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Kraken review

BitMEX Vs. Kraken: Leveraging Your Crypto Trades

BitMEX vs Kraken at a Glance

The question of BitMEX vs Kraken comes down to your experience as a crypto trader — and whether you live in the United States. BitMEX is a futures exchange that higher, riskier leveraged positions. Kraken is a crypto-trading exchange that also supports fiat currencies and allows moderately leveraged trades.

Our guide to BitMEX vs Kraken will help you judge which exchange is best for your crypto trading portfolio.

BitMEX Kraken
Pros
  • Fast, stable trading interface.
  • Allows margin trades with up to 100X leverage.
  • Well-documented support for futures trading.
  • Available in the USA.
  • 17 cryptocurrencies and 5 fiat currencies.
  • Leveraged trading.
  • More inclusive.
Cons
  • Not available in the USA.
  • Novices could be exposed to high risks.
  • No fiat currencies, only 5 cryptocurrencies.
  • Americans limited to 37 states.
  • No longer available in Japan.
Visit BitMEX

Where Did They Come From?

Kraken

Kraken review
Source: Kraken

Founded by cryptocurrency advocate Jesse Powell, Kraken has established itself as a stable, secure place to trade cryptocurrencies. Powell and his team devoted two years to developing Kraken’s systems before launching the exchange in 2013.

Although based in San Francisco, Kraken focused first on the European market. Only a few months after trading opened, Kraken became the largest euro-based bitcoin exchange. Acquisitions of failed exchanges in the United States and Canada allowed Kraken to expand into North America in 2016.

As the popularity of cryptocurrency exploded in 2017, Kraken began setting trading volume records. As early as May 2017, for example, the exchange saw more than $178 million in trades. This was less than two months after setting its previous one-day record of $134 million.

Since the rise of Asian exchanges like Binance and Huobi, Kraken has settled back into the middle tiers of crypto exchanges. CoinMarketCap regularly reports trading volumes in the $120 million range.

Related: Kraken Review: High Liquidity Markets for Advanced Traders

BitMEX

BitMEX Founders
Source: BitMEX

The financial center of Hong Kong has been the cradle — and refuge — for many crypto exchanges. BitMEX was founded in China’s autonomous territory by three financial professionals hoping to bring more sophisticated trading options to the crypto community.

Arthur Hayes, BitMEX’s CEO, had built a career as a futures trader in the Hong Kong offices of Deutsche Bank and Citibank. Chief Technology Officer Samuel Reed was a software developer who specialized in real-time interfaces while working for a number of startups. Chief Strategy Officer Ben Delo led trading system development projects at JP Morgan and IBM.

Their common background in the fiat financial world led the three founders to a shared realization: the cryptocurrency financial system in 2014 was relatively primitive and inefficient. They founded BitMEX with the intention of giving financial institutions the same kind of hedging tools available in the fiat system.

As with many crypto enthusiasts, Hayes and his co-founders were surprised at how reluctant the traditional financial institutions were to trade in bitcoin. BitMEX quickly pivoted from a strategy based on serving the needs of institutions to providing a high-risk/high-return venue for individual traders. Hayes explained to Bitcoin Futures Guide how that decision paid off:

“We have grown exponentially since we pivoted to focus on retail traders.”

Today, BitMEX regularly clears more than $2 billion in daily trading volume, as reported by CoinMarketCap.

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

Supported Currencies and Listing Policies

Kraken lists seventeen cryptocurrencies and five fiat currencies on its exchange. You cannot pair any given currency with any other currency. Instead, Kraken supports markets in bitcoin, ether and the five fiat currencies: US dollars, Canadian dollars, euros, British pounds and Japanese Yen.

Crypto traders do not join BitMEX to buy and sell coins. BitMEX’s specialty is futures trading. You can trade futures contracts in ada, bitcoin cash, ether, litecoin and ripple. There is also a “perpetual” futures contract for bitcoin.

