The Genesis of a Crypto Trading Revolution: How a Hong Kong Hike Changed Everything

In 2015, a hiking excursion in Hong Kong became the unlikely catalyst for the conception of the perpetual swap, a financial instrument that would forever alter the landscape of crypto trading. Ben Delo, BitMEX co-founder and mathematician, was engaged in a discussion with a friend, Bavik, a derivatives trader, as they grappled with a persistent issue that had been plaguing Delo for months. BitMEX had experimented with various futures contracts, including quarterly, monthly, weekly, 48-hour, and even 24-hour contracts, but none seemed to meet the needs of their customers, who were frustrated by positions closing without warning and desired a product that mimicked spot trading but offered the leverage of a derivatives exchange. Delo posed a question: what if a future never expired? Bavik's immediate response was that it would be mathematically worth infinity, given that a futures contract's value is partly derived from its time to expiry and carrying costs. However, Bavik proposed a solution: charge traders the bitcoin overnight rate, akin to LIBOR in traditional finance. The challenge was that this rate did not exist, prompting Delo to create it, thereby inventing one of the most impactful financial products of the 21st century. The story of BitMEX's evolution and the creation of the perpetual swap is a testament to innovation and the relentless pursuit of solving real-world problems in the financial sector.