Deribit is one of the only places that you can buy Bitcoin options on the market at the moment.

Deribit has also expanded their product offering to include bitcoin futures. This is great as it gives traders an alternative to the status quo of Bitcoin futures exchanges.

However, is Deribit safe and reliable?

In this complete Deribit Review, we will give you everything that you need to know about the exchange. Among other things, we will take a look at their reputation, technology and fees. We will also give you some top tips when trading Bitcoin options.

Let’s jump in.

Deribit Overview

Deribit was launched in 2016 and is based in Amsterdam, the Netherlands. They operate under the Deribit B.V. company which is located at Stationsstraat 2 B 3851 NH, Ermelo. The exchange was launched as a Bitcoin futures and options platform although it is better known for its options.

Deribit was founded by Bitcoin enthusiasts and ex traders. For example, the CEO (John Jansen) was a trader on the Amsterdam options exchange. He teamed up with the current CTO (Sebastian Smyczýnski) in order to develop an exchange that had the minimum latency and maximum functionality.

Other members of the team include John’s younger brother, Marius, who is the CMO as well as Andrew Yanovsky who is the Lead developer. You can read more about the team members and their background in the about us section of Deribit.

Deribit is currently unregulated as an options broker but that is mainly because European financial regulators have still not developed a framework for these exchanges to fall into.

Deribit Team Members
Deribit Team Members. From left: John Jansen, Marius Jansen, Sebastian Smyczýnski, Andrew Yanovsky.

Is Deribit Safe?

One of the most important questions that traders want to know about a cryptocurrency exchange is whether it is safe. We know all too well the consequences of using an untrustworthy or insecure exchange.

There are a few things that we look for when analyzing the safety of an exchange and these either relate to exchange side safety or user side safety.

Exchange Security

To date, Deribit has not suffered any sort of security breaches since inception. This does not mean that they are immune but it does show that they seem to have the right protocols in place.

In terms of coin handling, Deribit claims to make use of a 95% cold storage policy. This means that these coins are kept offline in a secure wallet that is “air gapped”. In this case, the wallets are kept in numerous different bank vaults.

In order to make sure that there are no vulnerabilities in the new code and updates that Deribit pushes, they have a pretty extensive bounty program. This is great as it encourages white hat hackers to find these bugs and receive their bounty before the black hat guys do.

They also have real time auditing of their accounts as well as a unique liquidation engine that makes sure that underfunded accounts get closed. This all forms part of the Deribit insurance fund which we cover below.

Lastly, they also have what they call their “risk engine” which is vital to the functioning of any derivative exchange. This analyses all incoming orders before they hit the exchanges book’s and are met with the matching engine.

User Security

Given that most often the user is the weakest link when it comes to account security, Deribit has a number of features to enhance your individual security.

For a start, all communication with the Deribit server is conducted through an SSL connection. You can confirm this by taking a look at the padlock in your browser address bar. This is also an extra check that you want to confirm before logging in to make sure that you are not on a phishing site.

Even if you have a compromised password, Deribit offers you the chance to enable two factor authentications. This is not enabled by default so you may want to enable it when you login.

Pinning IP Address Deribit
Pinning Your IP Address for security on Deribit

There are some other security features that you can enable on your account settings including IP pinning. This means that if someone were to login to your account from another IP when you are logged in, it will terminate the sessions.

You can also manually set your session timeouts. The standard timeout for inactivity in the account is one week but you can change this to an hour.

Of course, irrespective of the security procedures at an exchange, it is never wise to leave a large amount of coins on them. It goes back to old maxim in that if you do not control the keys you do not control the coins.

Deribit Fees

Given that Deribit is a trading platform, exchange fees are important. This is especially true if you are trading a large degree of volume with leveraged instruments that could be liquidated or delivered.

Here is the fee structure at Deribit:

Exchange Fees

Like most other exchanges, Deribit operates a “maker-taker” model. This means that those traders who provide liquidity to the Deribit books will get a lower fee (or even a rebate) than those traders who take it.

