BitMEX vs Poloniex at a Glance
Both BitMEX and Poloniex let traders use leverage to boost their returns. Where they differ is the nature of the trading. While Poloniex does this through trades of cryptocurrencies, BitMEX is a derivatives exchange that lets people trade on cryptocurrency futures contracts.
When choosing BitMEX vs Poloniex, you’ll need to understand how the two exchanges differ and what features you’re allowed to access. Our guide will walk you through the two exchanges.
Where Did They Come From?
Arthur Hayes, Samuel Reed, Ben Delo founded BitMEX in 2014 after all three of them had built careers in Hong Kong’s financial industry. Hayes was a futures trader at Citibank and Deutsche Bank. Reed worked at a series of Hong Kong startups and specialized in the development of real-time interfaces. Delo was a trading system developer with both IBM and JP Morgan.
Together, the three founders set out to address some of the weaknesses shared by cryptocurrency exchanges of the time. Hayes had spent his downtime after leaving Citibank playing arbitrage between various crypto exchanges. The inefficiencies in the cryptocurrency trading space were due in part to the absence of the sophisticated tools used in the fiat system.
BitMEX’s founders originally envisioned their company as a service for businesses and financial institutions rather than individual traders. As crypto became a growing part of their operations, these companies would need the hedging benefits that futures contracts offer.
Starting up in Asia
Hayes and his team took advantage of Hong Kong’s thriving startup scene. They won several business plan competitions and joined a Shanghai-based startup accelerator.
In a 2015 interview with Tech in Asia shortly after BitMEX’s launch, Hayes discussed the value of the Asian startup connection: “From the program, we have learned more about how to crack the Chinese market as foreigners.”
Soon after launching, the BitMEX team realized that the traditional financial system was not shifting to crypto as quickly as they had assumed. They were forced to pivot BitMEX and refocus the company on sophisticated individual traders who were seeking riskier, but more lucrative, trading options.
“We have grown exponentially since we pivoted to focus on retail traders,” Hayes told Bitcoin Futures Guide in 2016.
BitMEX is consistently at the top of CoinMarketCap’s exchange rankings with estimated trades worth nearly $2.3 billion going through BitMEX every day.
Freelance composing may not seem like the right background for the founder of a cryptocurrency exchange, but Tristan D’Agosta turned Poloniex into a well-respected service for a crypto community seeking a reliable exchange and high returns.
D’Agosta faced his biggest challenge shortly after Poloniex opened for business in 2014. Within months, hackers stole 12% of the bitcoins Poloniex’s customers had entrusted with the exchange.
This could have been the end for the startup, but the way Poloniex addressed the situation sparked a “positive and sympathetic response” according to CoinTelegraph.
Poloniex trimmed the balances of its customers’ accounts by an across-the-board 12% margin and then issued tokens against the exchange’s profits. The hack occurred in March 2014. By July, Poloniex had repaid all of its customers.
Poloniex’s rise and fall
With renewed confidence in the exchange, customers flooded into Poloniex and drove daily trading volume beyond the $1 billion mark. 2017’s hypergrowth in cryptocurrency trading, however, soon overwhelmed Poloniex’s other systems. Delays in verification checks and support ticket response times increasingly frustrated customers.
Today, Poloniex ranks as a mid-tier exchange on the CoinMarketCap leaderboards.
Circle Internet Financial, a mobile payments firm backed by Goldman Sachs, bought the struggling exchange in early 2018. While Circle has big plans for Poloniex’s future, the firm’s near-term strategy is to fix the exchange’s issues.
The new team resolved half of the nearly 160,000 outstanding support tickets within six weeks of the acquisition. Efforts to improve the reliability of deposit and withdrawal transfers as well as automating the verification process are also underway.
Supported Currencies and Listing Policies
Poloniex has a structure similar to other exchanges that serve advanced crypto traders. Rather than let people trade any altcoin for any other altcoin, the cryptocurrency trading is all done against a handful of coins.
The bitcoin market is the largest by far with more than 60 trading pairs, although most of it is dominated by trading in ether, ripple, bitcoin cash and monero. Poloniex’s other markets in ether, ripple and tether are much smaller with only 8 to 12 trading pairs.
BitMEX does not allow crypto trading at all. BitMEX is a derivatives marketplace that specializes in futures contracts for a handful of cryptocurrencies.
The markets for bitcoin cash, ada, ether, litecoin and ripple use traditional futures contracts. BitMEX’s bitcoin market, on the other hand, is based on a perpetual contract that does not expire.
Poloniex does not explain in detail the criteria it uses to evaluate projects for listing on the exchange. Beyond being unique and innovative, the project must have generated a lot of interest from traders. And of course, the project cannot be a security.
BitMEX does not add new altcoins to its futures exchange very often. In fact, the exchange cut its listing in half a few months ago to focus on the altcoins that generated the highest trading volumes.
