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Bitfinex Vs. Kraken: Pro-level Exchanges with Margin Trading

Bitfinex vs Kraken at a Glance

The exchanges at Bitfinex and Kraken are both designed to support advanced traders. Going beyond straight market orders, both exchanges offer trading tools and leverage that let traders manage risks and maximize their returns. Despite these similarities, Bitfinex only wants the highest-volume traders on its exchange.

Our guide to Bitfinex vs Kraken will help you figure out if you can make the Bitfinex cut or if Kraken is the advanced exchange for you.

Bitfinex Kraken
Pros
  • More than 60 altcoins.
  • Four fiat currencies
  • Leveraged trading.
  • No verification for crypto-only trading.
  • Available in the USA.
  • Seventeen cryptocurrencies.
  • Five fiat currencies.
  • Leveraged trading.
  • More inclusive.
Cons
  • Not available in USA.
  • Troubled history.
  • Crypto novices not welcome.
  • Discounts require much higher trading volumes.
  • Americans limited to 37 states.
  • No longer available in Japan.

Where Did They Come From?

Bitfinex

Join bitfinex
Source: Bitfinex

When Bitfinex first hit the bitcoin scene in 2011, it was among the first exchanges that allowed peer-to-peer lending for margin trading. Over the subsequent years, the exchange expanded its trading options and its crypto listings to become one of the largest digital exchanges on the planet.

Other exchanges like OKEx and Huobi have since eclipsed Bitfinex at the top of the CoinMarketCap rankings, but Bitfinex remains one of the ten largest cryptocurrency exchanges.

A troubled history, outlined by CoinDesk in some detail, may have stalled Bitfinex’s rapid growth. The exchange’s leadership has come under severe criticism for avoiding the public eye.

In addition, the frequency with which Bitfinex’s operations shut down earned it the moniker “Bugfinex” among some of its customers. Hackers targeted Bitfinex in 2016 and stole 120,000 bitcoin, worth $65 million at the time.

Troubled relationships with the established financial system have also dogged Bitfinex’s development. American banks refused to let their customers transfer funds to or from the exchange. And as recently as February 2018, the US Security & Exchange Commission issued a subpoena related to Bitfinex’s relationship with the Tether cryptocurrency project.

Bitfinex seems to have taken at least some of the criticism to heart. In March 2018, the exchange began publishing profiles of its senior leadership.

Related: Bitfinex Review: One of the World’s Biggest Digital Exchanges Has a Checkered Past

Kraken

Kraken review
Source: Kraken

Kraken has taken a more respectable path in its development. Borne from founder Jesse Powell’s experiences cleaning up the failed Mt. Gox exchange, Kraken has sought to operate more professionally. Kraken opened its doors to European traders in 2013 after more than a year of development. Within months, Kraken’s trading volume made it the largest euro-based exchange.

Powell steadily built Kraken’s reputation within the crypto community as well as within the traditional financial system. The trustee overseeing the Mt. Gox bankruptcy turned to Kraken for help tracking down the dying exchange’s lost bitcoins.

CME Group, the company that owns the Chicago Mercantile Exchange, created a bitcoin futures market last year. The bitcoin pricing index this market relies upon uses data from Kraken and a handful of other exchanges.

CoinMarketCap usually ranks Kraken among the twenty largest crypto exchanges.

Related: Kraken Review: High Liquidity Markets for Advanced Traders

Supported Currencies and Listing Policies

Bitfinex quickly developed a reputation as an exchange with deep markets in many cryptocurrencies beyond bitcoin. You’ll find more than sixty cryptocurrencies in the Bitfinex listings. However, the markets for the US dollar, bitcoin and ether have the most trading pairs. By contrast, only the highest-volume coins are traded against the euro, Japanese yen or British pound.

Kraken follows a similar path, albeit on a smaller scale, with seventeen cryptocurrencies and five fiat currencies.

