BitMEX has released its annual research report, State of Crypto Perpetual Swaps 2025, outlining how structural stress and shifting incentives reshaped the global crypto derivatives market over the past year. The study points to a decisive move away from easy, yield-driven strategies as volatility, liquidity shocks, and counterparty risk came into focus. For institutional traders, 2025 underscored that market structure now plays a central role in performance outcomes.
The report identifies the October 10 to 11 market selloff as the defining event of the year, triggering an estimated $20 billion in liquidations across exchanges. Auto-deleveraging mechanisms disrupted delta-neutral positioning, forcing professional market makers to pull back liquidity. Order books thinned to levels last seen in 2022, amplifying price dislocations during a period of already fragile risk appetite.
Market Structure Stress Redefines Risk
According to BitMEX, the October episode exposed vulnerabilities in exchange risk engines that many traders had previously discounted. Strategies designed to remain neutral to price direction failed when liquidity evaporated simultaneously across venues. In a macro environment marked by tighter financial conditions and reduced speculative leverage, these breakdowns prompted a reassessment of how derivatives are traded and where risk truly resides.
BitMEX CEO Stephan Lutz said the events highlighted the limits of sophistication when systems are stressed. Institutional participants increasingly evaluated exchanges based on transparency, rule clarity, and operational resilience, rather than headline fees or headline yields. This shift mirrors broader trends in traditional markets, where infrastructure reliability has become a competitive differentiator.
Funding Arbitrage Loses Its Edge
The report also documents the erosion of funding rate arbitrage as a dependable source of yield. Once a core strategy for hedge funds and proprietary desks, funding trades became crowded as exchanges introduced native delta-neutral products. By mid-2025, average funding yields compressed toward 4 percent and often fell below comparable US Treasury rates.
In a higher-rate macro backdrop, that compression reduced the appeal of perpetuals as a yield substitute. Capital rotated toward strategies emphasizing capital preservation and execution quality, reinforcing the idea that crypto derivatives are maturing into tools for risk transfer rather than yield extraction.
Trust, Decentralization, and New Products
Beyond mechanics, BitMEX highlights a widening trust gap between fair-matching venues and platforms operating internalized, or B-Book, models. The report cites incidents where profitable traders faced reversals or restrictions under broad “abnormal trading” clauses, sharpening focus on counterparty risk.
At the same time, perpetual decentralized exchanges expanded, bringing innovation alongside new vulnerabilities such as oracle manipulation and targeted liquidations. BitMEX notes emerging products, including equity perpetuals and funding rate derivatives, as evidence that competition and convergence with traditional finance are accelerating, even as the era of easy yield fades.