The Genesis of a Revolutionary Trading Concept: How a Hong Kong Hike Paved the Way for Crypto's Perpetual Swap

In 2015, a casual conversation between Ben Delo, BitMEX's co-founder, and a friend named Bavik on a Hong Kong hiking trail, laid the groundwork for the perpetual swap, a financial instrument that would forever change the landscape of cryptocurrency trading. Frustrated by the limitations of traditional futures contracts, Delo sought a solution that would provide traders with the leverage they craved without the constraints of expiration dates. The answer, as proposed by Bavik, was to charge traders an overnight rate, akin to LIBOR in traditional finance, to maintain the contract's value. However, this rate did not exist for Bitcoin at the time, prompting Delo to create it. The perpetual swap, launched in May 2016, allowed longs and shorts to interact in a continuous market, with a funding rate mechanism that ensured the contract's price remained anchored to the spot price of Bitcoin. Initially derived from external lending markets, the funding rate was later made dynamic, responding to the market conditions on BitMEX itself. This innovation has since been adopted by major derivatives exchanges worldwide, with the perpetual swap becoming a cornerstone of cryptocurrency trading, facilitating over $40 trillion in annual turnover and attracting the attention of traditional finance regulators.