For the futures, they charge a 0.02% rebate for the makers and they charge a 0.05% taker fee. Taking a look at the perpetual futures contract, the rebate for makers is 0.025% and the fee for the taker is 0.05%.

Fee Type Futures Perpetual Future Options*
Maker 0.02% (Rebate) 0.025% (Rebate) 0.04%
Taker 0.05% 0.075% 0.04%
Delivery 0.025% 0.025% 0.02%
Liquidation 0.15% 0.15% 0.15%

When it comes to the Bitcoin options, Deribit places a limit on the fees. They can never be higher than 20% of the cost of the option. This only really applies to those deep out of the money options that are really cheap.

The liquidation fees apply to the fees that Deribit will charge for liquidation orders. These are executed by Deribit for accounts where margin has been exhausted. In this case, the bulk of the fees go towards the Deribit insurance fund (0.15%).

Funding & Withdrawal Fees

Deribit does not charge a fee for deposits of coins onto the exchange. They will however charge a fee for withdrawals. This fee is based on the mining fee that is currently applicable on the network.

This may vary slightly from the fees that you can see on the open market. This is because on the processing of the withdrawal, Deribit will charge you the fee that they think best applies to the network. If could be slightly higher or slightly lower based on transaction batching.

Deribit Customer Support

For those traders who were active during the 2017-2018 bull run, they will know first hand how difficult it was when it came to customer support at a number of cryptocurrency exchanges. Days on end and unanswered tickets.

So, how does Deribit stack up?

They seem to have all of the standard customer support options. For one, they have a range of specific emails that you can reach them on from their contact page. However, they do not have an online contact section similar to those provided by a number of other exchanges.

Deribit Contact Emails
Email addresses used to contact Deribit

Given that they do not require you to verify your exchange, you do not have to wait on them to examine any documents like they do at numerous other fiat exchanges. These were often the slowest processes at these exchanges.

If you would like a more direct contact with them then you can always join their Telegram support channel. They also have a Twitter account which they seem to be relatively active on so you could also use these.

Of course, if you have a more routine question about something that is not account specific, their FAQ section is quite extensive and will most likely have the answer to your question over there.

Deribit Signup

Assuming that you wanted to sign up and give Deribit a try then you need to create an account. You can head on over to their sign-up section and register your details. Much like other anonymous cryptocurrency exchanges, you are not required to give your full name and can use an alias.

Deribit Signup
Required Information to Signup to Deribit

Once you have given them the details, they will send you an email with a confirmation link. When you follow that link your account will be fully functional and you can start using it. Now is perhaps the best time to also set up your two-factor authentication if you want to secure your account.

Deribit Testnet

Something that Deribit has that is not available on a number of exchanges is a live test-net for all users. You can think of it as a separate demo account. This can be accessed on test.deribit.com. You will need to create another account but you can use the same credentials if you like.

Once you have signed up and created an account here, you are given 10 BTC as demo funds. You can now trade these as you would a live account and test out your strategies. This is great for those traders who are beginners and are just getting used to options / futures. Or it could also be used by those traders who want to get a feel for the Deribit UI.

This domain is also useful for those of you who would like to develop bots on the Deribit API. This will give them the chance to refine their cryptocurrency algorithms before they can turn them on the live accounts.

Funding & Withdrawal

If you are content on with your trading and you would like to start trading on a live account then you will need to fund your account. Deribit is a crypto only exchange and unfortunately you cannot fund your account with any Fiat money.

Therefore, if you only have Fiat funds and you would like to trade with Deribit then you would need to make use of what is called a fiat gateway exchange. These are exchanges such as Bitstamp, Coinbase, Kraken (or your local equivalent).

Once you have your Bitcoin you will need to send it to your Deribit account. You can do this by hitting the “Deposit” button in the top right of the online panel. You will then need to generate a deposit address which you can send the funds to.

Deposit funds at Deribit
Creating a deposit Bitcoin address

Once you have this address and you send the funds, Deribit will wait for one confirmation and top up your account. This means that you can get trading much more quickly as most exchanges require at least three confirmations.

