About BitMex
BitMex has come in for some pretty harsh criticism in the last 12 months. Is it justifiable? Is the platform a safe and secure place to trade crypto derivatives? We will take an in-depth look at the platform and answer these questions and more.
BitMex describes itself as ‘the worlds most advanced peer to peer crypto products trading platform’.. ‘giving knowledge, confidence and precision to hundreds of thousands of traders everyday’. At the time of press BitMex had traded $4.4 billion in the previous 24 hours, equivalent to 103 bitcoin, with a 30 day average of $74 billion and a yearly average of $1.1 trillion. As you can see BitMex remains a popular place to trade however with an exchange ranking of #243 at coinmarketcap.com clearly things aren’t as rosy as they seem.
In October 2020 BitMex executives Arthur Hayes, Ben Delo and Samuel Reed were charged with violating the Bank Secrecy Act in a joint attack from the U.S Department of Justice and the Commodity Futures Trading Commission (CFTC). The charges relate to the inability to offer an adequate anti money laundering program from its inception to late 2020 and operating as a ‘futures commission merchant’ without registering with the CFTC first. Penalties of $100 million have recently been settled by the organization without admission or denial. Consequently, BitMex is currently undergoing a reputational and organizational restructure with new CEO Alex Höptner at the helm.
BitMex is a crypto derivatives trading platform offering leveraged contracts and providing access to 25 cryptocurrencies over 34 markets. With plans to incorporate educational services, brokerage, custody and spot trading sometime in the future, BitMex is clearly making strong attempts to make up ground and return to its former glories.
QUICK FACT
BitMex – a crypto derivatives trading platform offering leveraged contracts and providing access to 25 cryptocurrencies over 34 markets
BitMex Deposits & Withdrawals
BitMex only deals in Bitcoin. All trades are settled in Bitcoin and all profit and loss is administered in Bitcoin.
Depositing Bitcoin is quick and easy either via QR code or long form address. There is a minimum deposit of 0.0001 BTC and deposits paid with fees are credited after one confirmation (currently around 10 minutes). However, deposits which do not include fees are sent via the legacy Bitcoin network and may take up to an hour.
BitMex does not charge a withdrawal fee but again users must be aware of the minimum Bitcoin Network Fee that is necessary for the Bitcoin network to process the transaction. BitMex only process withdrawals once a day at 13:00 UTC.
BitMex Products & Services
BitMex is proud of its crypto heritage emerging as one of the first platforms to offer leverage trading in 2014. As part of the organizational restructure the company seem to be taking a responsible attitude in providing their users with the necessary information to make informed choices.
BitMex Futures
BitMex offers both expiry and perpetual contracts. As with many other derivative platforms perpetual contracts mimic a margin-based spot market and trade close to the underlying reference Index Price with a funding mechanism used to tether prices. As the name suggest perpetual contracts have no expiry date.
BitMex offer 25 perpetual contracts across a range of crypto with up to 100x leverage on Bitcoin and Ethereum and 50x on XRP. They are able to do this as the platform does not require users to post 100% of collateral as margin.
BitMex also offers inverse and quanto payouts. A quanto contract is a derivative in which the underlying and instrument prices are denominated in different currencies. An inverse contract is worth a fixed amount of the quote currency. Put simply quanto and inverse contracts benefit traders who wish to keep positions open for long periods while reducing exposure to price volatility.
Expiry Futures have a slightly different pricing structure to perpetual futures and are prone to settlement fees. BitMex currently offers 19 different expiry contracts across many of the top crypto including BTC, ETH, LTC, EOS, BCH XRP and ADA with leverage range from 20 to 100x. Contract length is either three or six months.
BitMex Options
BitMex does currently not offer options trading.
BitMex Fees
BitMex operates a standard maker/taker fee model common with many other top tier crypto exchanges. The maker fee is 0.01% and taker fees start at 0.05% falling to 0.025% for those with an average 30 day trade volume of equal and up to $50 million.
BitMex does not charge for deposits or withdrawals however as mentioned above the dynamic Bitcoin Network fee determines the minimum amount a user may withdraw in one instance.
BitMex Funding Rate
BitMex use a funding mechanism to keep perpetual contract prices in line with underlying indexes. Funding is applied every 8 hours at 04:00, 12:00 and 20:00 UTC and is time weight average priced (TWAP). Funding is calculated as – position value * funding rate.
The funding rate is a complicated calculation determined by interest rate and premium. As is common, when the funding rate is positive long positions pay shorts and when the funding rate is negative, short positions pay longs. However, BitMex themselves does not charge any fees for funding, the operation is conducted entirely peer to peer.
BitMex Security
As with any professional cryptocurrency derivative trading platform security is of paramount concern and consequently the platform employ rigorous and conservative security measures. BitMex is proud of the fact that the platform has never been hacked or compromised and in order to continue going forward BitMex operate a unique multi-signature deposit and withdrawal scheme which essentially means all BitMex addresses are multi-signature and all storage is kept offline.
