How a Hong Kong Hike Revolutionized Crypto Trading Forever

In 2015, a chance conversation on a Hong Kong hiking trail between Ben Delo, co-founder of BitMEX, and his friend Bavik, a derivatives trader, sparked an idea that would change the face of crypto trading. Delo was struggling to find a solution to the problems plaguing his exchange, where customers were frustrated with positions closing without warning. The answer lay in creating a futures contract that never expired, which would later become known as the perpetual swap or 'perp'. This innovative product allowed traders to buy and sell with leverage, while avoiding the complexities of traditional futures contracts. The perp's value was anchored to the spot price through a daily funding rate, where longs paid shorts or vice versa, depending on whether the swap was trading above or below spot. The launch of the perpetual swap in May 2016 marked a significant turning point for BitMEX, as it became the most liquid bitcoin market in the world, with the product at its core. The concentration of liquidity was a direct result of the swap's design, which consolidated market maker capital into one instrument. Today, the perpetual swap is used by every major derivatives exchange, with a turnover of $40-50 trillion per year, making it one of the most successful financial products in history. The fact that traditional finance regulators are now taking notice of the perpetual swap is a testament to its impact and a validation of Delo's vision. As the crypto market continues to evolve, the perpetual swap is likely to remain a key component, offering traders a unique combination of leverage and flexibility.