BitMEX: Everything to Know

By  Beluga Research August 13, 2023

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Summary

  • BitMEX is a cryptocurrency derivatives exchange offering leveraged trading, futures and swaps, providing traders with access to global markets
  • BitMEX was founded to meet demand for advanced trading platforms in the evolving cryptocurrency market
  • It offers unique features like leverage trading, perpetual contracts and futures contracts
  • BitMEX prioritizes security, provides a user-friendly trading interface, and supports various cryptocurrencies

Overview

BitMEX is a cryptocurrency derivatives exchange offering leveraged trading, futures, and swaps, providing traders with access to global markets. BitMEX, short for "Bitcoin Mercantile Exchange," is a cryptocurrency derivatives trading platform that was established in 2014 by Arthur Hayes, Ben Delo, and Samuel Reed. The platform is designed to cater to professional traders and offers a wide range of financial products, including perpetual contracts, futures contracts, and options contracts. BitMEX primarily focuses on Bitcoin trading but also supports a few other cryptocurrencies like Ethereum, Bitcoin Cash, Cardano, and Litecoin.

A Brief History

BitMEX emerged during a time when the cryptocurrency market was rapidly evolving and there was a growing demand for advanced trading platforms. The founding team recognized the need for a derivatives exchange that could provide traders with leveraged trading options and sophisticated financial instruments. With this vision in mind, BitMEX was born.

Since its launch, BitMEX has experienced both success and challenges. The platform quickly gained popularity due to its innovative features, high liquidity, and user-friendly interface. However, it has also faced regulatory scrutiny and legal issues in various jurisdictions, which have impacted its operations. Despite these challenges, BitMEX has maintained its position as one of the leading crypto exchanges in the industry.

What is BitMEX?

  • Trading Features: BitMEX offers several unique trading features that set it apart from other exchanges. One of its key offerings is leverage trading, which allows users to amplify their potential profits by borrowing funds to open larger positions. However, it's essential to note that leverage trading also carries higher risks, as losses can be magnified. BitMEX offers leverage options ranging from 1x to 100x, depending on the chosen trading pair.
  • Perpetual Contracts: BitMEX introduced the concept of perpetual contracts, which are derivative products designed to mimic the behavior of spot markets. These contracts do not have an expiration date, making them different from traditional futures contracts. Perpetual contracts on BitMEX are settled every eight hours, and their prices are closely tied to the underlying spot market, ensuring minimal deviation.
  • Futures Contracts: BitMEX also supports traditional futures contracts. Futures contracts on BitMEX have fixed expiration dates and settlement periods. Traders can choose from various contract durations, such as weekly, monthly and quarterly. By trading futures contracts, users can speculate on the future price movements of cryptocurrencies and potentially profit from both upward and downward price trends.
  • Security Measures: BitMEX places a strong emphasis on security to protect user funds and personal information. The platform employs industry-standard security protocols, including two-factor authentication (2FA) and cold storage for the majority of user funds. Additionally, BitMEX has a robust insurance fund to cover any unexpected losses that may occur during highly volatile market conditions. BitMEX promotes it has never lost cryptocurrencies from intrusion or hacking.
  • Trading Interface: BitMEX offers a user-friendly trading interface that provides traders with advanced charting tools, order types and real-time market data. The platform allows users to customize their trading experience and provides efficient order execution. However, due to its advanced nature, BitMEX may be more suitable for experienced traders who are familiar with leveraged trading and derivatives.

Getting Started

To begin trading on BitMEX, users need to create an account and complete the necessary verification process. Once registered, users can deposit funds into their BitMEX wallet using crypto. Once the funds are deposited, users can start exploring the platform's various trading options.

BitMEX offers several types of trading products, including perpetual contracts, futures contracts and options contracts. Perpetual contracts are similar to traditional futures contracts but do not have an expiration date. They allow traders to speculate on the price of a cryptocurrency without holding the underlying asset. Futures contracts, on the other hand, have a specified expiration date and are settled in bitcoin. Options contracts provide traders with the right, but not the obligation, to buy or sell a cryptocurrency at a predetermined price within a specific timeframe.

Unique Aspects

BitMEX stands out from other cryptocurrency exchanges due to its unique features and trading options. One notable feature is its high leverage trading capability. BitMEX allows traders to leverage their positions by borrowing funds to amplify their potential profits or losses. This means that even with a relatively small amount of capital, traders can access larger trading positions. However, it's important to note that trading with leverage can also increase the risk of substantial losses.

Another unique aspect of BitMEX is its use of the Bitcoin-based settlement currency for all trading products. This means that profits and losses are settled in Bitcoin rather than traditional fiat currencies. While this can be advantageous for those who are well-versed in bitcoin and prefer to accumulate more of the digital currency, it also means that traders need to be mindful of bitcoin's price volatility and potential impact on their overall portfolio.

BitMEX also offers advanced trading features such as stop orders, limit orders and trailing stops. These tools provide traders with greater flexibility and control over their trading strategies. Stop orders allow traders to automatically execute a trade when the market reaches a specific price, while limit orders enable traders to set a price at which they are willing to buy or sell a cryptocurrency. Trailing stops are particularly useful for managing risk as they allow traders to set a dynamic stop price that adjusts with the market.

Advantages

  • High leverage trading: BitMEX allows traders to access high leverage ratios, enabling them to amplify their potential profits. This feature can be particularly attractive to experienced traders who are comfortable with the risks associated with leveraged trading.
  • Diverse range of trading instruments: BitMEX supports a wide variety of cryptocurrencies, including bitcoin, ether and litecoin. Additionally, it offers various trading instruments such as perpetual contracts and futures contracts. This extensive selection provides traders with ample opportunities to diversify their portfolios.
  • Deep liquidity: BitMEX consistently ranks among the top exchanges in terms of trading volume, ensuring that traders can execute their orders swiftly and at competitive prices. The platform's deep liquidity is especially beneficial for large-scale traders who require significant order sizes.
  • Advanced trading features: BitMEX offers advanced trading features such as stop orders, limit orders, and trailing stops. These features allow traders to implement sophisticated trading strategies and effectively manage their risk exposure.
  • Security measures: BitMEX has implemented robust security measures to protect users' funds and personal information. It employs cold storage for the majority of its funds, multi-signature wallets, and two-factor authentication (2FA) to enhance the security of user accounts and has never lost cryptocurrency from being hacked.

Disadvantages

  • Complexity: BitMEX's advanced trading features and leveraged trading can be complex for novice traders to grasp. The platform's interface may seem overwhelming at first, and understanding the intricacies of leveraged trading requires a solid understanding of risk management and market dynamics.
  • Limited fiat support: Unlike some other exchanges, BitMEX primarily focuses on cryptocurrency trading and does not support direct fiat deposits or withdrawals. This means that users need to acquire cryptocurrencies elsewhere and transfer them to BitMEX to start trading.
  • Regulatory concerns: BitMEX has faced regulatory scrutiny in the past due to its offering of leveraged trading and derivative products. This regulatory uncertainty can create potential risks and uncertainties for traders using the platform.
  • System overload during high volatility: BitMEX has experienced occasional system overload during periods of high volatility, leading to temporary trading disruptions. While the platform has taken steps to address this issue, it remains a concern for traders who rely on uninterrupted access to the market.
  • Limited customer support: BitMEX's customer support has been a subject of criticism, with some users reporting slow response times and difficulty in resolving issues. This lack of responsive customer support can be frustrating for traders who require timely assistance.