In 2016, the cryptocurrency exchange BitMEX introduced the first perpetual futures contract. The product gave traders a way to bet on Bitcoin’s price without an expiration date, a break from traditional futures.
What a perpetual futures contract is
Unlike standard futures that settle on a set date, a perpetual futures contract has no expiry. Instead, it uses a funding rate to keep the contract price close to the spot market. This design lets traders hold positions as long as they want, as long as they pay or receive the periodic funding fee.
Why it mattered
Before 2016, crypto derivatives were limited. BitMEX’s launch gave the market a new tool. The contract allowed for both long and short positions, and its perpetual nature removed the need to roll over contracts. That made it simpler for traders who wanted to maintain a position over time.
How the product works
The funding rate is the key mechanism. Every few hours, traders on one side of the trade pay the other side. If the contract trades above the spot price, longs pay shorts. If it trades below, shorts pay longs. This system pushes the contract price back toward the spot price, preventing large deviations.
BitMEX’s contract also used leverage, letting traders control a larger position with a smaller amount of capital. That amplified both gains and losses.
Legacy of the launch
The 2016 launch set a template. Perpetual futures contracts are now a standard product on many crypto exchanges. BitMEX itself grew quickly after the introduction, though the company later faced legal challenges. The contract itself remains a core part of the crypto derivatives market.
