There is no doubt that you would have heard of BitMEX (The Bitcoin Merentile Exchange).
This is one of the most well-known Bitcoin future exchanges in the world and is the go-to exchange for advanced traders and speculators alike.
But, what is the real deal with BitMEX?
Can it be trusted and is it a safe exchange to use? In this comprehensive BitMEX review we will dig deep into this exchange. We will cover the most important aspects that you would require to make an informed decision about BitMEX.
With that being said, let’s jump in!
BitMEX was started in 2014 by former Citibank trader Arthur Hayes as well as Samuel Reed and Ben Delo. BitMEX is located in Hong Kong and the team are based there.
The holding company is called HDR Global trading Limited which is registered in the Seychelles. This is a structure that many Bitcoin related businesses and exchanges tend to choose given the tax efficiency.
BitMEX Team. Image source: Technode
BitMEX is a margin trading exchange. This means that you will trade leveraged positions with coins placed on margin. Margin trading is not for all traders and can be really risky. This is especially true in the case of BitMEX where margins can run to 100 times.
BitMEX also offers trades on the future prices of a cryptocurrency through their bespoke futures contracts. In fact, before the CME and CBOE started offering Bitcoin futures, BitMEX was one of the first exchanges to offer this.
One of the great advantages of margin trading is that it allows the trader to short the price of the cryptocurrency. This means that they can make money on the fall in the price of the asset by short selling it.
Another thing that distinguishes BitMEX from numerous other exchanges is that they do not accept Fiat deposits. You can only fund in Bitcoin and withdraw in Bitcoin.
BitMEX also differs from other larger cryptocurrency exchanges such as Binance in the fact that all positions are marked in Bitcoin. Although you can trade a margin position on altcoins, you profit will be in Bitcoin and you cannot withdraw these coins from the exchange.
What this really means from the outset is that BitMEX is more the platform for traders than it is for your average cryptocurrency investor who just wants to buy and hold.
Crypto Asset Coverage
Extract of Some Bitmex Contracts
Given that BitMEX is a futures exchange, the only asset that you can trade in the spot market is Bitcoin. This is why when you take a look at the volume on Coinmarketcap, you will only see a figure for Bitcoin.
However, when it comes to the futures markets, BitMEX allows for you to trade 10 different cryptocurrency assets. These are given below:
Bitcoin (BTC), Dash (DASH), Ethereum (ETH), Ethereum Classic (ETC), Litecoin (LTC), Monero (XMR), Ripple (XRP), Tezos (TEZ), Zcash (ZEC) and Cardano (ADA).
Although this is much less coins than the likes of Cryptopia and Poloniex, these are cryptocurrency margin trades and not the purchase of physical coins. It could be much harder to find the liquidity for the smaller cap altcoin futures.
Perpetual Swaps vs. Futures
BitMEX has two types of derivative assets that you can trade. These are an instrument termed a “Perpetual Swap” and the plain vanilla futures.
What is a perpetual swap?
A perpetual swap is, quite simply, a future that does not have an expiry date. For those who do not know, futures are instruments that are settled sometime in the future. These are mostly settled every quarter and usually have an expiry price above the current spot.
A perpetual swap will merely be a future that is continually marked to market on a daily basis. In this manner, you can think of a perpetual swap in much the same way as spread betting or a Contract for Difference (CFD) works.
Don’t let definitions trip you up though.
Trading a perpetual swap is just like trading the physical instrument at spot. The price that will be presented will be the spot price of the asset. Of course, your gains / losses will be magnified due to the leverage.
BitMEX is favoured by cryptocurrency traders worldwide because of the leveraged trading that you can employ. For example, in the case of their Bitcoin instruments, you have a maximum leverage of up to 100x.
Although that is the maximum leverage that one can employ with Bitcoin, the other assets will have a lower maximum leverage. This will be determined by the amount of initial margin that must be put up. Below are some of the max leverage numbers for other coins:
BitMEX Leverage on Exchange
- Ripple (XRP): 20x
- Litecoin (LTC): 33x
- Ethereum (ETH): 50x
- Bitcoin Cash (BCH): 20x
- Cardano (ADA): 20x
- Ethereum Classic (ETC): 20x
- Monero (XMR): 25x
- ZCash (ZEC): 5x
When you are margin trading, there are two types that you can make use of: Isolated and Cross-Margin.
In the case of Isolated, you can select the amount of money in your wallet that should be used for a position after you have placed the order. The cross margin, on the other hand, will assume that all of the money that you have in your account is up for leverage.
Of course, it goes without saying that you should only use high leverage and cross margin if you know what you are doing. Leverage is a double edged sword and you can also find yourself taking out pretty quickly if you are on the wrong side of a trade.
This is due to infamous “margin calls”.
In the case of BitMEX, these margin calls are automatic and will either draw on the funds that are in your account or they will liquidate your positions. This will happen whenever your position drops to the level of the maintenance margin.
