How Do Financial Derivatives like Perpetual Swaps Relate to the Stability of a Crypto Ecosystem?

Perpetual swaps, a form of futures contract without an expiry date, are crucial for price discovery and providing leverage. They allow traders to bet on price movements, often driving high trading volume.

However, excessive leverage in the derivatives market can amplify price volatility and cascading liquidations, posing a systemic risk to the stability of the underlying spot markets and, by extension, stablecoin collateral.