BitMex Review: From Security to Trollbox to Types of Futures Contracts available
During Bitcoin’s early days, simple cryptocurrency trading didn’t quell the thirst of virtual currency traders. Unfortunately, even as Bitcoin and other cryptocurrencies gained traction, spot trading didn’t bring the fun in virtual currency trading. Fortunately, leveraged crypto trading brought a new dimension into how virtual currency investors made profits and losses.
The first cryptocurrency exchanges purely handled spot cryptocurrency trading, necessitating a new breed of cryptocurrencies to handle leveraged trading. BitMex breathed life in the space. Unlike Binance and other trading venues offering services in both worlds, spot and leverage, BitMex is purely leverage.
In this BitMex review, we take an unbiased look into the exchange. But first,
Where it all started
The BitMex dream came to Arthur Hayes, Samuel Reed, and Ben Delo and was actualized in 2014. The exchange has a Seychelles registration number under HDR Global Trading Ltd. Note that BitMex is an acronym of Bitcoin Mercantile Exchange and focuses mainly on margin trading.
However, the margin trading aspect is an addition to its derivatives offering. In its basic form, derivative trading deals with a product or service that derives its value from an underlying product.
In the case of cryptocurrencies, a derivative trader interacts with a product derived from a virtual asset. Therefore, traders do not need to hold the underlying asset.
During derivatives trading, participants project the underlying asset’s price movement. As such, they enter into a contract with opposing sides. One side believes the price will rise while the other takes the opposite direction.
By mixing derivative with margins, BitMex allows traders to hype their positions by up to 100 times. For example, if a trader has $500 worth of Bitcoin and wants to enter a trade with $1000, they borrow the extra $500. While a 100X leverage boosts profits by 100X is also amplifies the losses by 100X.
BitMex Sign Up Process and Interface
Generally, the exchange offers an easy sign-up process. To sign up, a new user needs a valid email address and a password. Also, they have to be over 18 years old and be outside the US, Hong Kong, Sudan, some parts of Canada, among a few other jurisdictions.
After verifying the email address, a new user will need to add more details before trading. Notably, there are no trading limits for new users.
On its interface, the exchange needs an uplift. Although it still works as intended, the welcome screen is intimidating for new users due to the exchange clamming many details in a single place. Fortunately, it provides widgets that help users view the interface based on their preferences.
Therefore, using a desktop or laptop computer eases a trader's journey from one menu to another since everything can clearly be accessed and or changed accordingly.
Types of Derivative Contracts on Bitmex
The exchange caters to different appetites of virtual currency derivative traders. They range from futures, perpetual, upside profit, and downside profit contracts.
- Futures – As the name suggests, it’s a contract where the participants agree to settle the contract in the future at a pre-agreed price. BitMex futures can either be quanto, linear, or inverse contracts. Quant futures contracts have different underlying and settlement currencies.
For instance, although the underlying asset may not be Bitcoin, a trader is still exposed to risks associated with Bitcoin.
For a linear futures contract, the contract’s price is provided in reference to Bitcoin. Inverse contracts, on the other hand, have a fixed amount of the quote currency.
For example, to lock BTC’s value in USD, a user would need to sell single XBT futures worth that amount. For instance, if a trader was to receive $500,000 worth of BTC in 90 days, to lock in the value, the trader needs to sell 500,000 contracts of XBT futures.
- Perpetual contracts – They have the same dimensions as a futures contract. However, unlike a futures contract that has a specific settlement or expiry date, perpetual contracts don’t have a fixed future settlement date.
- Upside and downside profit contracts – With upside contracts, traders bet on a cryptocurrency’s price moving upward. When the contract matures, they are paid the difference between the virtual currency’s price and the strike price. On the other hand, the downside profit contract allows BitMex traders to bet on a crypto’s plummeting price. And just as an upside contract, they receive the difference.
