How a Hong Kong Hike Revolutionized Crypto Trading Forever

The concept of the perpetual swap was born out of frustration with traditional futures contracts, which were not meeting the needs of crypto traders. Ben Delo, co-founder of BitMEX, was on a hike with a friend, Bavik, a derivatives trader, when he asked what if a future never expired. Bavik's response was that it would be worth infinity, but also suggested a solution - charging traders the bitcoin overnight rate. This idea led to the development of the perpetual swap, a futures contract with no expiry date, anchored to the spot price through a daily funding rate. The launch of the perpetual swap in May 2016 was a game-changer for BitMEX, which became the most liquid bitcoin market in the world. The product's success can be attributed to its ability to provide a leveraged product that never expired, meeting the needs of traders who wanted to speculate with high leverage. The funding rate mechanism, which was dynamically adjusted to reflect market conditions, played a crucial role in the product's success. Today, the perpetual swap is used by every major derivatives exchange in the world, with a turnover of over $40 trillion a year, making it one of the most successful financial products in history.