The 2025 Crypto Bull Market: A New Engine Driven by Perpetual Contracts
The 2025 crypto bull market is unlike any before, with perpetual contracts serving as its true engine. This article will unveil why liquidity is unprecedentedly concentrated in the contract market and explain how “short liquidations” have become the rocket fuel driving asset prices upward.
(Background: You did not misread your profit and loss; you were simply misled by the rules behind perpetual contracts.)
(Context: Where is institutional capital flowing? Uncovering the five golden tracks of this potential “altcoin season.”)
A New Era: The Bull Market’s Engine Roars Differently
The 2025 crypto bull market may already be upon us, but its engine roars in a manner vastly different from the past. If you are still fixated on spot trading volume to gauge market heat, you might 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 longs and shorts. Here, liquidity, narratives, and wealth effects are defining the entire market in unprecedented ways.
Why is liquidity exceptionally concentrated in the contract market, and how have “short liquidations” become rocket fuel propelling asset prices in a spiral upward?
1. Data Insight: 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 that of the spot market.
Trading Volume Comparison: According to data from platforms like TokenInsight in Q2 2025, the trading volume of crypto derivatives (primarily 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 in major cryptocurrencies like BTC and ETH, as well as popular new coins, reveals that their scale far exceeds the corresponding spot inventory on exchanges. This indicates that the vast majority of market participants’ risk exposure and capital are deployed in the derivatives sector.
Funding Rate: For most of this bull market, the funding rate has remained long-term positive and high. This has attracted a large number of “arbitrageurs” who earn stable funding rates through the strategy of “shorting perpetual contracts + buying an equivalent amount of spot,” further draining liquidity from the spot market and locking it into hedge positions.
Conclusion: The data clearly indicates a structural shift in the focus of market capital, attention, and competition. Perpetual contracts are no longer an appendage to the spot market; they have become the core battleground that dominates short-term price fluctuations. The market has transitioned from “spot driving contracts” to “contract speculation forcing spot.” At this moment, spot has indeed become a ‘subsidiary.’
2. Core Mechanism Revealed: How the ‘Short Liquidation Rocket’ is Launched
The “strange phenomenon” in the market: price increases do not begin with spot buying but are driven by liquidations on the contract side. This is the core mechanism of the current “Perps Bull Market.”
Let’s illustrate this process with a simplified numerical case.
Case Study: New Coin “RocketCoin” (RKT)
Background Setting: RKT is a popular new project with an extremely low initial circulation of only 1 million tokens (1/10) in the market. (Assuming a total circulation of 10 million tokens.) 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 that between $11 and $15, there are short orders worth $10 million (300,000 RKT) waiting to be liquidated.
Launch Process:
Initial Ignition: A whale or project party invests a small amount of capital in the spot market, for example, using $200,000 to buy 20,000 RKT, forcefully pushing the spot price from $10 to $11. The spot market has low circulation (a shallow pool), making the lifting cost extremely low.
First Stage Rocket Separation (First Liquidation Round): When RKT price reaches $11, the first batch of short positions set to stop-loss at this price is forcibly liquidated (i.e., blown up). Assume this batch is worth $1 million.
Liquidation Mechanism: The operation of “liquidating the short position” equates to “buying.” The liquidation engine needs to immediately purchase $1 million worth of RKT contracts in the market.
Market Maker Hedge: Market makers providing liquidity to the liquidation engine will simultaneously sell contracts and immediately buy an equivalent amount of RKT spot to hedge against their exposed short risk.
Price Feedback: This purchase order from the market maker further pushes the already thin spot price higher, for example, from $11 to $12.
Second Stage Rocket Ignition (Chain Liquidations): When the spot price reaches $12, a new batch of larger short positions is triggered for liquidation. This process perfectly repeats the second step: contract liquidation -> market maker buys spot for hedging -> spot price rises further.
Entering Orbit: This cycle continues, forming a positive liquidation spiral. Each layer of short liquidation becomes fuel for the next round of price increases, pushing RKT’s price from $11 all the way to $15 or even higher. In this process, the initial $200,000 of “ignition” capital has leveraged hundreds of thousands or even millions of dollars of passive buying.
Conclusion: This is the simple version of the essence of the “Perps Bull Market”: leveraging extremely low spot liquidity as a pivot, creating opposing positions (a large number of shorts) in the contract market, and ultimately using the mechanism of “liquidation” as the engine to drive prices to seemingly “rise from nowhere.” The increase in spot prices is more of a result and manifestation of this process rather than a cause. (Clearly, in practice, things are not this straightforward.)
3. Why ‘This Version’? Timing, Location, and People
This phenomenon was not as pronounced in previous cycles and is the result of multiple factors acting together:
Timing (Project Party Strategy): Projects in this cycle generally adopt a “Low float, High FDV” issuance model. This creates perfect “necessary and sufficient conditions” for artificially controlling spot liquidity and leveraging the high-leverage contract market.
Location (Market Infrastructure): Perpetual contract products have matured significantly after years of development. The smooth trading experience, deep liquidity, and comprehensive API and market maker systems enable it to accommodate massive capital and complex speculation.
People (Market Consensus and Narrative):
The paradigm of “shorting new coins”: This rendered “consensus” actively generates a large amount of “fuel” for the market.
The myth of getting rich: The promotion of contract gods achieving returns of hundreds of times continues to attract players eager for high-risk, high-reward opportunities. Especially, the extreme trading operations of whales on Hyperliquid provide ample room for imagination within this “get-rich (negative)” narrative.
The temptation of mechanisms: Strategies like funding rate arbitrage and liquidation grabbing have transformed the market from a simple long-short confrontation into a multi-role, multi-dimensional financial game, further locking in liquidity.
Conclusion
Do not take it to heart; this is merely a “Perps Bull Market,” a playful term for the deep structural changes in the market. While it signifies stories of wealth growth, it more so narrates a complex financial fable about leverage, liquidity, mechanisms, and human nature, rather than simple value discovery.
In this version, spot has become the hedging instrument and the ultimate embodiment of price, while perpetual contracts are the core vehicle that integrates narrative, capital, and mechanism, truly defining the pulse of the market. Understanding and adapting to this game rule of “using your liquidation as fuel” is key to navigating this cycle.
Finance, or rather speculation, works this way; PVP will always bring new experiences.
May we always maintain a sense of awe towards the market.
