The crypto bull market in 2025 is different from the past, with perpetual contracts being the real engine. This article will reveal why liquidity is concentrated in the contract market as never before, and explain how 'short squeeze' has become the rocket fuel to drive up asset prices. (Previous context: You are not seeing the wrong profit and loss on paper, you just misunderstood the rules of the game behind perpetual contracts) (Background supplement: Where is institutional capital flowing? Revealing the five golden tracks of this potential 'altcoin season') The crypto bull market in 2025 may (already) be coming, but its engine is roaring in a very different way than before. If you are still closely watching spot trading volume to judge market sentiment, you may only be seeing the tip of the iceberg. The real protagonist of this bull market is Perpetual Contracts Perps: a huge, highly leveraged PVP arena driven by fierce games between long and short sides. Liquidity, narrative, and wealth effects here are defining the entire market in unprecedented ways. Why is liquidity concentrated in the contract market as never before, and how does 'short squeeze' become rocket fuel and drive asset prices to rise in a spiral? 1. Data Perspective: When the 'Tail' Starts to Wag the 'Dog' The phenomenon is the best proof of theory. We first verify an amazing fact through data: the trading volume of perpetual contracts has completely crushed the spot market. Trading Volume Comparison: According to data from TokenInsight and other data platforms in the second quarter of 2025, the trading volume of crypto derivatives (mainly perpetual contracts) on mainstream exchanges is usually 10 to 15 times that of spot trading volume. This means that when the spot market has a trading volume of $10 billion, the trading volume of the contract market may have reached $100 billion to $150 billion. Open Interest: By observing the open interest of mainstream currencies such as BTC and ETH, as well as popular new currencies, we can see that its scale far exceeds the spot stock of the corresponding currencies on the exchange. This shows that the vast majority of market participants' risk exposure and funds are deployed on the derivatives side. Funding Rate: In most of the time in this bull market, the funding rate has maintained a positive and high value for a long time. This attracts a large number of 'arbitrageurs' to enter the market. They use the strategy of 'shorting perpetual contracts + buying the same amount of spot' to earn a stable funding rate. This operation further draws away the liquidity of the spot market and locks it into hedging positions. Conclusion: The data clearly shows that the market's funds, attention, and game focus have undergone a structural shift. Perpetual contracts are no longer an appendage of the spot market, but have become the core battlefield that dominates short-term price fluctuations. The market has changed from 'spot drives contracts' to 'contract game, forcing spot'. 'At this moment, the spot has become an 'accessory'.' 2. Core Mechanism Unveiled: How is the 'Short Squeeze Rocket' Launched? The 'weird 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 'Perps Bull Market'. Let's use a simplified numerical case to explain this process. Case: New Coin "RocketCoin" (RKT) Background Setting: RKT is a popular new project with extremely low initial circulation, only 1 million coins (1/10) on the market. (Assuming the total circulation is 10 million coins) The exchange launched RKT's U-based perpetual contract. Current spot price: $10. Due to the 'consensus' that 'new coins should be shorted', a large number of short positions have accumulated in the contract market. Assuming that between $11 and $15, there are $10 million worth of short orders (300,000 RKT) waiting to be liquidated. Launch Process: Initial Ignition: A certain whale or project party invests a small amount of funds in the spot market, such as buying 20,000 RKT with $200,000, and forcibly pushes the spot price from $10 to $11. The cost of pulling up the spot market is extremely low due to the low circulation (shallow market). First-Stage Rocket Separation (First Round of Liquidation): The RKT price reaches $11, and the first batch of short positions that set stop losses at this price are forcibly closed (i.e., liquidated). Assuming that this batch of positions is worth $1 million. Liquidation Mechanism: The operation of 'closing a short order' is 'buying'. The liquidation engine needs to immediately buy $1 million worth of RKT contracts on the market. Market Maker Hedging: The market maker providing liquidity for the liquidation engine sells the contract, and at the same time, in order to avoid its own naked short risk, it will immediately go to the spot market to buy the same amount of RKT spot for hedging. Price Feedback: This spot buy order from the market maker further pushes up the already thin spot price, such as pushing it from 11 to 12. Second-Stage Rocket Ignition (Chain 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 maker buys spot for hedging -> spot price further rises. Entering Orbit: This cycle repeats itself, forming a positive liquidation spiral. Each layer of short liquidation becomes the fuel for the next round of price increases, pushing the price of RKT from $11 all the way to $15 or even higher. In this process, the initial $200,000 of 'ignition' funds leverage millions or even tens of millions of dollars of passive buying. Conclusion: This is the essence of the simple version of the 'Perps Bull Market': using extremely low spot liquidity as a leverage fulcrum, creating counterparty (a large number of shorts) in the contract market, and finally using the mechanism of 'liquidation and settlement' as the engine to drive the price to achieve a seemingly 'out of thin air' increase. The rise of the spot is more like the result and manifestation of this process, rather than the cause. (Obviously, the actual operation is not so smooth) 3. Why is it 'This Version'? Timing, Location, and People This phenomenon was not so obvious in previous cycles. It is the result of the combined effect of multiple factors: Timing (Project Party Strategy): The projects in this cycle generally adopt the 'Low float, High FDV' issuance model. This creates the perfect 'necessary and sufficient conditions' for artificially controlling the spot market and leveraging the high-leverage contract market. Location (Market Infrastructure): The perpetual contract product itself has been extremely mature after years of development. Smooth trading experience, deep liquidity, complete APIs and market maker system enable it to carry massive funds and complex games. People (Market Consensus and Narrative): The Paradigm of 'Shorting New Coins': This rendered 'consensus' actively creates a lot of 'fuel' for the market. Get-Rich Myths: The propaganda of contract masters with hundreds or thousands of times the return continues to attract players who desire high risk and high return to enter the market. In particular, the extreme trading operations of the whales on Hyperliquid give enough imagination to this narrative of 'getting rich (negative)'. The Temptation of the Mechanism: Complex gameplay such as funding rate arbitrage and liquidation snatching has transformed the market from a simple long-short showdown into a multi-role, multi-dimensional financial game, further locking in liquidity. Conclusion Everyone, don't take it seriously. This round is a 'Bull Market for Perps', which is just a 'joking term' for the deep structural changes in the market. Although it means a story of wealth growth, it is more about telling a complex financial allegory about leverage, liquidity, mechanism and human nature, rather than simple value discovery. In this version, the spot has become a hedging product and the price of...

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