How a Hong Kong Hike Revolutionized Crypto Trading Forever

In 2015, Ben Delo, co-founder of BitMEX, was on a hike in Hong Kong with his friend Bavik, a derivatives trader. Delo was struggling to find a solution to a problem that had been plaguing his customers: futures contracts that kept expiring, causing positions to close without warning. His customers wanted a product that combined the benefits of spot trading with the leverage of derivatives. Delo asked, 'What if a future never expired?' Bavik's response was that it would be mathematically worth infinity. However, he also suggested a solution: charge traders the bitcoin overnight rate. This conversation marked the birth of the perpetual swap, a financial product that would go on to revolutionize crypto trading. The perpetual swap was launched in May 2016, with a core mechanic that was straightforward: a futures contract with no expiry date, anchored to the spot price through a daily funding rate. Longs paid shorts, or vice versa, depending on whether the swap was trading above or below spot. The early funding rate was derived from third-party lending markets, but it eventually had to be dynamically adjusted to respond to conditions on BitMEX itself. The new approach looked inward at how the swap was trading, rather than outward at external lending markets. This solution was elegant and effective, creating a dynamic equilibrium that kept the swap price aligned with the spot price. By 2017, BitMEX was the most liquid bitcoin market in the world, processing $3-4 billion a day, with the perpetual swap at its center. The product's success was due in part to its ability to consolidate liquidity into one instrument, creating a more liquid market with tighter spreads. Competitors took notice, and soon every major exchange in crypto was offering its own perpetual swap, built on the funding rate architecture that Delo had created. Today, the perpetual swap is one of the most successful financial products in history, with an estimated $40-50 trillion in annual turnover. Despite its success, BitMEX chose not to patent the perpetual swap, opting instead to focus on building and innovating. Now, traditional finance regulators are taking notice, with the CFTC reportedly making room for perpetual swaps under its framework, and speculation that the CME could eventually list them on equities. For Delo, this is the final validation of a product that started as a question on a hillside above Hong Kong, asked by someone who was tired of watching his customers struggle with expiring positions.