On 13 May 2016, a new product was announced in a short post on the BitMEX Blog. It described what came to be known as the XBTUSD perpetual swap. Though no one knew it at the time, this would come to change crypto – and finance in general – forever.
All great innovations solve a problem. For crypto traders, this was that the futures markets were inherently limiting – in a 24/7 market, we were relying on outmoded traditional futures products with expiration dates and limited ability to trade with leverage. That might do for traditional finance, but in crypto, we dream bigger. In a market that never stops, why should a crypto futures product need to expire?
We had an idea for how to solve this. We set about getting to work, sometimes in the unlikeliest of places – scribbles on a cocktail napkin in a raucous bar and bouncing ideas back and forth on one of the most famous hiking trails in Asia.
The result was the perpetual swap – a futures contract that never expires, mimics a margin-based spot market, and requires lower margin, unlocking opportunities for leverage – up to 100x, which broke new ground.
The overall result is straightforward, as Arthur put it in the original blog: “longs profit when the price rises, shorts profit when the price falls.”
One of the central innovations was the funding mechanism, which is what makes the swap ‘perpetual’. To make sure the contract stays in line with the cash price of XBT, holders pay or receive funding every 8 hours depending on whether they’re long or short and whether the perpetual swap price is higher or lower than the XBT cash level.
The perpetual swap wasn’t an immediate success, but it soon became one. Interest in crypto and trading volumes on the swap surged over the next three years (with plenty of debate over the extent to which each influenced the other). This resulted in the XBTUSD perpetual swap becoming the most traded cryptocurrency derivatives product of all time, with over 3 trillion USD in total volume on BitMEX alone to date.
Crypto, like other industries, is iterative. So, by virtue of some copypasta, the perpetual swap was soon the top performer on other derivatives exchanges as well, bringing with it many more users to the crypto space. And on BitMEX and other exchanges, the perpetual swap was applied to ETH and many other altcoins.
Many iterations later, the crypto space is breaking into the mainstream. XBT, ETH, and a host of cryptocurrencies are hitting all-time highs, previously sceptical institutions are embracing Bitcoin, and a surge of everyday users have entered spot markets. More importantly, crypto is becoming part of our culture. And we’re proud the perpetual swap played a role in that.
Five years on, we’re embarking on our own evolution, going beyond derivatives and greatly expanding our service offerings by adding five new global business segments: Spot, Brokerage, Custody, Information Products, and Academy.
At the same time, we’re finding ways to celebrate this anniversary in the truest way possible for us, because we’re traders at heart. So later today we’ll announce a positive change on the ETHUSD Perpetual Swap, and next week we’ll introduce some fun initiatives to reward our current traders and incentivise new traders to try BitMEX for themselves.
It’s a great time to be on BitMEX, whether you’re a longtime user, someone that hasn’t logged on in a while, or have never used BitMEX before.
We’re excited to have you join us – register here to get started on BitMEX.
If you have any questions, our Support team would be happy to help.