How a Hong Kong Hike Revolutionized Crypto Trading Forever

In 2015, Ben Delo, co-founder of BitMEX, was on a hike in Hong Kong, discussing a problem that had been plaguing him for months. Customers were complaining about their positions closing without warning, and Delo was determined to find a solution. His friend, Bavik, a derivatives trader, suggested creating a futures contract that never expired. Delo was intrigued and decided to build it, inventing one of the most influential financial products of the 21st century. The perpetual swap, launched in 2016, allowed traders to buy and sell with leverage, without the need for expiry dates. The core mechanic was simple: a futures contract 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 as demand for long exposure on BitMEX grew, the mechanism had to be adjusted. Delo introduced a dynamic funding rate, looking inward at how the swap was trading, rather than outward at external lending markets. This solution allowed market makers to anchor the swap back down to the spot price, creating a dynamic equilibrium. By 2017, BitMEX was the most liquid bitcoin market, processing $3-4 billion a day, with the perpetual swap at its center. The product's success has been unprecedented, with every major derivatives exchange in the world now using the funding rate mechanism. Delo's innovation has attracted the attention of traditional finance regulators, with the CFTC reportedly making room for perpetual swaps under its framework. As the perpetual swap continues to evolve, it's clear that this financial product has revolutionized the crypto trading landscape, with far-reaching implications for traditional finance.