Hong Kong Perp Origins: BitMEX’s Funding Rate and the Future of Crypto Perpetuals
BitMEX co-founder Ben Delo says a hike in Hong Kong in 2015 sparked the idea behind crypto perpetual swaps (“perps”)—futures with no expiry, intended to trade like spot while offering leverage.
BitMEX originally aimed to serve institutional hedgers, but retail traders wanted maximum leverage and continuous exposure. After launching perpetual swaps in May 2016, the key mechanism became the daily funding rate: when the perp price trades above spot, longs pay shorts; when below, shorts pay longs.
Early funding was imported from external lending markets, mainly Bitfinex, but during Bitcoin’s 2016–2017 rally the funding failed to keep the perp anchored to spot. BitMEX then shifted to a dynamic funding rate calculated from the perp’s premium/discount versus spot over an eight-hour window, improving market-maker incentives and creating a self-correcting equilibrium.
By 2017, BitMEX reported $3–4 billion in daily volume and concentrated bitcoin derivatives liquidity into one instrument, tightening spreads and boosting price discovery on the order book. Competitors copied the design; today, most major exchanges use funding-rate architecture derived from this original framework.
Looking ahead, regulators are increasingly engaging with perps. The article says the CFTC is reportedly making room for perpetual swaps under its framework, and speculation suggests CME could eventually list them. The piece frames this as validation that a product born from trader complaints may now be moving toward mainstream finance oversight.
Neutral
The story is largely historical—BitMEX’s perpetual swap design and funding-rate mechanics—so it’s not a direct new catalyst like an exchange listing or a protocol upgrade. Still, it matters for traders because the funding-rate model directly affects perp pricing, liquidation dynamics, and how quickly markets “snap back” to spot during stress.
In the short term, the article is unlikely to change funding rates immediately. However, it may shape trader expectations around funding as a stabilizer: the dynamic funding-rate method (premium/discount over a rolling window) is meant to damp persistent divergence between perp and spot. That can reduce the frequency of “basis blowouts” seen when funding is miscalibrated.
Long term, regulatory signals (CFTC framework and possible CME listing) can shift risk premia. If regulation improves perceived market legitimacy and liquidity access, it can be mildly supportive for overall perp activity. But compliance requirements can also introduce frictions (product restrictions, leverage limits, reporting), which could be neutral to mildly bearish for risk-taking.
Similar to how prior institutional adoption waves (e.g., futures/ETP expansions) tend to improve depth while changing hedging flows, this narrative suggests a gradual mainstreaming of perps rather than a sudden market regime change.