BitMEX is one of the largest cryptocurrency exchanges in terms of trading volume, facilitating more than $900 billion in trades from October 2017 to October 2018. The platform offers peer-to-peer margin trading, futures and options.
Arthur Hayes, a former Deutsche Bank and Citigroup trader, founded BitMEX in 2014 alongside ex bankers Samuel Reed and Ben Delo. The exchange is registered in the Seychelles but operates from Hong-Kong, sharing an office building with the likes of Barclays, Bank of America, Goldman Sachs and The Securities Regulator.
In order to fund a trading account on BitMEX users must deposit Bitcoin, there are no deposit options for fiat or any other cryptocurrency. Once Bitcoin is deposited, users have the capability to trade Cardano, Bitcoin Cash, EOS, Ethereum, Litecoin, Tron and XRP, with perpetual swap markets offered on Bitcoin and Ethereum.
Signing up to have an account at BitMEX is far simpler than many other exchanges, all that’s required is a valid email address. There are no KYC checks for customers, however, traders based in the United States are banned from trading on the site due to local laws in the US.
After registering an account users are given a unique wallet address, this address can be used to deposit, and eventually withdraw, Bitcoin. Users can also earn Bitcoin without having to deposit by sharing a referral link, for every new trader who signs up through that link the original account will receive 10% of trading fees paid by the referred account.
BitMEX offers an extensive range of trading tools, notably futures and perpetual swaps, both of which can be used with up to 100x leverage. A futures contract is an arrangement to buy or sell a given asset in the future at a predetermined price. Perpetual swap, on the other hand, has no settlement date but does have a funding rate, which is paid every eight hours. The funding rate is calculated between the premium of the index price and the interest rate, more information between the specific calculation can be found here.
In 2018 BitMEX continued to implement new features, adding an adaptation of option trading in the form of the Up/Down contract. This enables users to capitalise on price-action to the upside or downside over a seven day period.
BitMEX’s volume has been considered to be inflated by many, mostly due to their high leverage offerings. On certain markets – Bitcoin perpetual swap, for example – users can trade with up to 100x leverage, which means if a trader has the equivalent of $1,000 in their account, they can be exposed to up to $100,000 by using 100x leverage.
Unlike most other leveraged exchanges, losses on BitMEX will never exceed deposits. However, using high leverage will put a particular order’s liquidation price closer to the entry price. For example, if a user executes a long order at $6,600 with 5x leverage, their funds will be liquidated if the price goes below $5,525. Whereas if a user was to execute the same order with 100x leverage, their funds would be liquidated if the price went below $6,569, increasing the risk substantially.
BitMEX offer a fixed market fee structure, with perpetual swap contracts set at -0.025% for maker fees and 0.075% for taker fees. The negative fee means the user will actually receive a rebate when their limit order gets filled by another user, while the ‘taker’ will pay 0.075% for filling one of the orders already on the order book.
Futures also have a different set of fees. With altcoins the taker fee is 0.25%, while the maker fee is -0.05%. Bitcoin futures is set at the same right at the perpetual swap contract.
BitMEX CEO Arthur Hayes has been outspoken about his bullish perspective on Bitcoin, claiming the currency could soar to $50,000 by the end of the 2018, labelling the interest around cryptocurrency as a ‘retail phenomenon’.
The exchange has seen continuous growth throughout 2018, becoming a market leader in terms of trade volume and open interest. However, BitMEX have often struggled with ‘server overload’ during volatile price movements this year, frustrating many of their userbase.
Margin trading platform Deribit have signalled their intent to compete with BitMEX this year, also offering 100x leverage on perpetual swaps and option trading, this could be a catalyst for Arthur Hayes and the BitMEX team to fix the server issues and postpone the current exodus to Deribit.
The company also hired a new Chief Operating Officer (COO) at the start of October, recruiting former financial markets regulator Angelina Kwan in a bold move to legitimise the exchange from a regulatory standpoint.