BitMex charges market makers and takers a fee to interact with the system. Basic futures, quanto futures, and perpetual contracts attract a flat maker and taker fee of -0.0250 percent and 0.0750 percent, respectively. The settlement fee for traditional and quanto futures is 0.0000 percent except for Bitcoin conventional futures that attract a settlement fee of 0.0500 percent.
Note that the crypto margin trading exchange doesn’t charge for account deposits and withdrawals. However, withdrawing and depositing Bitcoin attracts the necessary network fees. Networks fees vary depending on the load on the Bitcoin blockchain.
Is BitMex Secure?
Before we look at the current security measure imposed by the exchange, it’s good noting that in 2019, the exchange compromised its users’ privacy by accidentally revealing their personal information such as email addresses.
Apart from not providing enough measures to enhance users’ privacy, the exchange seems to have enough security measures. BitMex divides its security into wallet, system, trading engine, and communication security.
To provide security to deposited funds, the exchange employs a multi-signature process on its storage wallets. Also, the exchange keeps all deposited coins in cold wallets to keep the cryptocurrencies out of hackers’ prying eyes.
Apart from multi-sig-offline wallets, the exchange manually interrogates individual withdrawals before honoring the withdrawal request.
The exchange taps into the to-notch security offered by AWS (Amazon Web Services). As such, accessing BitMex’s core system requires hardware tokens, among other authentications that open up communication through monitored channels.
BitMex uses similar security for its trading engine as the one used by leading financial institutions that focus on high-frequency trading. Note that the exchange’s trading engine is designed to achieve high trading speeds. However, apart from powering faster trades, the engine conducts a system-wide risk check after every withdrawal, deposit, trade, order placement, and settlement.
BitMex Customer Support
BitMex’s customer support can be accessed through email. Since email tickets can take long before being resolved, the exchange has what it calls a “Trollbox.” It’s a chatbox open to all users and exchange staff. Apart from providing a more convenient way to engage with the exchange’s staff, Trollbox allows interaction between users.
For a way to maneuver around the exchange, BitMex maintains an information-packed support center. The center contains trading guides and other educative materials to help make the best out of the exchange.
API and Mobile App
The derivatives trading platform allows access to services outside its native website. Through complete REST application programming interfaces (APIs) and a WebSocket API for streaming, BitMex makes it simple for developers to interface with the exchange. For example, its BitcoinCharts API enhances access to orderbook and trading data that can be used with other cryptocurrency trading platforms.
Since 2014, the exchange was only available on desktop. However, in April 2020, BitMex released a mobile application for Android-powered mobile devices. Consequently, it ensures traders never miss an important signal or notification even when on the go. sureOn August of 2020, it released a version for iOS-driven phones.
Using the mobile app allows traders to conduct basic functions such as:
- Deposit and withdraw
- Place orders
- Manage orders
- Access charts
- Receive critical notifications
- Biometrically re-access the app after being signed out due to a period of inactivity.
BitMex Affiliate Program
The affiliate program is the exchange’s way to reward users for bringing in new users. BitMex rewards both the affiliate and the referral. The affiliate receives a commission from the referral’s trading fees while the referral receives a 10 percent discount on trading fees for six months.
Affiliate commissions are paid in BTC every 24 hours. Note that the commission earned depends on the amount traded by the referral. For instance, a trade of between 0 and 1000 XBT rakes in a 10 percent commission while trades above 10,000 XBT attracts a 20 percent commission.
The exchange provides relatively sufficient security measures from storing users’ funds offline to encrypting communication to and from customer support. By shifting from a pure desktop platform to include a mobile application, it ensures traders don’t miss an important update when away from their trading desk.
Additionally, offering different types of contracts enables the exchange to address different needs from across the cryptocurrency ecosystem. Apart from earning affiliates a hustle-free commission, an affiliate program helps the exchange boost its number of users. It’s desktop interface needs a revamp to be accommodating to novice crypto traders.
Unfortunately, whether on Binance, BitMex, or any other virtual currency exchange offering derivatives trading, take caution; the sweeter the profits, the bitter the losses.