Trading fees are really important for your profitability. This is especially true if you are trading a large degree of volume.
The trading fees at BitMEX work a little bit differently given that you are trading leveraged instruments. You will have “maker” and “taker” fees. These essentially imply whether you are making an order or taking an order.
What does this mean?
Basically, when you are a taker, you are matching an order that is already on the order books. You are essentially removing liquidity by taking an order that is already on their books.
In the case of a maker, you are adding liquidity to the order books by placing a limit order that is away from the current price. This would be a buy limit order below the current price or a sell limit order above the current price.
At BitMEX, when you are adding liquidity to their books, they will pay you. This is why they are termed a rebate. BitMEX has a rather simple structure for its fees.
For Tezos and ZCash, the fees are:
- Maker fee (Rebate): 0%
- Taker fee: 0.25%
- Settlement fee: 0.25%
And for all of the other coins:
- Maker fee (Rebate): 0.075%
- Taker fee: 0.025%
- Settlement fee: 0.05%
In the case of hidden orders (more below) the fees that you will differ slightly. When you place your hidden order, you will pay the taker fee until the complete order is done. Then, once it has been executed, you will be given the maker rebate.
When it comes to other fees, you will not have to pay anything to BitMEX to deposit or withdraw your funds. However, they will charge you a minimum network fee for your payments so it makes sense to keep your transaction in larger tranches.
Registration and Trading
Before you can test out the platform, you have to sign up at BitMEX with an account. The signup process is relatively straightforward and you will only be required to provide an email.
So far, BitMEX does not require KYC documents from traders so it is possible to sign up anonymously. You are required to give a valid email, however, as you will need this to confirm your account and all the witdrawals etc.
It is also important to note at this point that BitMEX does not allow US traders. This is because they are not licence to provide futures products by the CFTC. There are other options if you are a US resident such as GDAX and Kraken.
The BitMEX Trading Platform
It is time to head into the belly of the BitMEX beast.
That is the trading platform and technology. Given that the exchange was launched by Ex-investment bankers and traders, it is well known for having one of the most efficient “matching engines” around.
Let’s take a deeper look.
Once you have confirmed your email and you have logged back into the website, you will be presented with the BitMEX trading platform. You have a list of all the instruments that you can trade at the top of the platform.
BitMEX Trading Platform
Once you select a particular instrument, then it will open up on that market. What you are presented with is pretty typical for a cryptocurrency exchange. You will have the order books, charts, recent orders and positions.
Something that is a bit more unique to BitMEX is the involved order form. This is obviously needed in order to select the desired leverage and order specifics.
One can also see that this plaform was developed specifically for traders.
You can move widgets around such that they conform to your preferences. You can also expand the chart to full screen and make use of all the charting tools and analysis. BitMEX makes use of trading view charts which have means that you will have access to most of the studies and indicators that you need.
Below all the charts in the image you will also have all of the orders that you currently have. If you have a live limit order that you decide you would not like to be filled then you can merely decide to cancel it from this order interface.
You would also be surprised to know that this is the default layout and there is an even more advanced dashboard option. This can be selected in your account options but we would only recommend this for the most seasoned traders.
In terms of the trading engine itself, BitMEX uses software that is being used on Wall Street by high frequency trading firms. It is written in kdb+.
Just to give you an idea of how fast the trading engine can execute orders, it is well known that kdb+ has a throughput rate of up to 1,000,000 trades per second.
As mentioned above, there are a range of order types that you have at BitMEX.
Below is a screenshot of the order form on the left. BitMEX also includes a handy calculator tool where you can work out your profit / loss given your target entry and exit levels.
BitMEX Order form (left) and PnL Calculator (Left)
If you are a person who has ever traded on any of the other more advanced forex or stock trading platforms then these order types will be known to you. Below are the orders:
- Market Order: Order that is executed at the market rate.
- Limit Order: Order will be executed at the price that you have chosen
- Stop Limit Order: This will create a limit order that is chosen by the trader once a certain stop level is reached
- Stop Market Order: With this stop order, the order will be executed at market the moment that the stop level is reached.
- Trailing Stop Order: This can be thought of as a moving stop market order. The stop level will follow the price accounted for a spread away from market level.
- Take Profit Limit Order: This operates alot like a stop order except it is executed to close out the position to lock in gains.
- Take Profit Market Order: This works like the stop market order but in respect to locking in gains through a market order once a certain level is reached.
There are two other orders that BitMEX has in the order form that you may not have come across before. These are the Hidden and Iceberg orders that we have talked about before.
- Hidden Order: Hidden order is a limit order that is not placed on the public order books. This is used by those traders who do not want other traders to know about the positions that they are about to put on.
- Iceberg Orders: This is a variant of the hidden order where only a part of the order is displayed to the market. This is done by some traders in order to “disguise” their hidden order from certain “savvy traders”
Of course, these orders are likely to only ever be used by those really large crypto whales who’s orders are likely to have an outsized impact on the current order book.
