Hong Kong Hike Forged BitMEX Perpetual Swap Juggernaut

A product born during a 2015 hiking trail conversation in Hong Kong later put BitMEX at the center of bitcoin price discovery, with the exchange processing $3-4 billion a day by 2017.

A Hong Kong hike turned the BitMEX perpetual swap into crypto's trading machine

The BitMEX perpetual swap did more than give traders a cleaner way to bet on bitcoin. It solved a market-structure problem that BitMEX’s own users kept throwing back at the exchange: futures expired, positions closed, and customers hated it.

Ben Delo, BitMEX’s mathematician co-founder, told CoinDesk that the idea emerged while he was walking with Bavik, a derivatives trader, in Hong Kong sometime in 2015. BitMEX had already tried quarterly futures, monthly futures, weekly futures, 48-hour futures, and even a contract that reset after 24 hours. None fit what users wanted.

"We were a scrappy startup," Delo said of BitMEX back in 2016, when it launched the first perpetual future. "We thought, ‘Just get it out there. If it was any good, the market would show us.’"

The market did show them. The BitMEX perpetual swap became the template for a product that, according to Delo, now does $40, 50 trillion dollars a year of turnover.

XOOMAR analysis: the deeper story is not that crypto traders discovered leverage. They already wanted it. The real shift was that BitMEX turned leverage into a single, liquid, always-on instrument that behaved more like spot than a dated futures contract.

How the 2016 BitMEX perpetual future solved the expiry problem

The original user complaint was simple: traders wanted exposure that did not vanish on a settlement schedule. They wanted something that “looked like spot, traded like spot,” but came with the leverage of a derivatives venue.

Delo’s first formulation was almost absurdly direct.

"What if a future never expired?" Delo asked.

Bavik’s answer exposed the mathematical problem. Without expiry, the carry component could compound indefinitely. Delo recalls Bavik saying:

"Mathematically, it would be worth infinity."

The fix was the funding rate. Bavik suggested charging traders the bitcoin overnight rate, similar to how one might charge LIBOR in traditional finance. Delo’s answer captured the blank space crypto still had in 2015:

"I said, what's that?" Delo recalls. "He said, ‘Hm, just charge them the overnight bitcoin interest rate’. I said, ‘I don't think that exists.’"

So BitMEX built a synthetic mechanism.

The perpetual future launched in May 2016. It had no expiry date. Instead, the contract stayed tied to spot through a daily funding rate. If the swap traded above spot, longs paid shorts. If it traded below spot, shorts paid longs. BitMEX took no cut from that payment, according to the source. The rate existed to pull the contract back toward the underlying bitcoin price.

That design changed trader behavior. No rolling contracts. No surprise expiry. No need for BitMEX to split liquidity across a ladder of separate tenors. The product collapsed trading into one market.

The scale markers Delo gives: 100x leverage, $3-4 billion a day, and $40, 50 trillion a year

BitMEX did not start as a casino-style venue chasing retail leverage. Delo and Arthur Hayes founded the exchange in 2014 with institutional hedgers in mind. Hayes had worked at Deutsche Bank. Delo had built high-frequency trading systems at JP Morgan. Their early theory was that bitcoin miners and payment companies needed hedging infrastructure.

"We built it basically to look like a Bloomberg terminal," Delo said. "We used Reuters instruction codes. Z14 meant expiring December 2014."

The institutions did not arrive. Instead, BitMEX attracted sophisticated retail traders with financial experience and their own capital at risk. By Halloween 2015, the exchange offered 100x leverage, enabled by a real-time margining system Delo said he built himself.

"I built the order matching engine, the position keeping system, the margining system, the PnL system, the settlement system," he says. "Everything on that was me."

The data points in the source are enough to show the arc:

XOOMAR analysis: the critical metric is not just volume. It is concentration. Before the perpetual swap, BitMEX spread market maker capital across quarterly, monthly, weekly, 48-hour, and 24-hour contracts. After the swap, liquidity had one obvious home.

Old futures DNA, crypto-native mechanics

The BitMEX perpetual swap borrowed from conventional futures but cut out the feature that kept breaking the user experience: expiry.

Traditional futures have a settlement date. That date creates basis, the premium or discount to spot that reflects carry and time. Delo said BitMEX users struggled with this in 2015.

"Our customers would be like, why is bitcoin so expensive on your exchange?" Delo recalled "And we would say, ‘Well, if it is expensive, why don't you short it?’ And that would blow some of their minds. You could short something rather than just long it."