Market Bitfinex Kraken
US dollar 65 trading pairs 14 trading pairs
Euro 7 13
British pound 7 3
Japanese yen 7 5
Canadian dollar n/a 6
Bitcoin 64 15
Ether 54 6

Listing policies

Bitfinex is much more aggressive when it comes to adding new coins to its listings. Even so, the exchange only provides a brief introduction to the way listing decisions get made. When deciding whether or not to list a coin, Bitfinex considers the following factors:

  • User requests.
  • Shareholder interest
  • Market capitalization.
  • Token design parameters.
  • Thorough assessment of the token’s development process.
  • Team behind the coin.
  • Strategies for solving technical and nontechnical problems.

Kraken, on the other hand, does not discuss its listing criteria at all. A CNBC report earlier this year quoted Kraken CEO Powell saying that his company’s selection process is “thorough”.  Powell followed that up with a warning: “I think ultimately consumers need to look out for themselves.”

Security and Hacks

Bitfinex was the target of a high-profile hack in which 120,000 bitcoins disappeared from the company’s hot wallet. Quartz reported that Bitfinex solved the problem by slashing its customers’ holdings by 36%. After “socializing” the loss, Bitfinex issued tokens to those customers, in effect giving them IOUs. Eight months later, Bitfinex redeemed all of the outstanding tokens from its own profits.

Bitfinex has since improved its security systems. More than 99% of the assets the exchange holds are kept in offline cold wallets. Access to those cold wallets requires manual authorization from several members of Bitfinex management.

Given Powell’s experience cleaning up the Mt. Gox hack and bankruptcy, it shouldn’t be surprising that security is a top priority at the exchange. There have been no known hacks in the company’s history. Kraken’s security system includes the separation of hot and cold wallets. The exchange even builds separate computer networks for each internal team. The computers used for customer support, for example, run on a different network than those processing customer verification requests.

Availability and Identity Verification

“We suggest that traders who are new to cryptocurrency trading try another, more straightforward platform first and return to Bitfinex later.”

Bitfinex prefers to focus on “professional traders and regional exchanges” rather than novices. Besides telling crypto newbies to stay away, the exchange requires an initial deposit of $1,000 in fiat and digital currencies before new customers can begin trading.

Bitfinex also imposes geographical limits on its customer base. Americans need not apply. In late 2017, Bitfinex announced that American customers had 90 days to close their accounts. The high cost of dealing with US regulators was out of proportion with the small amount of business American customers generated, according to the announcement. In addition, the exchange’s on-going struggles with American banks made deposits and withdrawals increasingly difficult.

“Bitfinex is not based in the United States. Exchanges based in the U.S. are better positioned to properly service retail U.S. customers.”

Secure from the start

Kraken withdrew from New York and twelve other states rather than be subjected to those states’ regulations. Similarly, Kraken withdrew from Japan earlier this year when the burden of regulations outweighed the exchange’s small market share.

Verification policies

Bitfinex only requires verification from customers who want to deposit or withdraw fiat currencies. Those who go through the process must supply contact information, ID scans, a bank statement and a proof of residency. The review process takes Bitfinex’s staff 6-8 weeks to process — if everything goes well.

Kraken has a similar, tiered verification process. If you only want to deal in cryptocurrencies, then tier one verification simply requires some personal data and contact information.

The second and third tiers allow you to make fiat-based transactions and require proof of identity. The third tier, required of all Americans, adds a proof of residency requirement.

A fourth tier unlocks even higher trading limits and is handled on a case-by-case basis by Kraken’s verification staff.

Trading, Fees and Apps

Trading interface

Bitfinex lets customers trade on the spot market through its web app. Through this interface, traders can adjust a number of settings like stop-limit and trailing stop to manage risks and returns. For very large orders, Bitfinex operates an over-the-counter (OTC) desk.

Trading chart on Bitfinex
Source: Bitfinex

Margin trading, long a source of Bitfinex’s popularity, lets traders who want to place leveraged orders borrow from other Bitfinex customers. In this peer-to-peer process, lenders fund dedicated wallets that fund loans to margin traders, earning interest in the process.

