Why Perps Are Overtaking Options | DAS New York

Transcript

Nothing said on ZeroX Research is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only and any views expressed by anyone on the show are solely our opinions, not financial advice. Bocaccio, Ryan, and our guests may hold positions in the companies, funds, or projects discussed. Good afternoon, everyone. I'm Shawn the Devins and I'm part of the Blockworks Research team. Over the past year, I've had the privilege of leading our team's coverage into perpetuals and hyperliquid. Not only has this informed our view of the on-chain perpetual landscape, but it's also given us a deeper appreciation for perpetuals as a financial instrument.

This has informed one of our highest conviction ideas. 24/7 equity perpetuals will become a key a key theme in 2026. So, what I want to do with the time I have today is firstly walk you through our 24/7 equity perpetual thesis. Talk about what's required to go from a crypto perpetual to a try-try perpetual. Talk about why hyperliquid and Trade XYZ will win. And finally, walk through two recent case studies, crude oil and silver. To understand our preference for perpetuals, we need to understand the alternative options.

Options are a very powerful financial instrument, but they're also complex. Because options have an expiry and a settlement, the value of an option depends on multiple variables, such as the time to expiry, the strike price, and the implied volatility. For traders that want to trade just price, which we believe is the majority of the segment, perpetuals are a much cleaner delta-one instrument. Perpetuals replace the expiry with a funding rate that anchors the value of the derivative to the underlying and thus isolates price as the only variable that matters.

Simply put, if your goal is to trade price of underlying, perpetuals are the superior instrument, and we believe that there's a lot of demand in options that could be better expressed through perps. So, how big is this market opportunity? We looked at OCC data, and we aggregated all single stocks and index volume in September. We found that the total monthly volume was $89 trillion of turnover. Zero days to expiry options, which we believe is the cleanest form of leverage demand, was $48 trillion.

These options embedded a median leverage of 200x. The CBOE estimates that retail drives 54% of this. So, these retail users are having extreme theta decay to express their positions via options. In contrast, crypto perps did just $1.2 trillion of volume in the same time frame. So, taking just the zero days to option segment and comparing that to crypto, it's around 40x larger. Now, we're not saying that all of this can be captured, but it is a massive opportunity for crypto.

The next question is, can we make a case that crypto infrastructure can actually capture this demand? In crypto, perpetuals are already the dominant form of leverage, doing around 97% of volume versus options that do just 3%. Crypto exchanges already process trillions of dollars in monthly volume, and they already trade 24/7. If we were to extend this to on-chain perpetual venues, they're also trustless, transparent, and verifiable.

At their core, perpetuals are simple instrument. You have the oracle price that references the price feed of the underlying asset. You have a mark price, which is venue's internal calculation of the instrument's fair value. And you have a funding rate that tethers both together. In theory, all that's required to turn a crypto perpetual into a TradFi perpetual would be to change the price feed from a token to a real-world asset price feed. For example, Chainlink's Google price feed or Apple's price feed. And then you've turned the performant crypto perpetual into a TradFi perpetual.

Of course, this is an oversimplification, and there are tweaks we must consider when turning the instrument into a TradFi instrument. For example, how do you create a 24/7 market for asset whose underlying only trades 5 days a week? How do you enable enough liquidity depth to prevent dislocations from the marked price and the underlying? And how do you enable efficient hedging for market makers that might have collateral on TradFi venues? But, and this is the core idea, the same infrastructure that powers trillions of dollars in monthly value can be applied to real-world assets, commodities, anything with a price feed.

This is the exact reason that we also chose a winner. And this should probably come to no surprise to anyone who's been following our work. This winner is Hyperliquid and Trade XYZ. Hyperliquid's HIP-3 model enables exactly what we just discussed. Hypercore order books power the back end. This is the margining, the collateral, the liquidations. HIP-3 deployers stake 500K hype, and in exchange bid to list markets. They can list equities, commodities, anything with a price feed.

And they gain access to the distribution network of Hyperliquid's builder codes. These are over 3.9 million users trading from different front ends, such as Rabby MetaMask and other front ends. Through this, Trade XYZ has become the de facto asset layer for Hyperliquid and does listings for commodities and equities, and most recently also an S&P 500 perpetual in collaboration with S&P Global. The way that a Trade XYZ perp works is during normal hours, the oracle references the official price feed.