Listing policies

Neither Kraken or BitMEX provide much guidance to project teams who want to list on the two exchanges. Kraken’s support site even goes so far as to tell people not to ask why. In a 2018 interview with CNBC, all Powell would say is that Kraken is “thorough” when vetting altcoins.

BitMEX has offered even less information to the public, but a token’s ability to support high trading volume is certainly one of the exchange’s main criteria. In early 2018, BitMEX culled half a dozen altcoins — dash, ethereum classic, lumen, monero, neo and z-cash — from its listings to “free up trading engine capacity on our more popular contracts.”

Security and Hacks

One of the reasons it took Powell and his team two years to get Kraken ready for launch was their focus on security. Powell was part of the team that Mt. Gox brought in after the Japanese exchange’s first hacking incident in mid-2011.

In a personal blog post commiserating the final Mt. Gox meltdown, Powell recalled his reaction to the unprofessional behavior of the Mt. Gox leadership. “When I left, I thought—for the greater good—somebody oughta make another exchange pronto because this ship is going down in flames.”

In a Reddit AMA, Powell explained that getting involved in “BBSes and phreaking and 2600 magazine and that whole scene” as a kid shaped his attitude towards security: “now I pretty much trust nothing.”

The result of this focus on security is an exchange that has never been hacked successfully.

Don’t lose the bitcoin

Don’t lose the bitcoin” is the motto BitMEX co-founder and CTO Samuel Reed uses to guide his security team. The exchange keeps 100% of the coins in its custody in an offline cold wallet which requires signatures from two of the three founders to access.

As a result of security’s fundamental place in the BitMEX development mindset, the exchange’s homepage can claim that not a single bitcoin has been lost “through intrusion or hacking.”

Availability and verification

Although headquartered in the United States, Kraken has been an international exchange since the day it opened its doors. In fact, it took three years for Kraken to start serving American customers at all. Regulatory issues still prevent Kraken from serving residents of thirteen US states and recently led the exchange to withdraw from Japan.

BitMEX focuses on the Asian and European markets, but has avoided the United States due to the heavy burden regulations place on startups.

Verification policies

BitMEX does not deal in fiat currency, which reduces its exposure to regulations. The only information required to create a BitMEX account is a name and email address. Unless a government comes knocking, BitMEX will not ask for any other identifying information.

As a custodial exchange that handles fiat currencies, Kraken operates in a much more regulated environment. There are four verification tiers that grant Kraken customers greater access to the exchange. With a little personal data, you can get tier-one access and the ability to trade cryptocurrencies.

In order to make fiat-based deposits, withdrawals and trades, you will need to get tier-two access, or tier-three access for Americans. Both levels require scans of government identification documents and an ID selfie. The tier-three verification requires a scan of proof-of-residency documents.

Kraken does not discuss the requirements for tier-four access. Intended only for the highest-volume traders, Kraken’s verification staff processes the requests individually.

Trading, Fees and Apps

Kraken markets itself to “serious and professional bitcoin traders.” In contrast to the simple coin-to-coin trades provided by exchanges like ShapeShift or Changelly, Kraken offers a range of advanced trading tools.

Kraken lets traders place market or limit orders and provides settings for managing risk and automating trading. Leveraged trading is also an option for more risk-tolerant traders. Only available on 16 currency pairs, traders can place margin orders with up to 5X leverage.

Advanced traders with even more risk tolerance take advantage of the leveraged trading services offered by BitMEX. Most of the futures contracts the exchange offers allow positions to be opened with up to 20X leverage. The bitcoin perpetual contract, on the other hand, allows positions with 100X leverage.

Trading interface

The BitMEX web app lets you tab quickly between the six futures markets. Its easy customization options let you choose which tables and charts appear on the screen.

BitMEX trading interface
Source: BitMEX

If you expand the BitMEX chart, you get access to a wide range of analytical tools that let you evaluate price trends and plan your trades.

