Crypto Current #85

This week, we examine how perpetual futures—the derivative born from frustrated Chinese gold miners in the 1980s—are reshaping traditional finance as NASDAQ prepares for 24/5 trading and institutions embrace crypto's continuous market innovations. Meanwhile, the Federal Housing Finance Agency's directive allowing Fannie Mae and Freddie Mac to accept cryptocurrency as mortgage collateral represents more than regulatory accommodation—it creates the first tax-efficient bridge between crypto wealth and real estate markets. Together, these developments demonstrate how crypto's most practical innovations are migrating into traditional finance, not through disruption but through demonstrated superiority in solving real-world problems.

The crypto market showed resilience this week despite geopolitical uncertainties, with Bitcoin holding steady at $107,000, up 2% over seven days and maintaining strong momentum with 73% gains over the past year. Ethereum faced headwinds, declining 4% to $2,400, reflecting broader altcoin weakness as Bitcoin dominance strengthened to 66%. The total crypto market cap remained steady at $3.2 trillion, supported by continued institutional inflows. Spot Bitcoin ETFs recorded $548 million in net inflows on June 25 alone, marking 12 consecutive days of positive flows and validating the institutional adoption thesis we've been tracking.

What's happening in crypto?

Chart of the week

Cumulative Solana DEX volume by month, 2024 v 2025

Source: Syndica

The ‘perpification’ of speculation

How crypto's perpetual futures are reshaping traditional finance

This week witnessed another convergence between traditional finance and crypto innovations as NASDAQ announced 24/5 trading hours starting in 2026—the latest example of TradFi borrowing from crypto's playbook. But perhaps the most significant adoption may be happening in derivatives, where perpetual futures—or "perps"—are poised to fundamentally reshape how retail investors access leveraged speculation.

A brief history: From annoyed gold miners to market infrastructure

To understand why perpetual futures represent such a paradigm shift, we need to examine their unlikely origins. The story begins not with crypto innovation, but with frustrated Chinese gold miners in the late 1980s who were hemorrhaging money on the Chinese Gold and Silver Exchange of Hong Kong.

The miners faced a classic hedging problem: traditional futures contracts expired regularly, forcing costly rollovers that created basis risk—the price difference between futures and spot markets at expiration. These miners were losing substantial money not just on transaction costs, but on contracts that expired above spot gold prices, creating losses even when their directional bets were correct.

Fed up with these losses, the exchange introduced something revolutionary: the "undated futures contract." No expiration date, no costly rollovers, and a nightly interest payment mechanism that kept contract prices aligned with spot markets by eliminating contango and backwardation.

The concept remained obscure until 1992, when economist Robert Shiller formalized it as the "perpetual future" in academic literature. Shiller envisioned applications for illiquid assets like real estate and sparsely traded stocks, but the idea languished as an exotic OTC derivative for decades.

Crypto changed everything. In 2011, Russian entrepreneur Alexey Bragin discovered Shiller's paper while launching the Icbit exchange, recognizing that perpetuals could solve Bitcoin's liquidity fragmentation across multiple contract months. BitMEX popularized the concept with their XBTUSD contract in 2016, concentrating all leveraged Bitcoin trading into a single, continuous market.

The elegance proved revolutionary: retail traders gained leverage without understanding options Greeks or expiration dynamics, while institutions found deeper liquidity than traditional futures could provide. What began as a solution for annoyed gold miners became the dominant trading mechanism in crypto markets.

The case for perps over options

Today's traditional finance landscape reveals striking parallels to crypto's pre-perpetual era. Zero-day-to-expiration (0DTE) options have seen explosive growth, representing approximately 43% of S&P 500 options volume in 2024, up 100% from 2021, clearly demonstrating retail demand for lottery-ticket-like exposure.

But options remain fundamentally ill-suited for pure directional speculation. Complex Greeks create pricing inefficiencies that benefit sophisticated market makers at retail traders' expense. Time decay erodes positions daily, regardless of the underlying asset's movement. Strike price selection adds another layer of complexity that can derail even correct directional bets.

Perpetual futures offer a cleaner solution: pure directional exposure with leverage, without the complexity of strike prices, expiration dates, or implied volatility. As Jeff Yan, founder of Hyperliquid, recently explained: "Very few retail traders actually want to trade volatility; they actually just want leverage." But most importantly, they’re a product that is profitable, and that is why TradFi will take note.

