Jenna Wright, Managing Director, Digital Assets, LMAX Group
The digital asset space, once a niche corner of finance, has rapidly evolved into a significant and increasingly sophisticated market. For professional traders and institutional brokers, understanding the various instruments available and how to engage with them safely and efficiently is paramount.
This article will explore three primary trading instruments – spot crypto, perpetual futures and crypto CFDs – providing a holistic view for those looking to enter or expand their presence in digital asset trading. At LMAX Group, we recognise the growing interest and the need for clear pathways into this exciting frontier.
State of play
Before diving into the instruments, it's crucial to understand the current market structure. The crypto landscape is overwhelmingly dominated by derivatives trading, with perpetual futures being the single most popular and high-volume instrument.
Derivatives dominance
In the centralised exchange ecosystem, monthly derivatives trading volume consistently outpaces spot trading volume by a significant margin. In periods of high activity, monthly derivatives volumes can reach into the multitrillion-dollar range, while spot volumes sit lower.
Within derivatives, perpetual futures are the clear leader. This year, perpetual futures volumes have reached record highs, with monthly trading volume reaching nearly $49 trillion on centralised exchanges (CEXs) as of October 2025, on track to surpass 2024. perpetual futures volume which hit $58.5t on the top 10 centralised perpetual exchanges, double its volumes of $28.0t in 2023. Bitcoin perpetual futures have been reported to have an average daily volume up to three times larger than their corresponding spot products on major centralised exchanges in recent quarters.
Spot crypto trading: the foundation
Spot crypto trading is a direct entry point into the digital asset market. It involves the immediate purchase or sale of cryptocurrencies, with actual ownership of the underlying asset being transferred.
How it works: when you buy Bitcoin on the spot market, you own Bitcoin.
For institutions, spot trading is fundamental for:
- Direct asset ownership: provides full control over the asset, enabling long- term holding strategies.
- Clear valuation: the price reflects the current market supply and demand, offering transparency.
- Institutional adoption: the introduction of regulated products like spot Bitcoin ETFs has amplified institutional participation in the spot market, leading to improved liquidity and tighter spreads.
Considerations for institutions: while simple in concept, institutional spot trading demands robust infrastructure, deep liquidity and secure custody solutions. Firms need reliable venues that can handle large order sizes without significant price impact and provide segregated accounts for client funds.
Perpetual futures: managing exposure with leverage
Perpetual futures blend characteristics of traditional futures contracts with an indefinite expiry date. Their high-volume nature demonstrates their role as the primary vehicle for leveraged speculation and hedging.
How it works: perpetual futures track the price of an underlying cryptocurrency but are synthetic instruments. Traders speculate on price movements. The "funding rate", a small payment exchanged between long and short positions, is key to tethering the perpetual future's price to the spot market.
- Leverage and capital efficiency: perpetual futures allow traders to use high leverage, a major driver of their huge trading volumes and popularity, as it enables controlling a larger position with a smaller amount of capital.
- Hedging: institutions use the high liquidity of perpetuals to effectively hedge existing spot positions.
- Sophisticated strategies: the perpetual nature and funding mechanism facilitate advanced strategies like cash-and-carry arbitrage between the spot and perpetual markets.
Considerations for institutions: the use of leverage introduces higher risk, necessitating stringent risk management protocols. Institutions engaging with perpetual futures require platforms offering robust margin systems, clear funding rate mechanisms and the ability to execute large orders without significant slippage.
Crypto CFDs: accessible price exposure without direct asset handling
Contracts for Difference (CFDs) are another derivative instrument that allows traders to speculate on the price movements of an asset without owning the underlying asset itself.
How it works: when trading a crypto CFD, you contract with a broker to exchange the difference in the price of a cryptocurrency from the time the contract is opened until it is closed.
- No custody burden: for many traditional institutions and brokers, CFDs are operationally appealing as they eliminate the complexity and security risk of managing crypto wallets and custody. This is a major factor in their adoption by brokerages for client offerings.
- Familiar framework: CFDs operate within established financial market structures, offering a familiar risk and regulatory profile for firms accustomed to traditional derivative products.
- Leverage: like perpetual futures, crypto CFDs often offer leverage, appealing to directional speculation strategies.
Considerations for institutions: while popular, CFDs involve counterparty risk with the broker. Institutions must partner with well-regulated providers who offer transparent, reliable pricing that accurately mirrors the deep liquidity of the underlying spot market.
LMAX Group: your trusted partner in digital assets
We understand that professional traders and institutional brokers have diverse needs when approaching the digital asset space. We provide a secure, regulated and high- performance environment designed to support your strategy, regardless of which instrument you choose.
We are currently onboarding institutional brokers to a new, fully hosted, broker- branded interface that allows clients to seamlessly deposit digital assets and use as cross-asset collateral across our ecosystem. This industry-leading solution is designed to solve existing challenges and empower brokers and financial institutions with secure, efficient, cross-asset collateral management.
We bridge the world of traditional finance and digital assets, understanding the institutional demand for regulated, transparent and high-quality venues for both spot and derivatives activities. Our institutional approach ensures that you can execute your strategies efficiently, whether capitalising on derivates or the spot market.
Embrace the future of finance with a partner you can trust.