In addition, EVERY withdrawal from the platform is audited by hand by at least two BitMex employees while no private keys are kept on any cloud server and deep cold storage is used for 99% of funds.
BitMex takes advantage of Amazon Web Services’ world class security meaning that individual systems cannot communicate with one another while all BitMex systems require multiple forms of authentication to gain access.
The trading engine used by the BitMex platform is written in kdb+ which is frequently used by banking institutions for high frequency trading. As a consequence the BitMex trading engine features high levels of speed and reliability.
Furthermore, optional PGP encryption is available for all automated emails should a user require.
Since the lawsuit, subsequent settlement and now organisational restructuring BitMex have been forced to post a mandatory warning to users in the UK highlighting the lack of authorisation and regulation by the Financial Conduct Authority (FCA). Rather than banning the platform outright users in the UK are made aware of their personal responsibility when accessing the site and their lack of consumer protection. BitMex hope this is simply a temporary measure with a return to full regulation available in the coming months.
With past events in recent memory BitMex are keen to shine in a new light and can now confidently state that 100% of its customer base has followed and completed extensive Know Your Customer regulation. This is hoped to inspire and generate renewed confidence across the cryptocurrency eco-system.
In order to combat against price manipulation and subsequent liquidations, BitMex use an underlying index price for the purpose of margin calculations instead of the last traded price. This means that any malicious trader cannot place large orders on the platform which may have an immediate affect on the asset price.
The BitMex platform features various responsible ‘Contract Loss Mechanisms’ in order to mitigate loss on the system. The Risk Limit System ensures that larger positions require a bigger initial maintenance margin whilst the sophisticated Liquidation Process attempts to avoid liquidations by automatically reducing the risk tier or cancelling any open orders which may be taking up available margin. Furthermore, the Auto-Deleveraging System closes traders who hold opposing positions against the liquidated order with the emphasis on highly leveraged positions being closed first.
BitMex Backing / Partners
The BitMex platform is a component of HDR Global Trading Limited who in turn are overseen by 100x which itself is a product of the phenomenal growth of BitMex in the last 7 years.
As we mentioned above BitMex is in a significant period of transformation and holds ambitious plans for the growth of the platform to include the development of spot markets, brokerage, custody, user academy and information products.
100X Ventures is another arm of the organisation whose aim is the investment and development of the cryptocurrency ecosystem as a whole. Areas of particular interest include:
• Fixed income solutions – financial products that produce predictable returns
• Emerging spot market exchanges – allowing users to move from fiat to cryptocurrency
• Algorithmic and automated trading – facilitating 24/7 trading strategy
External backers of 100x Ventures include MaiCoin, Merklescience, PDAX and Sparrowexchange.
BitMex Future Plans
The cryptocurrency ecosystem develops at a rapid pace and new and emerging trends are constantly in development. With this in mind BitMex are pro-actively using this period of organisational restructuring as an opportunity to repair the company reputation while taking advantage of new and emerging markets.
As cryptocurrencies and blockchain become ubiquitous to everyday life the range of financial services continues to increase through technological development and red hot competition. The rise to individual self-sovereignty continues apace. Therefore, 100x are committing resources and grants into areas which enhance and grow the cryptocurrency ecosystem as a whole. The ‘100x Open Source Development Grant’ program provides funding and resources to those working with Bitcoin, Java, NodeJS or Kubernetes in an effort to further nourish and generate continued interest. Smaller grants are also available to those looking to develop educational materials, workshops, translating and transcribing technical documents. This altruistic approach is indicative of the new leadership at the head of the organisation.
Sitting alongside 100x CEO Alex Hoptner is Group Chairman Dr David Wong. Widely recognised for his outstanding contribution to financial services, Dr Wong is responsible for overseeing the long term growth strategy of the group and with an impressive pedigree from Bank of China (Hong Kong Group) and ABN Amro it feels as if the group is finally in safe hands.
With extensive experience in previous roles including CEO of Börse Stuttgart, Mr Höptner’s chief responsibility is the development of the BitMex platform itself together with directing the overall growth of the organisation.
Conclusion
To put it mildly BitMex has experienced a tumultuous last 12 months with significant damage done to both the company reputation and group finances. However, the organization continue to offer progressive and competitive crypto derivatives in a highly fought market and given the company’s historic pedigree and new leadership there may be light at the end of the tunnel.
The financial application of cryptocurrency is becoming increasingly popular as more people become comfortable with the concept and use of digital assets.
Regulatory pressure over the sale of crypto derivatives is an ongoing and real concern and until there is a clear horizon ahead users of platforms such as BitMex are advised to proceed with a high level of caution.
With that being said, the responsible verbiage of the 100x website, the further adoption of consumer protection policies and increased levels of security all point towards a bright new future for BitMex. Lets hope the relevant authorities think along the same lines.