When it comes to withdrawals, it is just as simple. You will need to create a new wallet profile with a name and attach your external wallet address. Once this has been done you can process the withdrawal.

Withdrawing Funds Deribit
Choosing Wallet to Withdraw to at Deribit

Deribit says that they will try and do this immediately but this will of course depend on whether the funds are available in their hot wallet. If they need to replenish their funds from cold storage you may need to wait a little bit.

Deribit Platform

It is time to go into the belly of the beast and examine the underlying platform and exchanges. From a first glance, we are quite impressed. The platform looks highly functional yet appears to also be relatively intuitive.

Compared to other futures exchanges, it is also more attractive from a User Interface (UI) perspective. The menus are laid out to the left sidebar with all the options for markets, FAQs and other important documentation. Deribit has also translated the website and platform into a number of different languages.

You also have a lot of functionality when it comes to managing your accounts. For example, you can set up different sub accounts, cross margin between accounts as well as get a comprehensive breakdown of your trading statistics.

There is also extensive documentation and content to help you get started trading. These include overviews of their trading instruments as well as more general information about the exchange itself. They also have helpful videos which can explain the process to you.

Options Exchange

When you move on over to the options exchange, you will be presented with all of the option markets. This is probably a bit more complicated to the uninitiated trader when they first take a glance at it. They present you with the different expiries, option type and strike on the platform. They also give you other important data like the volatility, Delta, open interest etc.

A full overview of option theory is beyond the scope of this review but you can read our complete guide to cryptocurrency options should you want more information. Below we have a screenshot from the Deribit options market. This just gives you a full “lay of the land”.

Options exchange at Deribit
Complete overview of Deribit Option Markets

If you wanted to trade a particular option then there are two methods that you can use to narrow in on the exact option in question. You could either refine the search criteria in the top right or you could select the option in the particular order form.

When you click on a particular option in the market overview, you get presented with the option order form. In this case we have selected the most liquid market, the $6,500 call option expiring at the end of November 2018. Below is the specific order form where you will see the order books.

Deribit Option Order form
Order form for chosen option on the market

In this form you can refine your order or you can even change the option type in the top left. You will of course notice that the further out-of-the-money / in-the-money you take your options, the more illiquid the market becomes.

In this order form you can also choose the type of order (time in force or limit / market). You can also use more complicated order parameters like choosing the implied volatility of the option that you would like to place an order for.

Once you are satisfied with the order parameters you can submit it. You will need to confirm the amount of margin that they can use for the trade. Once your order is placed and matched you can monitor it in your options dashboard.

The only thing that we did notice about the Deribit options is the general lack of liquidity for those options that are out of the money or deep in the money. This could limit the range of option strategies that you could employ.

Futures Exchange

If you have traded futures on other exchanges such as BitMEX then the futures exchange is a bit more familiar territory for you (see our BitMEX Review). The markets will change according to the expiry date of the futures contract. You can then decide on whether to go long or short either as a “buy” or “sell”.

Like other exchanges, Deribit also offers what is called a “perpetual futures”. These are essentially just contracts that do not have an expiry date. You can think of them as a rolling futures contract and they are equivalent CFD’s (Contracts for Differences) and spread betting derivatives.

Below we have the screenshot from the Deribit Futures exchange. You can see the order books, recent trades as well as the order form all in one place. You also have access to your current orders and live trades just below that.

Deribit Futures Exchange
Futures Exchange Platform with traditional and Perpetual

You also have a range of order types for you to refine your trade. These include your standard market / limit orders as well as those that involve stop losses in the case of severe market movements. It is perhaps wise to always place a stop loss at certain break points to limit downside risk.

Lastly, in order to work out the potential profit / loss on your position, you have a handy calculator. This is in the top right of your order form and it could help you understand your position more.

Margin and Leverage

As you may now know, you do not trade physical products at Deribit but rather derivatives. These are of course levered instruments as you will need to post a margin for the position. This is comprised of the initial position margin as well as the maintenance margin.

