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BitMEX review

BitMEX Review: Crypto Futures Markets for Traders in Asia, Europe

BitMEX in Brief

BitMEX is a crypto-only exchange that focuses exclusively on futures contracts in Bitcoin and five other cryptocurrencies. Seychelles-registered, but operating out of Hong Kong, BitMEX primarily serves advanced retail traders in Asia and Western Europe. BitMEX is not registered with US regulators, so it does not allow Americans to trade.

Pros

  • Fast, stable trading platform.
  • Focused approach minimizes customer complaints.
  • Allows 100X leverage.
  • Resources to help novices with futures trading.

Cons

  • Americans cannot trade on BitMEX.
  • Several altcoins delisted due to low trading volumes.

Visit BitMEX

What is BitMEX?

History

BitMEX CEO and co-founder Arthur Hayes’ career began in the financial industry, where he traded futures at the Hong Kong offices of Deutsche Bank and CitiGroup. Hayes told CoinDesk that he first got into Bitcoin trading after CitiGroup eliminated his job (along with 11,000 others).

Hayes noticed how inefficient and immature the Bitcoin trading world was compared to the equities world he had just left. Within a few months, Hayes decided to apply his experience in futures trading to build more sophisticated tools for the cryptocurrency community.

Part of what drives Hayes’ push to build a more robust cryptocurrency system for the financial industry is his belief that Bitcoin is more relevant to that world than to the individual consumer.

”I don’t think bitcoin is going to replace consumer facing activities,” Hayes said.

In a September 2014 interview with CoinTelegraph, Hayes said that a futures market in Bitcoin would let merchants and miners develop hedging strategies to smooth out the market volatility. He also believed that “investors and speculators need a liquid and safe way to trade the future price of Bitcoin. Short selling is an essential component of a market, and futures contracts will allow this.”

Hayes and his co-founders built a trading platform on the same kdb+ database that professional high-frequency trading platforms in the equities world use. Before going live with their new service, they created a simulator and invited traders to compete in contests. Each participant received 50 fake Bitcoins to make their trades. Over the course of several weeks, BitMEX simulation hosted more than 33 million trades. The winner turned his original 50 Bitcoins into a final total of 550 Bitcoins.

BitMEX went live in early 2015 and within a few months had an average daily trading volume of more than $5 million.

Focus on Asia

Hayes and his team took advantage of the Asian startup community to help get their new service off the ground. They won the Asian round of the Slush 2014 business plan competition, won the Tech in Asia Singapore Arena pitch battle and took part in the Chinaccelerator program in Shanghai.

“From the program, we have learned more about how to crack the Chinese market as foreigners,” Hayes said to Tech in Asia.

However, Hayes and his co-founders soon found a flaw in their initial assumptions. Few large retailers adopted Bitcoin and institutional investors did not sweep into the market to the degree BitMEX needed. “The commercial uses of Bitcoin are not large enough to warrant a liquid hedging market,” Hayes explained to Bitcoin Futures Guide in 2016. “We have grown exponentially since we pivoted to focus on retail traders.”

Leadership and investors

BitMEX Founders
Source: BitMEX

The three co-founders of BitMEX met each other while working in Hong Kong’s financial industry. Six months after they mapped out their plans to create a futures exchange, they began testing their software. All three are still deeply involved in BitMEX.

  • Arthur Hayes, co-founder and chief executive officer: Hayes built a career as an equity derivatives trader while working at HSBC and Citibank.
  • Samuel Reed, co-founder and chief technology officer: Reed’s specialized his career as a software developer in the design of real-time interfaces. He served as the CTO of two Hong Kong startups.
  • Ben Delo, co-founder and chief strategy officer: Delo developed trading systems for IBM and J.P. Morgan.

