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What is a cryptocurrency exchange?

Beginners guide to cryptocurrency exchange Bitfinex

Bitfinex is an esteemed cryptocurrency exchange that enables users to buy and sell a wide range of digital assets like Bitcoin and Ethereum. Here is a comprehensive guide to Bitfinex and their trading tools...

Introduction

Founded in 2012 by Giancarlo Devasini and Raphael Nicolle, Bitfinex has provided an assured sense of stability to the cryptocurrency ecosystem, cementing itself as one of the leading exchanges in terms of trading volume, often exceeding $10bn weekly trading volume throughout 2018.

Based in Hong Kong, the exchange caters to both retail and institutional investors with high-liquidity and an impressive funding model.

However, their journey over the past six years hasn’t passed without controversy; the exchange suffered two major setbacks over the course of 2015 and 2016, with 1500 Bitcoins being stolen in a hack in 2015 before a further $79 million was siphoned from users’ accounts one year later.

The way in which Bitfinex responded to the hacks was commendable, managing to refund customers in full less than eight months later. This, coupled with their constant communication throughout the ordeal, saw the crypto community gain an immense amount of trust in Bitfinex.

How to sign up

While signing up to have an account on Bitfinex is relatively straight-forward, to access the trading instruments users need to deposit $10,000, or the equivalent in cryptocurrency, which can be withdrawn once an account is verified without losing trading capabilities.

Once an account is acquired users can trade one cryptocurrency for another, as well as trading against Bitfinex’s own stable coin, USD-Tether. Trading against Tether allows users to hold an effective cash, or flat, position, reducing the risks of the volatile cryptocurrency markets.

Bitfinex require customers to go through a KYC process depositing and withdrawing fiat currencies, usually this is in the form of scanned ID and proof of address, but this isn’t needed for users who plan on solely trading without cashing out.

Trading tools

As well as having advanced trading features and charting software, Bitfinex also offer an OTC market for institutional investors looking to purchase a high volume of cryptocurrency without affecting the current market price, this is also known as avoiding slippage.

Aside from this, there is also a margin trading feature where customers can long or short various cryptocurrencies with up to 3x leverage. Furthermore, unlike any other exchange in the space, Bitfinex have an impressive lending service that enables users with a large holding of Bitcoin to lend their funds to other traders, receiving an average daily interest of 0.028% over 2018.

Bitfinex’s spot market provides a seamless service to those wishing to buy or sell bitcoin without leverage, their server rarely suffers outages, making it ideal for users looking to trade during Bitcoin or other Altcoins during a period of volatile price action. Aside from the Bitcoin/USD-T market, Bitfinex boast an impressive total of 84 cryptocurrency pairs, allowing users to purchase the likes of EOS, Ethereum, XRP and many more.

Fees, deposits and withdrawals

Cryptocurrency exchanges make their revenue from trading fees, which taken from users every time they execute a trade, with Bitfinex that is no different, although if a user’s account exceeds $7.5 million their fees will be waived.

For traders and investors with smaller bankrolls trading fees vary between 0.1% and 0.2%, which is comparatively low when put alongside the likes of Coinbase and Kraken, with the former charging 1.49% while the latter’s figure is 1%.

Users also have the capability to withdraw USD direct to a bank account, the minimum withdrawal limit is $250, however, there is an option to withdraw a lesser amount by completing a request form.

Future plans

There isn’t much Bifinex hasn’t been through in the last six years since their inception; becoming one of the most reputable exchanges while simultaneously dealing with two malicious hacks and the following fallout. However, they also have big plans going into the future, EOSfinex was announced at the start of 2018 with plans to open a decentralised exchange in the coming years. The exchange will be built on the EOS blockchain, which will be able to process ‘tens of thousands of transactions per second’ with minimal fees and confirmation time.

The addition of a decentralised exchange to Bitfinex’s roster will enable users to trade their digital assets while retaining control of their coins or tokens. This would make it extremely tough for hackers to repeat what happened in 2016, as assets would be spread around individual user’s wallets, as opposed to a Bitfinex cold storage wallet.

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