The Birth of a Revolution: How a Hong Kong Hike Paved the Way for Crypto Trading

In 2015, a chance conversation on a Hong Kong hiking trail between Delo and a derivatives trader named Bavik led to the creation of the perpetual swap, a financial innovation that would change the face of crypto trading forever. The idea was simple: a futures contract with no expiry date, which would allow traders to buy and sell with leverage, without the hassle of constantly rolling over contracts. The only problem was, it seemed impossible to price. Bavik's initial response was that, mathematically, it would be worth infinity. But then he suggested a solution: charge traders the bitcoin overnight rate, similar to the way traditional finance charges LIBOR. The issue was, this rate didn't exist. So Delo built it. And in doing so, he created one of the most influential financial products of the 21st century. The perpetual swap launched in May 2016, and it quickly became the go-to instrument for traders looking to speculate on bitcoin. The core mechanic was straightforward: a futures contract with no expiry date, 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 it soon became clear that this approach was flawed. As bitcoin began its rise in 2016 and 2017, demand for long exposure on BitMEX overwhelmed the funding mechanism, causing the contract price to drift away from the actual price of bitcoin. Delo and his team had to dynamically adjust the funding rate, looking inward at how the swap was trading rather than outward at external lending markets. The solution was elegant: measure the gap between the swap and spot over an eight-hour window, treat it as an implied basis, and back-calculate the annualized rate from it. This approach gave market makers notice of how the rate would be calculated, allowing them to anchor the swap back down to the spot price. The result was a dynamic equilibrium that has become the standard for derivatives exchanges around the world. By 2017, BitMEX was the most liquid bitcoin market on the planet, processing $3-4 billion a day, with the perpetual swap at its core. The product's success was not lost on competitors, who quickly copied the concept. Today, every major exchange in crypto offers its own perpetual swap, each one built on the funding rate architecture that Delo pioneered. The perpetual swap has become one of the most successful financial products in history, with an estimated $40-50 trillion in annual turnover. And now, traditional finance regulators are taking notice, with the CFTC reportedly making room for perpetual swaps under its framework. For Delo, this is the ultimate validation of an idea that started as a question on a hillside above Hong Kong.