
Enter orbit: This cycle repeats, forming a positive liquidation spiral. Each layer of short liquidation fuels the next round of price increases, pushing RKT's price from $11 to $15 and beyond. Throughout this process, the initial $200,000 in "ignition" funds leveraged millions, even tens of millions, of dollars in passive buying. Conclusion: This is the essence of a simple version of a "Perps bull market": leveraging extremely low spot liquidity to create counterparty (large short positions) in the contract market, ultimately using the "margin call" mechanism as an engine to drive seemingly "out of thin air" price increases. The spot price increase is more a result and manifestation of this process than a cause. (Obviously, in practice, it's not such a smooth sailing.) III. Why "this version"? Right timing, right location, and right people This phenomenon was less pronounced in previous cycles and is the result of a combination of factors: Right timing (project strategy): Projects in this cycle generally adopted a "low float, high FDV" issuance model. This creates the perfect "necessary and sufficient conditions" for artificially manipulating spot prices and leveraging the highly leveraged contract market.
Geographic Advantage (Market Infrastructure): Perpetual contract products have reached extreme maturity after years of development. Their smooth trading experience, deep liquidity, comprehensive API, and market maker system enable them to handle massive amounts of capital and complex game-playing.
Human Harmony (Market Consensus and Narrative):
The "Short Coin" Paradigm: This exaggerated "consensus" actively creates a large amount of "fuel" for the market.
Get-Rich-Quick Mythology: Contract industry experts' claims of hundreds of times returns continue to attract players eager for high risk, high returns. The extreme trading maneuvers of the whales on Hyperliquid, in particular, give this "get rich quick (or lose money)" narrative plenty of room for imagination. The allure of the mechanism: Complex tactics like funding rate arbitrage and liquidation grabs have transformed the market from a simple bull-bear duel into a multi-role, multi-dimensional financial game, further locking up liquidity. Don't take it seriously. This cycle is a "Perps' bull market," a tongue-in-cheek reference to underlying structural shifts in the market. While it suggests a story of wealth growth, it's more a complex financial allegory about the interplay of leverage, liquidity, mechanisms, and human nature, rather than simple value discovery. In this version, spot trading has become the ultimate embodiment of hedges and prices, while perpetual contracts are the core vehicle that integrates narrative, capital, and mechanisms, truly defining the pulse of the market. Understanding and adapting to the rules of the game where "your margin calls are fuel" is the key to navigating this cycle. Finance, or gaming, is like this; PvP always brings new experiences. May we always maintain a reverent heart towards the market.
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