So, is BitMEX safe?
To this day, BitMEX has not suffered any hacks. This could be down to their advanced security practices which you can read about in more detail here. They break their exchange policies down by function:
The wallets are secured with multisignature deposits and withdrawals. This means that BTC from the exchange’s cold stored wallets cannot be spent until the signatories (BitMEX partners) can authorise withdrawal.
They also use an external service to verify that all deposit addresses that are created on the system are those that are controlled by the founders. If they do not then all trading is halted.
For personal security, you have two factor authentication should you want to make use of it. The hand processed withdrawals is an extra layer of security should your account be compromised at any time.
The server infrastructure is secured by Amazon Web Services. They require multiple forms of authentication as well as hardware tokens.
Apart from the threat that comes from external attackers, there is also a great deal of risk in running such a highly levered and voluminous trading platform.
This is why BitMEX has a number of policies in place in order to make sure that all of the orders are indeed matched. They run a risk check after any movement on the exchange and the moment that there is any discrepancy, trading is shut down.
For those traders who are extra cautious about their communication security, BitMEX offers the option to PGP encrypt the automated emails.
Enabling PGP Security in Your Account
If this is something that you would like to do, then you will have to go to your account and insert your PGP public key into the form they present. Once this is completed, all emails that come from support@BitMEX.com will be encrypted.
BitMEX Deposits and Withdrawals
As mentioned, BitMEX is a crypto only exchange. There are no options for funding your account with fiat currencies.
The account is funded and collateral is maintained almost exclusively in Bitcoin. Hence, you will have to send Bitcoin to your account if you want to fund it. As noted earlier, this is free.
The minimum that you can deposit is 0.001BTC and there are no limits on withdrawals. If you want to initiate a withdrawal on BitMEX, you will just select the “balances” tab from the platform and then choose the amount and the chosen wallet address.
Initiating a Withdrawal on BitMEX
Although deposits are automated, the withdrawals are handled by hand. While this may slow down the process slightly, it is a better option in terms of security as it gives the user time to notice a suspicious withdrawal.
BitMEX Customer Support
The customer support on BitMEX is reasonable in comparison to other exchanges.
They have 24/7 support through emails, tickets and their social media channels such as Reddit and Twitter. The feedback from other traders that we have been getting is that they are generally quite responsive and take about an hour or so on average.
BitMEX Knowledge Base for Queries
Of course, if you are asking a more general question, you are better served to search their knowledge database. This is relatively easy to navigate and it seems that they have indeed covered all of their bases.
The BitMEX “Trollbox”
Something else that BitMEX has that is being offered by a great deal of FX platforms these days is the group chat options.
This is a pretty neat way for you to communicate with other traders and get their perspective on the market currently. This has aptly being named the BitMEX “trollbox”. There are chat groups in English, Russian, Spanish, Japanese and Chinese.
In terms of the quality of the conversations, the troll box is more for well… trolling. If you wanted to get more meaningful conversation with the traders then you can join the IRC chats. BitMEX gives you the option to do that as well.
What We Didn’t Like
While BitMEX is no doubt an impressive, there are a few things that we think warrant some improvement.
Firstly, while the platform is advanced, the user interface is quite dated and things could be better laid out. For those traders who have not used advanced FX and trading platforms before, it could be quite hard to use at first.
There is also the lack of any mobile trading functionality.
While mobile trading is not for everyone, it is handy to be able to quickly monitor your positions while you are away from your PC. Of course, developing a mobile app for a platform like BitMEX’s is no easy feat.
Another disadvantage of course is the fact that it is not open to US traders.
Now, there is nothing stopping a US trader from accessing BitMEX through the use of a VPN. Given that they do not ask for any identifying information, you can do easily do this.
Is doing so wise? Probably not.
It is against BitMEX’s terms and conditions and if there is ever a situation where you will need to interact with them and they find out you are a US resident, it could only lead to more problems.
One thing that is clear from this review is that BitMEX is an advanced trading platform and is not for everyone.
With BitMEX, you are trading very volatile assets with leverage that can reach up to 100x. This is clearly not the type of trading for those who are new to cryptocurrencies. Other exchanges such as Coinbase or Hodly wallet could be a better option for those.
You also have to be aware of the fact that you are not buying the underlying asset and are entering a derivative trade. This is not the platform that you will use for any sort of “buy and hold”.
With that being said, for those traders who are familiar with margin trading and technical studies, then BitMEX is one of the best options.
They have advanced security, a responsive customer support team and a trading engine that is almost unrivalled.
If you are going to use BitMEX, make sure that you are aware of the risks that come with margin trading and of course, never risk more than you can afford to lose.
Featured Image via BitMEX and Fotolia
- Advanced Trading Engine
- Strong Security
- Responsive Customer Support
- Numerous Order Types
- Complicated Trading Platform
- Only BTC Funding
- Not Available to US Traders