A rarity among US-based exchanges, Kraken also supports margin trading. Kraken funds the loans itself rather than using a Bitfinex-style peer-to-peer system. Kraken does restrict margin trades to the highest volume markets such as BTC/USD or ETH/EUR.

Kraken trading web app
Source: Kraken

Less risk-tolerant traders can take place market orders. A number of settings, such as stop-loss, let customers manage their limit orders.

Fees

Bitfinex charges fees for all fiat deposits and any crypto deposits worth less than $1000. Withdrawals of all currencies, fiat or digital, incur fees from Bitfinex.

Transaction fees on Bitfinex start at 0.1% for market makers and 0.2% for market takers. Keeping with the exchange’s focus on professional traders, the discounts don’t begin until a customer’s 30-day trading volumes reach $500,000. At the $7,500,000 level, market makers pay no fees. At the $30,000,000 level, market taker fees reach their lowest level at 0.1%.

Trades brokered by the OTC Desk do not incur fees. Both sides must pay a 0.1% fee if they make their OTC trade directly.

The interest generated on loans to margin traders gets charged 15% or 18% depending on the nature of the leveraged order.

Kraken charges fees for all fiat deposits and withdrawals. Only a few altcoins generate fees, mostly related to setting up the wallet. Kraken’s maker-taker fee structure starts at 0.16% and 0.26%, respectively. Discounts begin when 30-day trading volume reaches $100,000. Fees reach their lowest levels (0% and 0.1%) when trading volume exceeds $10,000,000.

Mobile apps

bitfinex for iOS and android
Source: Bitfinex

Bitfinex offers mobile apps for the iPhone and for Android phones. App Store users only gave the app a 2.8-star rating while Google Play users awarded it a slightly higher score, with 3.9 stars. The most common complaints surround the poorly-executed UI, sluggish performance and delays processing trades.

Kraken seems to have abandoned its iOS app. Last updated in 2014, the slow and buggy app has a dismal 1.3-star rating. Kraken never produced an Android app.

Customer Support and Community

Self-serve knowledge bases and ticket-based support groups are the main ways to get help from Kraken or Bitfinex.

Support Options Bitfinex Kraken
Ticket-based system Yes Yes
Telephone support No No
Online chat No No
Knowledgebase Yes Yes
FAQ No No
In-house forum No No

Both exchanges moderate their own subreddits where they post updates and respond to general questions. Bitfinex’s support group has started an interesting experiment on its subreddit. They open a weekly thread where people can post their open support tickets. Bitfinex won’t answer the questions in the thread, but will escalate the issues.

Cryptocurrency Regulation

As we’ve already seen, Bitfinex follows anti-money-laundering and know-your-customer practices. Unlike Kraken, Bitfinex does not comment publicly on regulatory issues.

In early May, the exchange hired a new chief compliance officer. Peter Warrack was formerly the compliance officer at the Bank of Montreal and a senior official at the Royal Bank of Canada. Bitfinex hopes Warrack’s appointment will give the exchange “the expertise and experience required to ensure that we continue to meet all relevant regulatory compliance standards.”

As mentioned earlier, Kraken has taken it upon itself from its founding to develop solid relationships with the traditional finance world. In addition to its relationship with the CME Group, Kraken was the first crypto exchange Bloomberg included in its Terminal service.

Powell is, however, a vocal critic of regulations and regulators he disagrees with. Most recently, Powell released a detailed rebuttal to the New York Attorney General’s demand for information.

Final Thoughts

Bitfinex makes its preferences clear: don’t bother joining unless you bring to the table a lot of coins, large trades, and a frequent trading history. The exchange sees its role as providing liquidity to the crypto market by serving professional traders and institutional investors.

Kraken, by comparison, is more egalitarian. The exchange focuses on advanced traders, providing analytical tools and leveraged trading. At the same time, anyone can join the exchange, subject to a few geographical restrictions.

For CoinIQ readers, the choice of Bitfinex vs Kraken is clear. You’ll be more welcome as a Kraken customer while still finding the trading options that meet your experience and risk-tolerance levels.

Christopher Casper

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