Security and Hacks
As discussed above, Poloniex saw its bitcoin hot wallet raided two months after its January 2014 launch. The company fixed the situation, but it left a mark and the exchange tightened up its security. Even as Poloniex’s customer support and verification systems were grinding to a halt in 2017, the exchange never got hacked.
BitMEX has a counter on its homepage that tracks how much bitcoin has been lost “through intrusion or hacking.” Three years after opening BitMEX for business, the counter is still at zero.
BitMEX co-founder Samuel Reed recently said that one of the fundamental requirements that the exchange’s systems are built on is “Don’t lose the Bitcoin.” All of the crypto assets BitMEX holds for its customers are kept in offline cold wallets. At least 2 of the 3 founders must authorize any access to those wallets.
Availability and verification
Poloniex is available to crypto traders in 100 countries around the world. That includes almost all American traders, with the exception of those in the states of New Hampshire, New York and Washington.
BitMEX also operates globally, but its focus is on Asia and Europe. Hayes recently told Wharton Fintech that China represents its biggest market, followed by Western Europe, South Korea and Japan. BitMEX chose not to serve the US market due to the expensive regulatory burden that imposes.
All you need to provide BitMEX when opening an account is a name and email address. Although the exchange operates out of Hong Kong, it is registered in Seychelles and could be required to verify customers identities if the government of Seychelles asks.
Another reason trading volumes on Poloniex have fallen since their peak are tighter policies on account verification. At the end of 2017, Poloniex announced that all customers would have to go through the verification process. A notice posted to Poloniex’s trading message board informed any remaining unverified users that they would not be able to use the exchange until their verification was complete.
The information that Poloniex requires is similar to other exchanges: personal information and an identification selfie.
Trading, Fees and Apps
The Poloniex web app lets its customers trade bitcoin for 66 altcoins. The three other markets for ether, ripple or tether each support trades with a dozen currency pairs.
More advanced, and risk-tolerant, traders can borrow funds from other Poloniex customers to place margin orders. However, leverage is capped at 2.5X.
BitMEX, by contrast, supports a wide range of advanced trading tools that let its customers maximize returns on their futures trading. The peer-to-peer lending system at BitMEX lets traders borrow coins to place margin orders. The amount of leverage varies by market. The bitcoin perpetual contract, for example, supports positions with up to 100X leverage. In comparison, the ripple market only allows 20X leverage.
The tabbed interface lets BitMEX traders shift quickly between the exchange’s six futures markets. You can customize the interface and alter the layout to see just the information you need to make your trades.
For more detailed analysis of pricing trends on the BitMEX exchange, the chart can be expanded. It gives you access to many analytical tools.
The layout of Poloniex’s web app does not display as much at once. You will have to scroll up and down to get the full picture. In addition, the chart tools Poloniex offers are not as sophisticated as those on BitMEX.
BitMEX structures its fees on a simple maker-taker basis, but it is much more aggressive than other exchanges when it comes to rewarding the market makers who add liquidity to the exchange. Market makers who trade bitcoin get paid 0.025% while those trading the other altcoins get paid 0.05%. Market takers pay 0.075% or 0.25% for bitcoin and altcoin trades respectively.
Poloniex applies a 0.2% fee for trades placed by market takers and a 0.1% fee for market makers. Volume discounts reward frequent traders, ultimately eliminating market makers’ fees entirely and reducing market takers fees to 0.1%.
Poloniex customers who lend their coins to margin traders must pay a 15% fee on the interest they earn.
Neither exchange offers mobile apps.
Customer Support and Community
Poloniex’s knowledge base covers the basics new customers need to get started with the exchange. However, the company’s features and policies are not documented as thoroughly as at other exchanges. For specific questions, Poloniex customers can open a support ticket. Despite the new team’s efforts, there are still about 80,000 open tickets waiting for resolution.
BitMEX has a very detailed support site that is especially useful for traders new to the futures scene.
Poloniex honors the regulations that apply to them. At the same time, the exchange has altered its business strategy to avoid regulatory burdens. Commenting on the state of New York’s BitLicense, D’Agosta told Bitcoin Magazine that “BitLicense was not written with small businesses in mind,” adding that the regulations were “limiting” and “frustrating”. The exchange withdrew from New York rather than subject itself to the financial burden.
BitMEX chose to register in Seychelles, operate out of Hong Kong and stay out of the United States in order to minimize the cost of compliance. In his interview with Wharton Fintech, Hayes accused US regulators of “applying banking regulations to essentially an industry filled with startups.”
BitMEX and Poloniex offer two very different services but both serve the same customers: advanced traders with the risk-tolerance to handle leveraged trading.
BitMEX is a derivatives market. You will need to be comfortable with the concepts and process of futures trading. You will also need to be more comfortable with risk, as the ability to place orders with 100X leverage exposes you to significant losses.
Poloniex is more welcoming to less-experienced crypto traders. You can still use the exchange to make straight-forward trades in a wide range of altcoins. For many of our readers, Poloniex will be the better choice – especially since it lets Americans join.