Hayes, Reed and Delo took the friends-and-family route to finance their initial development. Startup accelerators SOSV and Chinacclerator contributed small amounts during the exchange’s seed round. Hayes has avoided the VC system since then. “When we needed the VCs the most,” Hayes said in a Business Insider interview, “they didn’t want to be associated with Bitcoin or cryptocurrencies.”

Protecting customers’ coins

Legal and regulatory compliance

BitMEX operates out of Hong Kong but is registered in Seychelles. Hayes claimed in a Bitcoin Forum AMA that Seychelles’ system of English common law and the absence of corporate taxes made the island nation a popular place for foreign exchanges to register.

The decision not to support traders in the United States was driven by the difficulty BitMEX would face integrating with the various regulatory agencies.

“The U.S. is intent on applying banking regulations to essentially an industry filled with startups,” Hayes explained to the Wharton Fintech podcast.

In an interview with Bitcoin Futures Guide, Hayes said that BitMEX “will serve US customers when the money and time spent getting the proper licenses is worth the revenue.“

Coin listing policies

BitMEX started out as a Bitcoin-only futures market, and added more coins over time. By March 2018, however, BitMEX delisted many low-volume contracts to devote resources to the six highest-volume futures contracts.

Network security

BitMEX prides itself on never having lost its customers’ Bitcoins through hacking. As part of its security procedures, BitMEX holds all of its customers’ digital assets in cold, multi-signature wallets. Access to those wallets is only possible with the signatures of a majority of BitMEX partners. Several layers of automated and manual checks inspect each withdrawal to ensure funds go to their rightful owners.

BitMEX built its trading platform using the same enterprise-class kdb+ database used by traditional equities trading platforms. The high-speed systems let BitMEX audit every transaction for suspicious activities without delaying the customers’ experience.

BitMEX customers can add more protection to their accounts with 2-factor authentication as well as PGP encryption of all email communications with BitMEX.

Customer support

BitMEX provides its customers with a rich mix of support options. An extensive BitMEX guide gives advanced traders quick access to the information they need. At the same time, guides for novices help them through the processes and terminology of futures trading. In addition, a Knowledge Base and FAQ provide more self-support options.

The customer service staff at BitMEX monitor social media and major online forums including Reddit and Weibo.

For more complicated issues, BitMEX has a ticket-based system.

BitMEX reputation

As Bitcoin trading increased exponentially in 2017, BitMEX scrambled to keep ahead of the hyper-growth. The company quadrupled its trading capacity in July 2017 and did it again in September 2017.

By November 2017, however, BitMEX had to throttle its systems by capping the number of requests even as it increased trading capacity. In early December, BitMEX placed limits on the number of orders accounts could place on contracts.

On February 2, 2018, the growth finally got the best of BitMEX. “About 13:00 UTC today, the BitMEX platform sustained a record amount of traffic,” Reed announced. The surge in traffic triggered a cascade of failures large enough to “render the site unusable.”

How to Join BitMEX

BitMEX not available in US
Source: BitMEX

Who can join?

Anyone can create a BitMEX account, but the terms of service will not let account holders trade on the exchange if they are residents “of the United States of America, Cuba, Crimea and Sevastopol, Iran, Syria, North Korea, Sudan, or any other jurisdiction where the services offered by BitMEX are restricted.”

Hayes explained in his mid-2017 interview with Wharton Fintech that “the majority of our customers, or the biggest country is China followed by Western Europe. And right now what we’re seeing in terms of where we see future growth, is South Korea.”

Verification

Individual accounts

BitMEX does not have a verification process, although its support group may ask for ID verification to resolve support issues.

Business accounts

BitMEX pivoted away from institutional investors to focus on retail investors.

What Can You Trade on BitMEX?

BitMEX is a futures trading platform that is fully denominated in Bitcoins. All deposits and withdrawals are made in Bitcoins and all futures pricing is quoted in Bitcoins.

Cryptocurrencies

Futures contracts are available in Bitcoin, Bitcoin Cash, Cardano, Ethereum, Litecoin and Ripple.

