JPMorgan Chase: Institutional demand for perpetual contracts is limited, with more use for speculation than hedging.

According to a report by CoinDesk, citing Foresight News , JPMorgan Chase stated in a report released on Monday that institutional demand for perpetual contracts remains limited, with the product being viewed more as a speculative trading tool than an effective alternative to traditional derivatives. Based on communications between JPMorgan Chase and its clients and market participants, the report states that while perpetual contracts offer 24/7 trading and eliminate the rollover costs of traditional futures, most trading activity comes from traders seeking leveraged directional exposure, rather than from producers, consumers, or other participants hedging the underlying market risks. JPMorgan Chase analysts wrote in the report that their internal due diligence revealed almost no institutional demand for perpetual contracts on trading desks, and the industry consensus seems to be that perpetual contract activity is more akin to speculative use by traders than hedging by producers/consumers genuinely assuming exposure to the underlying assets. The report argues that perpetual contracts offer limited incremental value to institutional investors compared to traditional derivatives: on-chain perpetual contracts lack traditional liquidation protection mechanisms, making them unattractive to US institutions; while off-chain products reduce rollover risk, they still suffer from other structural flaws, including unlimited basis risk, a lack of forward term structure, and in most cases, a lack of support for physical delivery. This makes them less attractive to commercial hedgers and benchmark asset management firms that need to closely link to regulatory indices and forward pricing curves. The report also cites publicly available data from Hyperliquid, pointing out that the offshore perpetual contract market is highly concentrated, with approximately half of the perpetual contract trading volume funded by only 12 wallet addresses. This concentration raises questions about market depth and whether the product can support wider institutional adoption. However, JPMorgan Chase also acknowledges that the continuous trading, flexible holding periods, and embedded leverage of perpetual contracts make them more suitable for retail traders and trend-driven strategies, and the elimination of the need for rollovers is expected to continue supporting retail demand, even as institutional adoption remains low. Currently, perpetual contracts account for approximately 90% of crypto derivatives trading volume, often significantly exceeding that of the spot market, making them a key driver of price discovery and market liquidity.