The perpetual kept the derivative but replaced expiry with funding. At first, BitMEX derived the funding rate from third-party lending markets, mainly Bitfinex, by taking the dollar borrow rate and subtracting the bitcoin borrow rate. That worked until bitcoin’s rise through 2016 and into 2017 overwhelmed the imported rate.

The swap traded at a persistent premium. The anchor slipped.

"We had to dynamically adjust how we calculated that funding rate," Delo said.

BitMEX then measured how far the swap traded above or below spot over an eight-hour window, treated that gap as implied basis, back-calculated an annualized rate, and charged it at the end of the next eight-hour window.

That was the real invention. Not “a future with no expiry” in isolation, but a feedback loop that paid traders to pull the contract back toward spot.

Traders got speed, exchanges got liquidity, regulators got a harder problem

Active traders loved the product for obvious reasons: leverage, no expiry, and a contract that stayed close enough to spot to become the main venue for directional risk. Delo said that by 2017, bitcoin price discovery was happening on the BitMEX order book, not on Coinbase or Bitstamp.

Exchanges got an even cleaner prize: one product that concentrated flow. Delo put it plainly.

"By offering one product, they [traders] were able to consolidate their liquidity, which meant a more liquid market, tighter spreads," Delo said.

Competitors noticed. Delo told CoinDesk that one exchange copied portions of the BitMEX FAQ without understanding the product. Others adopted the architecture seriously. Eventually, according to the source, every major crypto exchange offered its own perpetual swap.

Regulators are now circling the same design from a different angle. CoinDesk reports that the CFTC is reportedly making room for perpetual swaps under its framework, while there is speculation that CME could eventually list them on equities.

That debate sits inside a broader crypto-policy fight. XOOMAR has tracked how U.S. rulemaking can stretch over years in Clarity Act Draft Kicks Trump Crypto Fight to 2029, while enforcement pressure around crypto flows appears in cases like Scam Cash-Out Trail Draws $25M Crypto Forfeiture Push. Perps are a different issue, but the shared theme is the same: crypto products scale faster than oversight structures adapt.

Derivatives-first price discovery is the real legacy

The enduring lesson from the BitMEX perpetual swap is that crypto price discovery can move where leverage and liquidity are deepest, not necessarily where the underlying asset changes hands.

That means traders cannot read bitcoin markets by looking only at spot buying and selling. The source does not provide current open interest, liquidation totals, or funding spikes, so those numbers should not be invented here. But the mechanism itself tells investors what matters: funding rates, basis, liquidation engines, and the distance between the perpetual and spot.

XOOMAR analysis: a trader can be correct on direction and still lose money in a perpetual if funding, margin, or liquidation mechanics move against them. That is the hidden cost of an instrument designed to feel like spot while behaving like a leveraged derivative.

For exchanges, the strategic lesson is sharper. A successful perp market does not merely add a product tab. It can become the center of liquidity, the venue traders watch first, and the instrument market makers use to hedge everything else.

The next test: regulated perps without killing what made them work

Delo says BitMEX considered patenting the perpetual swap and chose not to. The company decided to ship.

"We were a scrappy startup," he says. "We thought, just get it out there. If it was any good, the market would show us."

The next phase will test whether the product can move further into regulated finance without losing the traits that made it dominant: continuous exposure, deep liquidity, transparent funding, and fast risk transfer.

The evidence to watch is specific. If the CFTC creates workable room for perpetual swaps, and if CME-linked products eventually appear in equities as CoinDesk says some speculate, the thesis strengthens: BitMEX did not just build a crypto trading tool. It created a derivatives format traditional finance now has to study.

If regulated versions fail to attract liquidity, the opposite becomes clear. The perpetual swap’s power may depend less on its elegance and more on the risk appetite of the markets that first embraced it.

Disclaimer: This XOOMAR analysis is for informational and educational purposes only. It is not financial, investment, legal, tax, or professional advice. It does not provide buy, sell, hold, price-target, portfolio, or personalized recommendations. Verify information independently and consult qualified professionals before making decisions.

The Bottom Line

• BitMEX’s perpetual swap helped turn crypto leverage into a single, liquid, always-on trading product.
• The product addressed a core market-structure flaw by removing expiry from futures-style bitcoin exposure.
• Its growth helped make perpetual swaps central to bitcoin price discovery and modern crypto trading.