Fiat currencies

Bitmex does not allow fiat currency trades.

Currency exchanges

BitMEX pairs each of the five cryptocurrency contracts with Bitcoin.

Besides making trades in the futures contracts, BitMEX offers a Perpetual Contract, which has no expiry or settlement date. This is only available for Bitcoin futures and is listed as XBTUSD.

Advanced trading

BitMEX offers both a REST API and a WebSocket API for integration into automated trading applications.

Trading Tools and Fees

Trading interface

BitMEX trading interface
Source: BitMEX

The BitMEX web app presents a tabbed interface for each futures contract. By default, the interface opens to the perpetual Bitcoin contract (XBT/USD).

You can expand individual elements to get a more detailed view. The Chart section, for example, lets you change the formatting and apply tools for trend analysis.

Analyze BitMEX trends
Source: BitMEX

You place your orders on we app’s side panel. Your options include long, short, limit, market or stop limit orders. Note that the prices of the XBT/USD market are quoted in US dollars while the other markets are quoted in Bitcoins.

Place BitMEX orders
Source: BitMEX

You can also customize which elements appear and where in the web app’s display.

Customize the BitMEX interface
Source: BitMEX

The Account section lets you manage your wallet, deposit or withdraw Bitcoins and review your transaction history.

Manage BitMEX account
Source: BitMEX

 

Mobile app support

BitMEX does not have mobile apps. All trading and customer support activity happens through the web app. Any BitMEX apps that you see in the Google Play Store or Apple App Store may be scams intended to get your account credentials.

Deposits and withdrawals

BitMEX does not charge deposit or withdrawal fees. It will, however, pass through any network fees that blockchain’s miners charge for processing the transaction.

Transaction fees

BitMEX applies a maker/taker fee structure to its traditional futures contracts. Makers receive a rebate while takers are charged a fee:

  • Bitcoin makers: 2.5 basis point rebate.
  • Altcoin makers: 5 basis point rebate.
  • Bitcoin takers: 7.5 basis point fee.
  • Altcoin takers: 25 basis point fee.

Settlement fees only apply to traditional Bitcoin contracts (5 basis points).

For perpetual Bitcoin futures contracts, BitMEX rewards makers and long funding with rebates and charges fees to takers and short funding.

Affiliate referral program

BitMEX launched its Affiliate Referral Program in 2014 to drive user growth. Account holders have unique BitMEX URLs they can share. Anyone who becomes a new BitMEX member after following that link will get a 10% discount on their trading fees for the first six months.

Referrals earn account holders commissions on all trades the new members make for as long as they trade on BitMEX. The commissions are based on the new members’ trading volumes. Payments start at 10% of the trading fee, rise to 15% when the new member hits 1000 Bitcoins in trading value, and then bumps up again to 20% once the new member passes the 10,000 Bitcoin mark

Final Word

BitMEX lets advanced traders take advantage of leveraged trading on a high-volume futures markets in Bitcoin and five other cryptocurrencies. Primarily serving Asian and Western European individual traders, BitMEX has become one of the largest crypto futures markets.

The only significant gap in its service is the United States. Registering as a securities exchange in the US is expensive. Until the potential upside makes that cost worthwhile, BitMEX does not allow Americans to trade on its exchange.

For new traders

BitMEX may not be the best place for people totally new to both cryptocurrencies and derivatives trading. One of the cryptocurrency exchanges like Kraken or Gemini might be a better place to start.

For those ready to dive into the world of highly-leveraged futures trading, BitMEX tries to make the on-boarding process as easy as possible. Their guides, YouTube videos, and feature explanations to help novices get up to speed on trading Bitcoin futures.

For advanced traders

BitMEX did better than most exchanges at keeping up with last year’s hyper-growth in Bitcoin trading. The exchange’s large trading volume makes it an attractive choice for those wanting to leverage their way to higher profits than more traditionally-structured crypto exchanges can deliver.

Christopher Casper

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