Source: Dune

Innovation continues: The Hyperliquid model

While traditional finance grapples with regulatory frameworks, crypto continues pushing perpetual innovation boundaries. Hyperliquid's HIP-3 upgrade represents the next evolutionary step, enabling anyone to permissionlessly create perpetual markets on virtually any asset by staking 1 million HYPE tokens and providing market specifications plus a price oracle.

This democratization of market creation opens extraordinary possibilities. Rather than waiting for centralized exchanges to list new trading pairs, users can deploy markets for exotic assets, regional equities, or even synthetic instruments tracking specific economic indicators. The 1 million HYPE staking requirement—currently valued at approximately $37million—serves as both a capital commitment and slashing mechanism to deter malicious behavior.

Conclusion: The future of leveraged access

The "perpification" of speculation represents more than just another crypto innovation migrating to traditional finance. It signals a fundamental shift toward more efficient, accessible, and continuous financial markets that better serve both institutional and retail participants.

Traditional derivatives markets, with their complex calendar structures and fragmented liquidity, increasingly appear outdated compared to the elegant simplicity of perpetual mechanisms. As regulatory frameworks adapt and institutional adoption accelerates, perpetuals may become the primary mechanism for leveraged exposure across all asset classes.

For institutional allocators, the message is clear: perpetual futures represent not just a crypto curiosity but a genuine innovation that may reshape leveraged market access across all asset classes. Understanding and adapting to this shift will prove crucial for maintaining competitive advantage in an increasingly integrated financial landscape.

When Fannie and Freddie met Satoshi

The FHFA's tax-free bridge between crypto wealth and real estate

On Wednesday, Federal Housing Finance Agency Director William Pulte issued a directive solving a massive problem for crypto holders: how to buy a house without the taxman taking a cut. Fannie Mae and Freddie Mac must now prepare proposals to recognize cryptocurrency holdings as qualifying mortgage reserves without requiring conversion to dollars, provided the crypto sits on regulated exchanges.

For Bitcoin holders with substantial gains, this is financial alchemy: leverage crypto wealth for homeownership while keeping upside exposure and dodging capital gains taxes. Coming one week after Circle made USDC eligible futures collateral, crypto is rapidly becoming accepted collateral across traditional finance.

Source: Pulte X post (US Director of Federal Housing FHFA)

The never-sell strategy goes mainstream

The directive's genius lies in tax treatment. Borrowing against crypto typically doesn't trigger capital gains since you're not selling anything. This creates a powerful wealth-building loop for crypto holders previously locked out of traditional real estate financing.

The principle is simple: why realize taxable events to fund real estate when you can leverage that wealth without triggering tax consequences? Crypto as mortgage collateral avoids the taxable event entirely while preserving upside exposure.

This mirrors strategies already popular among crypto sophisticates, where borrowing against digital assets provides liquidity while preserving long-term holdings. The FHFA directive just brought this tax-efficient approach to Main Street mortgage markets.

Volatility meets reality

Crypto's volatility demands careful risk management. Different assets get different loan-to-value treatment based on risk profiles—commercial real estate typically allows 75-80% ratios, while volatile assets like land often get capped at 50%.

Crypto will likely face meaningful haircuts, potentially more conservative than traditional assets. But even with substantial valuation discounts, digital asset holders gain leverage while keeping full upside exposure.

The regulated exchange requirement clarifies which assets qualify. Your Fartcoin speculation won't help, but properly custodied Bitcoin and Ethereum on compliant platforms suddenly become valuable financial building blocks.

Infrastructure wins again

This validates last week's stablecoin infrastructure thesis. The same regulatory momentum making USDC eligible futures collateral now extends to housing finance—systematic crypto recognition across traditional finance rather than isolated experiments.

For infrastructure providers, this creates another value proposition. Coinbase, already benefiting from Circle's USDC distribution, now has additional justification for institutional custody services. The more crypto becomes accepted collateral, the more valuable compliant custody infrastructure becomes.

The bottom line

The FHFA directive represents more than regulatory accommodation—it creates a tax-efficient bridge between crypto wealth and traditional real estate. For Bitcoin holders reluctant to realize gains, this opens homeownership opportunities without sacrificing upside exposure.

The speed—from stablecoin futures collateral to mortgage reserves in weeks—suggests institutional adoption is accelerating beyond traditional finance's typical pace. Your Fartcoin still won't qualify, but your properly custodied Bitcoin might soon help buy a house while keeping capital gains unrealized.

That transformation from impossible to probable represents exactly the infrastructure evolution creating lasting investment opportunities.

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