BitMEX time series chart
Source: BitMEX

Kraken offers a similar experience through its online trading platform. However, the Kraken interface does not support as many analytical options as BitMEX’s.

EOS on Kraken
Source: Kraken

Fees

All deposits and withdrawals of fiat currencies will trigger fees from Kraken. The exchange does not charge fees for most bitcoin and altcoin transactions, but some of the altcoins do require special set up fees.

Kraken’s trading fee schedule has a maker-taker structure with discounts for high-volume traders. New customers will pay 0.16% for market maker orders and 0.26% for market taker orders. Once a customer’s 30-day trading volume exceeds the $100,000 level, Kraken starts reducing the fees. By the time a customer generates $10,000,000 or more in trades over 30 days, the fees drop to 0% for market maker orders and 0.1% for market maker orders.

The loans traders take to place leveraged orders are funded by Kraken itself. There are no fees for those transactions, but traders will pay interest on the loans.

BitMEX does not charge deposit or withdrawal fees. Its trading fees have a very simple maker-taker structure where market takers pay 0.075% on bitcoin trades and 0.25% for altcoin trades while market makers receive 0.025% rebates on bitcoin trades and 0.05% rebates on altcoin trades.

Mobile apps

BitMEX does not have mobile apps. Kraken, on the other hand, has one — which it really ought to shut down. Released in 2013 shortly after the exchange launched, the Kraken app for iOS hasn’t been updated since 2014. Slow, buggy and under-featured, the Kraken app has a well-deserved 1.3-star rating. Android users are much happier since Kraken never gave them an app.

Customer Support and Community

Like most exchanges, Kraken has a self-serve knowledge base and a ticket-based support system. The knowledge base is well-documented and covers everything a new customer needs to know to start trading on Kraken. Unlike most exchanges, Kraken also offers live chat support.

BitMEX has a thoroughly-documented support site that helps people new to futures trading get up-to-speed. An exchange simulator gives new BitMEX customers the ability to practice futures trading before putting their bitcoin at risk.

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

Cryptocurrency Regulation

Kraken CEO Jesse Powell
Source: Kraken

BitMEX chose to only deal in bitcoin and a limited number of altcoins. In addition, the exchange based itself in Hong Kong, registered in Seychelles, and chose not do business with Americans. These decisions combine to limit BitMEX’s exposure to regulation — enough so, that even Chinese citizens can trade its futures contracts.

Kraken deals in fiat currencies and serves the US market which places the exchange in a much more regulated environment. Up to a certain point, Kraken’s leadership welcomes regulation for the way it legitimizes cryptocurrency trading.

Kraken was the first bitcoin exchange included in the Bloomberg Terminal and was the first exchange to develop solid relationships with regulated banks. When the Chicago Mercantile Exchange’s parent company created a bitcoin futures market, it picked Kraken to calculate its bitcoin price index. Bloomberg even reported that Kraken could register with the Securities & Exchange Commission as a broker or alternative trading system.

But good relations with regulators have their limits. In the case of Powell and Kraken, that limit is the state of New York. Rather than submit to the BitLicense, Powell pulled Kraken out of New York with a pointed message. When the Attorney General of New York demanded information from crypto exchanges, Powell issued a scathing response.

Cryptocurrency regulations “should be treated as a national economic and national security issue, maybe even an international issue,” Powell said in comments reported by CoinDesk.

Final Thoughts

Kraken is a good choice for crypto enthusiasts who want a cheaper, more sophisticated service than trading services like Changelly. They can cut their teeth on advanced order types and even begin making riskier margin trades to maximize their returns.

BitMEX, on the other hand, is really intended for seasoned traders and professionals who understand the details of futures trading. More importantly, prospective customers should understand the risks that placing margin orders with leverage as high as 100X entails.

Of course, for Americans the BitMEX vs Kraken question is clear: Kraken is the only exchange they can do business with, unless they live in New York.

Christopher Casper

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