The crypto bull market of 2025 may (already) be coming, but the way its engine roars is vastly different from the past. If you are still fixated on spot trading volume to gauge market heat, you may only be seeing the tip of the iceberg. The true protagonist of this bull market is perpetual contracts, Perps — a massive, highly leveraged PVP arena driven by fierce competition between bulls and bears. The liquidity, narratives, and wealth effects here are defining the entire market in unprecedented ways.
Why liquidity has unprecedentedly concentrated in the contract market, revealing through a numerical example how 'short liquidation' becomes rocket fuel, driving the core mechanism of asset prices to spiral upwards.
Disclaimer: All fabricated, any resemblance to reality is coincidental.
Entertainment statement: Just for fun, don't take it too seriously.
Leverage declaration: If you think I'm wrong, then you are right.
1. Data perspective: When the 'tail' begins to wag the 'dog'
Phenomena are the best proof of theory. We first verify an astonishing fact through data: the trading volume of perpetual contracts has completely overshadowed the spot market.
Trading volume comparison: According to data platforms like TokenInsight, in the second quarter of 2025, the trading volume of crypto derivatives (mainly perpetual contracts) on mainstream exchanges is typically 10 to 15 times that of spot trading volume. This means that when the spot market has a trading volume of $10 billion, the contract market's trading volume may have 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 scale far exceeds the corresponding spot holdings on exchanges. This indicates that the vast majority of market participants' risk exposure and capital are deployed on the derivatives side.
Funding Rate: Throughout most of this bull market, the funding rate has remained positive and high for a long time. This has attracted a large number of 'arbitrageurs' who enter the market through the strategy of 'shorting perpetual contracts + buying an equal amount of spot' to earn stable funding rates. This operation further drains liquidity from the spot market and locks it into hedge positions.
Conclusion: The data clearly indicates that the capital, attention, and battlefield for gaming in the market have undergone a structural shift. Perpetual contracts are no longer an appendage to the spot market; instead, they have become the core battlefield that dictates short-term price fluctuations. The market has transformed from 'spot driving contracts' to 'contract gaming, forcing spot.'
At this moment, the spot has surprisingly become an 'appendage.'
2. Core mechanism revelation: How is the 'short liquidation rocket' launched?
The 'strange phenomenon' in the market — price increases do not start with spot buying, but are driven by liquidations on the contract side. This is the core mechanism of this round of 'Perps bull market.'
Let’s use a simplified numerical case to explain this process.
Case Study: New Coin 'RocketCoin' (RKT)
Background setting:
RKT is a popular new project with an extremely low initial circulation of only 1 million coins (1/10) in the market. (Assuming total circulation is 10 million coins)
The exchange has launched U-based perpetual contracts for RKT.
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 are $10 million worth of shorts (300,000 RKT) waiting to be liquidated between $11 and $15.
Launch process:
Initial ignition: A certain whale or project team invests a small amount of money in the spot market, for example, buying 20,000 RKT for $200,000, forcibly pushing the spot price from $10 to $11. The cost of raising the price is extremely low due to low circulation (shallow market).
First stage rocket separation (first round of liquidation): The RKT price hits $11, and the first batch of short positions with stop losses set at this price level are forcibly closed (i.e., liquidated). Assume this batch is worth $1 million.
Liquidation mechanism: The operation of 'closing short positions' is 'buying.' The liquidation engine needs to immediately buy $1 million worth of RKT contracts in the market.
Market maker hedging: Market makers providing liquidity to the liquidation engine sell contracts while immediately buying an equal amount of RKT spot in the spot market to avoid their own naked short risk.
Price feedback: This spot buy order from market makers further pushes the already thin spot price, for example, from 11 to 12.
Second stage rocket ignition (cascading liquidation): The spot price reaches $12, triggering a new batch of larger-scale short position liquidations. This process perfectly repeats the second step: contract liquidation -> market makers buy spot to hedge -> spot price further increases.
Entering orbit: This cycle continues to form a positive liquidation spiral. Each layer of short liquidation becomes fuel for the next round of price increases, pushing the RKT price from $11 all the way to $15 or even higher. In this process, the initial 'ignition' capital of $200,000 has leveraged millions or even tens of millions of dollars in passive buying.
Conclusion: This is the essence of the simple version of the 'Perps bull market': using extremely low spot liquidity as a leverage point, creating counter trades (massive shorts) in the contract market, ultimately using the 'liquidation mechanism' as an engine to drive prices to seemingly 'rise out of nowhere.' The rise in spot prices is more like a result and manifestation of this process, rather than the cause. (Clearly, in practice, it's not so straightforward.)
3. Why 'this version'? Timing, geographical advantage, human factors.
This phenomenon was not so apparent in previous cycles and is the result of many factors working together:
Timing (project strategies): Projects in this cycle generally adopt a 'Low float, High FDV' issuance model. This creates a perfect 'necessary and sufficient condition' for artificially controlling the spot market and leveraging high leverage in the contract market.
Geographical advantage (market infrastructure): Perpetual contract products have matured significantly after years of development. Smooth trading experience, deep liquidity, comprehensive APIs, and market maker systems enable them to handle massive capital and complex gaming.
Human factors (market consensus and narrative):
The paradigm of 'short new coins': This rendered 'consensus' actively creates a large amount of 'fuel' for the market.
Wealth myth: The promotion of contract experts with returns of hundreds or thousands of times continues to attract players looking for high-risk, high-reward opportunities. Especially the extreme trading operations of various whales on Hyperliquid provide ample imagination for this 'wealth (negative)' narrative.
The temptation of mechanisms: Funding rate arbitrage, liquidation rush orders, and other complex plays have transformed the market from simple long-short confrontations into a multi-role, multi-dimensional financial game, further locking in liquidity.
Conclusion
Everyone, don't take it seriously, this round is referred to as the 'Perps bull market', which is merely a playful term for the deep structural changes in the market. Although it implies a story of wealth growth, it is more about narrating a complex financial fable regarding leverage, liquidity, mechanisms, and the interplay of human nature, rather than simple value discovery.
In this version, the spot market has become the final embodiment of hedging and price, while perpetual contracts are the core carrier that truly defines the pulse of the market, integrating narrative, capital, and mechanism. Understanding and adapting to the game rules of 'using your liquidation as fuel' is key to navigating this cycle.
Finance, or rather, gaming is like this; PVP will always bring new experiences.
May we always hold a respectful heart towards the market.
