How a Hong Kong Hike Revolutionized Crypto Trading Forever

The concept of the perpetual swap was born in 2015, during a hike in Hong Kong, when Ben Delo, co-founder of BitMEX, was discussing a problem with a friend, Bavik, a derivatives trader. At the time, BitMEX was struggling to find the right product for its customers, who were complaining about positions closing without warning. Delo and his team had tried various types of futures contracts, but none seemed to work. The breakthrough came when Delo asked, "What if a future never expired?" Bavik's response was that it would be mathematically worth infinity, but he suggested charging traders the bitcoin overnight rate to solve the problem. Delo built the product, inventing one of the most significant financial products of the 21st century. The perpetual swap launched in May 2016, with a core mechanic that was straightforward: a futures contract with no expiry date, anchored to the spot price through a daily funding rate. The early funding rate was derived from third-party lending markets, but it eventually had to be adjusted dynamically to respond to market conditions. The solution was to look inward at how the swap was trading, rather than outward at other markets. This approach has become the standard for the industry, with every major derivatives exchange now using a similar funding rate mechanism. By 2017, BitMEX was the most liquid bitcoin market in the world, processing $3-4 billion a day, with the perpetual swap at its center. The product's success has been so significant that it has attracted the attention of traditional finance regulators, with the CFTC reportedly making room for perpetual swaps under its framework.