The Birth of a Crypto Revolution: How a Hong Kong Hike Changed the Game

In 2015, a hike in Hong Kong's countryside sparked an idea that would revolutionize crypto trading. Ben Delo, BitMEX co-founder, was trekking with friend and derivatives trader Bavik, grappling with a problem that had plagued him for months. BitMEX had tried various futures contracts, but customers kept complaining about positions closing unexpectedly. They yearned for a product that mimicked spot trading but offered the leverage of derivatives. Delo's question to Bavik - 'What if a future never expired?' - was met with a response that would change the course of crypto history: 'Mathematically, it would be worth infinity.' This conversation laid the groundwork for the perpetual swap, a financial innovation that would go on to transform the crypto landscape. Delo's solution was to charge traders the bitcoin overnight rate, a concept that didn't exist at the time. Undeterred, he built it, and in doing so, created one of the most influential financial products of the 21st century. The perpetual swap's launch in 2016 was a watershed moment, offering a futures contract with no expiry date, anchored to the spot price through a daily funding rate. This mechanism allowed longs and shorts to interact in a way that kept the contract price aligned with the actual price of bitcoin. As the crypto market evolved, so did the funding rate, with Delo's team dynamically adjusting the calculation to reflect the swap's trading activity. This inward-looking approach replaced the initial fixed reference point from external lending markets, ensuring the contract price remained tied to the spot price. The perpetual swap's impact was profound, with BitMEX becoming the most liquid bitcoin market in the world by 2017. The exchange's daily trading volume reached $3-4 billion, with the perpetual swap at its core. The product's success can be attributed to its design, which consolidated liquidity into a single instrument. Competitors took notice, with many copying the concept, and today, every major exchange in crypto offers its own perpetual swap. 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 crypto market continues to mature, the perpetual swap's influence will only continue to grow, a testament to the power of innovation and the vision of a hike in Hong Kong.