How a Hong Kong Hike Revolutionized Crypto Trading Forever

In 2015, a hike in Hong Kong's trails sparked an idea that would change the face of crypto trading. Ben Delo, BitMEX co-founder and mathematician, was discussing a persistent problem with Bavik, a derivatives trader. BitMEX had tried various futures contracts, but customers complained about positions closing unexpectedly. They sought a product that mimicked spot trading but offered the leverage of derivatives. Delo asked, "What if a future never expired?" Bavik replied, "Mathematically, it would be worth infinity." However, he suggested charging traders the bitcoin overnight rate to solve the issue. Delo built this concept, inventing one of the most significant financial products of the 21st century. Initially, BitMEX targeted institutional hedgers, but retail traders dominated the platform. By Halloween 2015, the exchange offered 100x leverage, thanks to Delo's real-time margining system. The perpetual swap, launched in May 2016, was a futures contract with no expiry date, anchored to the spot price via a daily funding rate. Longs paid shorts, or vice versa, depending on the swap's price relative to spot. The funding rate was derived from third-party lending markets but later became dynamic, reflecting the swap's trading activity. This mechanism is now used by every major derivatives exchange. By 2017, BitMEX was the most liquid bitcoin market, processing $3-4 billion daily. The perpetual swap's design concentrated liquidity, making it a product that competitors noticed and emulated. Today, the swap is considered one of the most successful financial products in history, with an estimated $40-50 trillion in annual turnover. BitMEX chose not to patent the perpetual swap, focusing on building instead. Now, traditional finance regulators are taking notice, with the CFTC reportedly making room for perpetual swaps, and speculation about the CME listing them on equities.