US Retail Traders Flock to Perpetual Futures Contracts Amid High Risk

US retail traders are flocking to perpetual futures contracts, also known as 'perps', in an attempt to chase outsized returns. However, the data on who actually wins this game is discouraging.

Perpetual futures contracts are a type of bet on the future price of a crypto asset, but unlike traditional futures, they have no expiration date. This means that traders can keep their positions open indefinitely, with platforms offering leverage ranging from 50x to over 100x.

The appeal of perps lies in their ability to amplify gains, but it also comes with a high risk of loss. When markets move fast, funding rates can swing wildly, eating into positions even when a trader's directional bet is technically correct.

Research consistently shows that between 70% and 97% of day traders lose money over time, across multiple asset classes and market conditions. The 24/7 nature of crypto markets also means that traders don't get the luxury of sleeping without worrying about a price crash liquidating their positions.