The New Bitcoin and Ethereum Perpetual Futures on SGX: How Does It Work?

[SINGAPORE] Cryptocurrencies’ upward trajectory for most of 2025 continues with the Singapore Exchange’s (SGX) launch of perpetual cryptocurrency futures on Monday (November 24).

The move, first announced in March, further strengthens Singapore’s leadership in the digital asset space and makes SGX one of the first exchanges in the world to offer such a derivative.

Japan’s Osaka Dojima exchange has also reportedly explored Bitcoin futures, while US exchanges such as the Chicago Mercantile Exchange and Cboe Global Markets plan to introduce similar products.

The introduction of Bitcoin and Ethereum futures on SGX aims to meet the rising institutional crypto demand by connecting traditional finance and crypto native ecosystems.

Perpetual futures account for more than US$187 billion in daily average volumes globally, with Asia as the epicenter of growth, but remain largely priced and settled on offshore platforms outside the region, SGX said.

So what are these perpetual Bitcoin and Ethereum futures, and how do they work? The Business Times is watching.

What are “perps”?

A futures contract is effectively a legal agreement where one party must buy or sell a commodity, asset or security at a predetermined price on a predetermined date. A perpetual future is very similar, except that it has no expiration date.

This means that traders do not have to own or deliver the underlying asset and can freely speculate on its price and movements.

Coinbase, one of the world’s largest cryptocurrency exchanges, said in a 2024 blog post that perpetual futures – or “perps” – make up the majority of cryptocurrency trading volumes.

Bitcoin perps have a daily average volume of US$57.7 billion on weekdays in the first quarter of 2024, three times larger than the US$18.8 billion average weekday spot volume.

Perps dominate cryptocurrency trading because they match its characteristics well. Crypto trades 24/7, has no physical delivery requirements, and often spans fragmented spot markets, making rolling contracts more practical than futures with fixed expirations. SGX’s traders will trade for 22.5 hours and over five days.

Traditional assets such as commodities, stocks and interest rate futures instead rely on contract maturity for settlement, delivery and risk management. Regulators also enforce limits on leverage and contract structure, making perpetual contracts impractical and risky for these markets.

Except for late 2022, following the collapse of cryptocurrency exchange FTX, perps have been the dominant way to trade Bitcoin exposure since late 2020, Coinbase said. They also became “increasingly leveraged” compared to fixed-term futures as measured by notional volume.

Part of the popularity of perps is the often easy access to borrowed funds, along with the removal of rollover costs associated with fixed-term futures, the exchange added.

Perps use a funding rate mechanism to keep their prices in line with the security’s spot price. This mechanism involves regular payments between the buyer and seller of the contract, calculated based on a combination of the perp’s price, the underlying security’s spot price and an interest rate component (the cost of borrowing or lending the underlying asset).

The payment formula sometimes also includes a cap and a floor to set a maximum and minimum funding rate.

“The funding rate mechanism enables perps prices to track spot prices with a similar accuracy to fixed-term futures. This makes perps popular not only for directional speculation, but also for hedging or arbitrage strategies,” Coinbase said.

Hassan Ahmed, head of country for Coinbase Singapore, said the funding rate was “almost like a rubber band”. As the price for the offender moves too far away from the security’s spot price, the financing rate becomes more expensive.

It allows buyers (or desirers) to pay sellers (or shorts) if the perp price is above the security price, and the reverse if it is below the security price.

Ahmed estimated that 90 percent of trading in crypto markets is on perps and that perp trading has “only gotten bigger” over the years.

So popular are perps that the derivative is also transferred to stocks. US-based software firm Architect Financial Technologies launched the first regulated exchange for trading perpetual futures on traditional underlying asset classes in October. These include foreign exchange, interest rates and stock indices.

While bonds have some advantages, such as holding the contract indefinitely, having greater liquidity than the security’s spot market (or even options), and using capital more efficiently through leverage, there are also risks.

The existence of leverage implies enhanced returns, which apply to the downside as well as the upside. The threat of liquidation – especially when working with limited capital – also requires a carefully planned risk management profile.

However, investors using SGX’s rulers will not have positions immediately liquidated if the market moves suddenly. Instead, they will receive margin calls and will have to top up their collateral.

Bitcoin, Ethereum futures will further boost the market

SGX’s launch of Bitcoin and Ethereum perps is a way to “meet the crypto market where it’s at,” as the derivative is “widely understood and accepted,” Ahmed said.

Ahmed added that Bitcoin and Ethereum perps could be a boost for the exchange itself.

Singapore has been looking for ways to revive SGX. In February, it unveiled the S$5 billion stock market development program.

Last week, SGX announced further measures to strengthen the Singapore stock market through a dual listing bridge between SGX and Nasdaq, as well as a “Value Unlock” program to help listed companies strengthen investment engagement.

Ahmed believes that the introduction of perps on SGX will also boost the crypto market in Singapore.

“Just in terms of ecosystem expansion, market access, credibility … it’s actually a very strong positive signal that we’re excited about,” Ahmed said. “In general, I’ve always seen it as an extension of the pie.”

He pointed out that many market participants, including investment banks, family offices and high-frequency traders, would likely want to gain crypto exposure but would have been limited without nationally approved exchanges offering crypto products like perps.

SGX’s perps will be limited to institutional, accredited and expert investors, with the Monetary Authority of Singapore describing crypto as “highly dangerous for retail investors” on its website.

However, Ahmed believes that the US’s crypto push this year has “levelled” the playing field and started to put pressure on existing regulators to find ways to maintain their digital asset leadership. That pressure may prompt attitudes against retail involvement to change in the future, Ahmed speculated.

Bitcoin futures launched just as profits were wiped out

The introduction of the perps comes at a time when a correction in Bitcoin has wiped out the gains it made in 2025. The cryptocurrency peaked at US$126,251 just last month, before falling below US$90,000.

Ahmed said the long-term fundamentals of Bitcoin and crypto haven’t changed, despite the reversal in fortunes, and SGX’s introduction of perps during a downturn could actually be a positive.

“The key benefit of launching during a downturn is that institutions see the value of perps as true risk management tools rather than speculative tools,” he said. “From a risk perspective, the same principles apply: people carry leverage, funding rates move with market sentiment and participants need to understand liquidation dynamics.”

However, investors participating in SGX trading should “understand what they are signing up for” when adding such leverage to their portfolios.

“Maybe there’s still some education, even for institutional participants, that (SGX) will have to do along the way,” Ahmed said.

He pointed out that Bitcoin’s volatility has fallen over the years. In 2025, every company in the Nasdaq 100 index became more volatile than Bitcoin during the Fed rate cut as measured by three-month realized volatility, according to cryptocurrency exchange and wallet service Cex.io in September.

For institutional investors, this relative stability combined with the safety of a regulated exchange could be the tipping point. If Bitcoin behaves more like a tech stock and less like a lottery ticket, then SGX’s newbies may have arrived at the exact moment traditional finance is ready to embrace them.