Futures

In the case of futures, the Initial Margin is 1% of the position which implies 100:1 leverage. This is not constant and will increase in a linear fashion at 0.5% per 100 BTC increase in the position size. Below is the formula that they use to apply the initial margin:

IM = {1% + (Position Size in BTC) * 0.005%} * {Position Size in BTC}

In terms of the maintenance margin, this starts at 0.55% and will increase at a similar rate per 100BTC increase in the position. Below is the formula that is used to determine the Maintenance Margin (MM).

IM = {0.55% + (Position Size in BTC) * 0.005%} * {Position Size in BTC}

The prices for settlement for the futures contract is based on what they call the “Mark Price”. This price is calculated based on their own internal Deribit BTC Index which is itself derived from the prices on a number of different exchanges. You can read more about how it is calculated in the docs.

Options

When looking at the options, you are not required to post a margin for Long options. This is because of the nature of these payoffs, you will never have to post anymore collateral. You have a limited downside risk which is the expense of the option.

However, you are required to post margin for short option positions. Given the unique risks of these instruments, these calculations are much more complex. You can get a full overview of their option margin protocol here.

Portfolio Margin

For the more advanced traders among us, you can ask Deribit to apply what is called a “Portfolio Margin”. With this, Deribit will apply a margin that is based on the historical volatility in your portfolio. It also combines the positions that you have in both futures and options.

So, for example, if you have positions that are partially offsetting risk for the portfolio in aggregate then Deribit could apply a lower margin. These could theoretically allow you more leverage on a particular trade.

In order to qualify, you need to maintain a minimum of 0.5BTC in your account at all times. You also need to have some prior experience trading option instruments in order to apply. There is a whole section on how the Portfolio margin works in the Options margins section.

Insurance Fund

While we are on the topic of margins and highly leveraged trades, it is worth mentioning the Deribit insurance fund. For those traders who have used BitMEX before, it is the same concept as the one their exchange.

The insurance fund is basically a pool of BTC that stands in reserve in case of position bankruptcies of the traders. It is funded through the fees that are charged by Deribit for liquidation orders (0.15%). These are then added every hour to the insurance fund.

Deribit Insurance Fund
Total amount of BTC in the Deribit Insurance Fund

As you can see from the above image, the Deribit insurance fund currently stands at 39BTC. As long as there is a non-zero amount of BTC in the fund, traders can withdraw unrealized profits on futures contracts.

However, if the insurance fund somehow gets depleted then the rest of the traders are on the hook and the bankrupt traders will be “socialised” among the winning traders. You can basically think of the insurance fund as a collective risk mitigation fund.

Deribit API

For those traders who like to develop their own bots and trading algorithms then they will want to make use of the Deribit API. This is actually quite an extensive API system that has a range of functionality for developers.

Deribit has both a REST API and a Websocket API. The former has a public and a private part. If you merely wanted to develop applications that made use of market data etc., then you could get by using the public API. However, if you want to access the private API, your requests must be signed with your API key.

In order to get your API key, you will head on over to your account and hit the API tab. You will then have to request your API key. Make sure that once you have your API key you also save your access key in a safe place. This is because it is your only way of recovering your API key in the case of loss.

Requesting Access Deribit API Key
Requesting Accesss to your Deribit API Key

Just as a general security measure as well, you have to be extra careful with your API keys. If any scammer or hacker gets hold of it that can send wayward trades to your accounts. The API console tag will give you all information as it pertains to your interaction with the API. In terms of rate limits on the API, they have a simple limit of 300 requests per second.

Something else that Deribit does that is not an option at other exchanges is that they offer developers co-location at their data center. This basically means that one can set up their trading servers right near Deribit’s servers in order to reduce latency. Their data-center is at OVH data-center in Strasbourg.

It is also worth mentioning here before we move onto the mobile app that this application operates through the API. Therefore, if you were considering using the Deribit mobile app then you will need to request an API key in any event.

Deribit Mobile App

While mobile apps can never match the functionality of web and PC client-based platforms, they can be helpful for those traders who cannot be at their desks the whole day. They could also be helpful merely to monitor live positions.

