How a Hong Kong Hike Revolutionized Crypto Trading

In 2015, a hike in Hong Kong sparked an idea that would go on to transform the world of cryptocurrency trading. Ben Delo, co-founder of BitMEX, was discussing the challenges of futures contracts with a friend, Bavik, a derivatives trader. Delo was searching for a solution to the problem of customers complaining about positions closing without warning. The conversation led to the concept of a perpetual swap, a futures contract with no expiry date. Initially, the idea seemed impossible, as the theoretical value of such a contract would be infinite. However, Bavik suggested charging traders the bitcoin overnight rate, which Delo then built into the product. The perpetual swap was launched in May 2016, and it quickly became a game-changer for BitMEX, allowing traders to speculate with high leverage and transforming the exchange into the most liquid bitcoin market in the world. The product's success can be attributed to its innovative funding rate mechanism, which dynamically adjusts to reflect the market conditions. This mechanism has since been adopted by other major derivatives exchanges. Today, the perpetual swap is considered one of the most successful financial products in history, with a turnover of $40-50 trillion per year. The story of the perpetual swap serves as a testament to the power of innovation and the importance of listening to customer needs. As traditional finance regulators begin to take notice of the product, it is likely that its impact will be felt beyond the world of cryptocurrency trading.