Perpetual swaps, also known as perps, move an astonishing $40 to 50 trillion in annual trading volume, overshadowing spot markets in crypto. These contracts let traders gain leveraged exposure to assets like Bitcoin without ever owning them directly.
Introduced by BitMEX in 2015, perps revolutionized crypto derivatives by removing expiry dates common in traditional futures contracts. That change means traders can hold positions indefinitely without rolling contracts over, a major pain point in earlier crypto futures trading.
Without an expiry date to keep prices anchored, BitMEX implemented a funding rate mechanism: every eight hours, payments shift between long and short positions based on how far the perp price strays from the spot price. If the perp trades above spot, longs pay shorts, encouraging price correction, and vice versa. The exchange itself takes no cut from these payments.
This innovation settled the persistent premium known as basis, seen in early crypto futures, and became the industry standard, embraced by hedge funds and retail speculators alike looking for efficient leveraged trading.
Perpetual swaps continue to dominate crypto markets, demonstrating how a clever contract design can reshape financial trading. For context on related market shifts, see how BitMEX’s recent changes affected the broader market.