Deribit has their own Native app that is available for both iOS and Android devices. This is an advantage that they have over BitMEX which has no apps at all. Similarly, the Deribit app could perform faster than other exchange based mobile apps as it is connected through the API.

Taking a look through the application, there appears to be a great deal of functionality. For example, you can access both the options and futures exchange and it gives you about the same overviews and order options that you will find on the web app.

In terms of feedback, there have been no reviews from users on the Apple Store. However, there were some users who submitted reviews on the Google play store. They were generally quite positive although there was some constructive criticism.

For example, some traders took issue with the fact that the app was data and energy heavy. There were also one or two bugs that needed ironing out. Some users expressed concerns that they needed an API key to use the app and were not too comfortable with this login option.

We would have to agree with some of these users.

While the API connection does indeed make the App fast, it is less secure than making use of standard local mobile authentications. Perhaps this is something Deribit could consider adapting with later versions of the App due towards the end of 2018.

Deribit Affiliate Program

If you happen to have a relatively strong following online then you could take advantage of the Deribit affiliate program. Much like other exchange referral programs, this will give you a share of the trading commission for the users that you refer.

Essentially, if you get your referrals to sign up and start using Deribit then they will get a 10% discount on their trading fees for up to 6 months. For your referral, you will get 20% of these trading fees for the first 6 months. Thereafter, you will get 10% in perpetuity.

This is better than the affiliate offer that is currently available on BitMEX where you will start at 10% fixed. However, it is slightly less attractive than that of Binance where you will get 20% unrestricted.

If you wanted to refer some people to Deribit then it makes sense to get yourself an affiliate link. You can obtain this in the affiliate section of your account. The below screenshot is your affiliate dashboard.

Deribit Affiliate Program
Obtaining your affiliate link to send friends

You are given two links that you can send your referrals to and these are either the homepage or the signup form. You are advised to read the affiliate terms and conditions to make sure that your marketing / referral practice is honest.

What We Didn’t Like

Of course, no review would be complete without taking a look at some of the biggest drawbacks that we could identify on the Deribit exchange.

Firstly, while the extensive range of option instruments on Deribit is great to implement option strategies, the lack of liquidity in some markets could impede that. This is not really a fault of Deribit but is more a result of lack of volume for traders on the other side.

Currently, Deribit only has Bitcoin markets with no other altcoins. If you wanted to trade in these markets then you would need to consider an alternative like Kraken or IQ Option.

Deribit is also not open to traders from particular regions such the United States, Canada or the Netherlands. They block IP addresses from these geos. This is on account of the regulations that these specific countries have for financial securities.

While you could indeed use a VPN to create an anonymous account, this is breaking the Deribit TOS and may come with risks. If there is ever a time Deribit may need some verification in the future, they may not take kindly to their TOS being broken.

Finally, while the lack of Fiat currency funding is not an issue for most crypto traders, it could be a slight impediment to traditional traders who could easily use a CFD or spread betting platform that accepts USD, EUR, GBP etc.

Conclusion

We were pleasantly surprised with our review of Deribit. The exchange is one of the most functional that we have seen which would satisfy most pro traders. It is also relatively intuitive with plenty of resources for some of the newer traders.

We also really liked the concept of a “demo account” on their test-net. This could be beneficial to all of those traders who are considering a switch from another exchange. It gives them more perspective on the entire exchange before they put forward live funds.

Yes, there are some issues that we thought warranted improvement. However, these should not overshadow the rest of the benefits of the exchange. Bitcoin options are still in a nascent stage of adoption and as more traders move over, volumes and awareness will increase.

In summary, a great exchange if you want to trade Bitcoin options and a strong alternative to BitMEX for futures trading.

Featured Image via Deribit

Deribit Ratings

8 Deribit Ratings

Pros

  • Bitcoin Options
  • Test-net (Demo)
  • Low Fees
  • Platform Features
  • Mobile App

Cons

  • Only Bitcoin
  • Low Volume
  • Geo Restricted
Security
Technology
Fees
Coin Coverage
Support

Posted by Editorial Team

Editors at large. Posting the latest news, reviews and analysis to hit the blockchain.