The Genesis of a Revolutionary Trading Concept: How a Hong Kong Hike Changed the Crypto Landscape

The concept of the perpetual swap was born out of a problem that had been plaguing BitMEX: customers were complaining about their positions closing without warning due to the expiry of futures contracts. Delo and his team had tried various contract durations, but nothing seemed to work. It wasn't until Delo's conversation with the derivatives trader, Bavik, that the idea of a futures contract with no expiry date began to take shape. Bavik's suggestion to charge traders the bitcoin overnight rate sparked a eureka moment for Delo, who would go on to build the perpetual swap from scratch. The product launched in May 2016 and quickly became a huge success, with BitMEX becoming the most liquid bitcoin market in the world. The perpetual swap's innovative funding rate mechanism, which looked inward at the swap's trading activity rather than outward at external lending markets, helped to keep the contract price aligned with the spot price of bitcoin. The product's success was not limited to BitMEX, as it soon became a staple of the cryptocurrency derivatives market, with every major exchange offering its own version of the perpetual swap. Today, the perpetual swap is considered one of the most successful financial products in history, with an estimated $40-50 trillion in annual turnover. Delo's decision not to patent the product has allowed it to become a standard component of the cryptocurrency derivatives market, and it is now attracting the attention of traditional finance regulators. As the perpetual swap continues to evolve and mature, it is likely to have a profound impact on the world of finance, and its influence will be felt for years to come.