During extended hours, it references the extended hours trading price feed. And during the weekend, it reverts towards an internal price feed. Because when the market opens again on Sunday evening, the market reverts to the external pricing, this allows a period in which traders can trade Hyperliquid's internal price and try to front run the open. So, for example, let's say Google is trading at a 1% premium to Friday's close. And a trader expects that it will open at plus 5%.

He can execute on Saturday, on Sunday, on Hyperliquid. And then when the market reverts, he will lock in that profit. So, were we right? In our December report, we made two claims. The first one was 24/7 equity perps would become a key theme in 2026. And the second one was that Trade XYZ and Hyperliquid would dominate. Looking at today's numbers, open interest is over 2 1.5 billion dollars, and Trade XYZ has the market share of over 90% of this open interest.

On certain days and weeks, HIP-3 real-world asset markets do over 40% of Hyperliquid's total volume. But, this is not enough for us. We want to truly understand how performant and efficient these markets are. So, we're going to walk through two recent case studies, silver and crude oil. Silver was interesting because it was one of the first commodity HIB3 markets on HyperLiquid that gained material traction. It became the second most traded asset on HyperLiquid only after Bitcoin.

Did over 2.2 billion dollars of volume. It was also interesting because this was during silver's worst crash in its history. Silver crashed 17% on the day. This gives us the opportunity not only to look at the demand of these markets, but also how efficient they are. We collected millions of order book updates and trades on HyperLiquid and we benchmarked it against the micro silver futures on the CME. And our results were pretty fascinating. In the pre-cash period, HyperLiquid had a median spread of 2.4 basis points, which was tighter than the median spread of the CME at three basis points.

Looking at the execution, it was within half a basis points of the underlying. During the 17% crash, as we would expect, spreads did widen significantly, but that was true for the benchmark venue as well. There was a dislocation of HyperLiquid's mark price to the oracle price, but this lasted only around 19 minutes, and after that, the market was back to normal. HyperLiquid had processed the worst crash in silver's history in a very orderly fashion, and in the pre-crash period was also handling and had better spreads than the CME.

Crude oil is interesting for a different reason. Like silver, it became the second most traded asset on HyperLiquid due to geopolitical stress, but unlike silver, this stress came on a weekend when traditional markets were closed and HyperLiquid was using its internal pricing. At 6:30, there was announcement of US strikes on Iran. None of this could be priced in traditional markets, but on HyperLiquid, not only did prices respond, they responded at 6:14 before a leak of the announcement.

Within minutes, Hyperliquid repriced from $67 to $70.6. That was a maximum that the price was allowed to move because of the bonds. The second weekend was equally as interesting as instead of one announcement, there was a series of rolling announcements. And because each market could be reacted to in real time, we saw each announcement affect the price. Just like the previous week, we saw that Hyperliquid silver, sorry, Hyperliquid crude oil closed 5% higher than on Friday. Again, only bound by the bonding bands that limited how far price could move.

And this was true not only for crude oil and silver, but for all markets. We took a sample of 131 weekend markets that did over $1 million of volume on the weekend. And we measured their Friday closing price on TradFi, the Hyperliquid closing price before the market opened, and the actual market open move. To see if the implied Hyperliquid move could accurately predict what markets would actually open at. What we found was that Hyperliquid prices were more accurate than Friday close in 85% of the cases. And if we plotted the implied move of Hyperliquid against the real TradFi move, we saw an almost one-to-one correlation that was

statistically significant. This is because Hyperliquid's weekend markets are not only open, but they're also efficient. When we compare spreads of Hyperliquid weekdays to weekends, we do see that median spreads did widen to around 4.8 basis points from 3.9 on weekdays. But this is still pretty performant, and we notice only a severe degradation in the tails. Overall, our equity thesis was that 24/7 equity perps will dominate in 2026.

We proved that perp markets are efficient looking at Silver's weekday market that was not only efficient during the pre-crash, but also the post-crash and during the crash period. We saw that these markets are also efficient on the weekends and allow for price discovery as proven in our crude oil case study and also the broader sample. And we showed that participation is scaling. HIP-3 real-world asset markets now account for over 40% of hyperliquid volumes. Hyperliquid is not only architecturally ready for 24/7 trading of real-world assets, it is already doing it.

That is all for me. Thank you. Hyperliquid.