A Decade of BitMEX: The Perpetual Swap Remains a Market Favorite

BitMEX CEO Stephan Lutz is unbothered by competitors copying the crypto exchange’s flagship invention: the perpetual swap.

The phrase “Good artists copy, great artists steal,” often attributed to Apple’s Steve Jobs, underscores the concept of borrowing and building upon others’ ideas. Lutz, who took over as CEO in late 2022, believes that BitMEX’s perpetual swap, the core financial instrument for crypto derivatives, has been beneficial for the market, even as others have copied it. According to him, the more traders that use the product, the better for the overall market.

“It was copied by everyone because that’s just open-source know-how,” Lutz told CoinDesk. “The whole world works on it, which is the best form of flattery we can wish for in the end.”

The perpetual swap differs from traditional futures contracts in that it does not have an expiration date and simulates margin trading. This financial product uses a funding rate, a mechanism where long and short positions exchange payments, to keep the price aligned with the underlying asset. This makes it a continuous market without expiry dates, offering traders the ability to keep their positions open indefinitely.

Lutz argues that the creation of the perpetual swap was a pivotal moment in crypto trading, solving key issues such as counterparty credit risk and creating a more structured environment for matching long and short positions.

“You faced counterparty credit risk, and there was no real structure for bringing longs and shorts together,” said Lutz. “The perpetual swap with the funding mechanism and the insurance fund behind it helped to ignite the entire [futures] trading industry.”

Lutz also emphasized how the perpetual swap is particularly suited to the rapid pace of the crypto market. In traditional finance, trends may unfold over years, but in crypto, they happen much faster.

“If you say it’s a seven-year cycle in TradFi, this cycle is six months in crypto,” Lutz explained, drawing from his experience at Deutsche Börse. “You need to react to new developments very quickly.”

While BitMEX may no longer be the largest derivatives exchange by volume—centralized exchanges like Binance have adopted perpetual swaps—BitMEX still maintains a loyal base of traders. One reason for this loyalty is BitMEX’s commitment to neutrality: unlike some exchanges, it does not operate a market-making desk that trades against its own customers.

“Our funding rates can sometimes differ because we ensure completely independent price discovery, which is important for fairness,” Lutz noted. “It’s a matter of neutrality.”

During volatile market periods, BitMEX sees its market share often increase as traders flock to the platform for its reliability and transparency.

Looking to the future, Lutz believes BitMEX will continue to carve out a niche in Bitcoin-based derivatives while exploring new opportunities for expansion. As the perpetual swap has already been widely adopted, Lutz imagines BitMEX may innovate further and, once again, have its ideas copied by the industry.