How a Hong Kong Hike Revolutionized Crypto Trading

In 2015, a hike in Hong Kong led to the creation of the perpetual swap, a financial product that changed the face of crypto trading. Ben Delo, co-founder of BitMEX, was on a hiking trail with a friend, Bavik, a derivatives trader, when he posed a question that would alter the course of cryptocurrency history: 'What if a future never expired?' The answer led to the development of a groundbreaking product that would give traders the leverage they desired without the constraints of traditional futures contracts. The perpetual swap, also known as a 'perp,' was born out of a need to address customer complaints about positions closing without warning. By charging traders an overnight rate, similar to LIBOR in traditional finance, Delo created a system that allowed for continuous trading without expiration dates. This innovation led to the creation of a real-time margining system, enabling 100x leverage and transforming BitMEX into the most liquid bitcoin market in the world. The perpetual swap's success was not without its challenges, as the initial funding rate mechanism struggled to keep up with demand. However, by dynamically adjusting the funding rate, BitMEX was able to create a stable and efficient system that would become the standard for the industry. Today, the perpetual swap is a cornerstone of cryptocurrency trading, with every major derivatives exchange offering its own version. The product's impact extends beyond the crypto world, with traditional finance regulators taking notice and considering the incorporation of perpetual swaps into their frameworks. As Delo looks back on the journey, he remains proud of the innovation that started as a simple question on a hillside above Hong Kong, 'I think once traditional finance sees the benefits of this financial product, it'll be impressive.'