Last Updated On December 26th, 2019
Is there such a thing as too much leverage? For the Bitcoin Mercantile Exchange (BitMEX), that answer is a definite no. BitMEX is famous for providing high-level margin trading on a select group of cryptocurrencies. Today we’ll find out if that policy is paying off for BitMEX and its users. Our BitMEX review will answer questions like:
- What is BitMEX?
- How Does BitMEX Work?
- Is BitMEX Safe?
We’ll go over the basics of BitMEX, what sets it apart from other exchanges, and why BitMEX is so popular with certain high-level traders. This BitMEX review will also take you through the process of signing up and making your first trade on BitMEX.
BitMEX was founded in 2014 by Arthur Hayes, Ben Delo, and Samuel Reed, a group of experienced bankers, equity traders, and FinTech developers. It is wholly owned by HDR Global Trading Limited, a holding company operating out of Hong Kong but is based in Seychelles. The reason for this is to take advantage of the very open nature of the Seychelles regulatory environment. It was designed from the ground up with highly sophisticated traders in mind.
BitMEX is technically a peer-to-peer exchange, but rarely do Bitcoin actually change hands. Instead, investors trade in derivatives using heavily leveraged positions to predict minute movements in several major cryptocurrencies.
BitMEX isn’t an exchange for people looking to HODL. It was built to allow advanced traders to carry out highly researched strategies using complex order types. This platform does an excellent job of this, providing trading at up to 100x margins. Investors have rewarded it for this capability by flocking to it in droves. It regularly sees daily volumes in the high hundreds of millions of dollars, with record high volumes of over $5 billion.
Since it’s founding, this platform has consistently sought to increase trader access to high-quality altcoins and improve overall liquidity in the cryptocurrency space.
Sign up & Identification
BitMEX is one of the easiest exchanges to get started trading on. If you’re outside the U.S. all you need to sign up is a valid email address. If you’re in the US, or a US citizen, it gets more complicated.
Officially it doesn’t allow any US traders to use its platform, but there is a gray area. Because it doesn’t collect any information other than an email, it relies on a user’s IP address to determine nationality. BitMEX USA VPN users get around the nationality restrictions by using a VPN service based outside the US.
Once you’ve signed up, you can choose to activate the two-factor authentication, which is highly recommended. After which you can get started trading.
Deposit & Withdrawal Methods
BitMEX only supports deposits and withdrawals of Bitcoin. As there is currently no way to purchase Bitcoin using fiat currency through the platform. You must transfer Bitcoin into your account from another wallet.
To make a deposit, you need to select deposit from the account homepage and select your multi-signature wallet address. You are required to have a minimum deposit of .0001 XBT, equal to 10,000 Satoshi.
Withdrawals are a little different than at other exchanges. It keeps all user funds in cold storage at all times. Every withdrawal request must go through a manual process to provide extra protection. You’ll need to enter a destination address, desired withdrawal amount, and confirm your two-factor authentication to begin the process.
There is only a single daily review for withdrawals. You must submit your request before 13:00 UTC for it to be carried out that day.
BitMEX technically only allows you to hold Bitcoin. All transactions are denominated in Bitcoin for payment purposes and you can only withdraw or deposit Bitcoin. That being said, there is a wide range of features available related to the value of altcoins.
Basically, you can only receive your gains in Bitcoin but are able to speculate in many currencies. It is set up to allow highly leveraged contracts on Bitcoin, Bitcoin Cash, Ethereum, Cardano, EOS, Litecoin, Ripple, and Tron.
BitMEX charges a schedule of fees based on several factors including the type of contract, leverage, and whether it is a maker or taker order. The only difference in fee for cryptocurrencies is between Bitcoin and everything else, with Bitcoin being slightly less expensive.
Taker orders are made up of any order that takes liquidity from the exchange. This is an order to buy or sell made at the current market price. This type of order closes out both your order and someone else’s order.
A maker order is any kind of order type that adds liquidity to the exchange. This is an order to buy or sell at above or below market prices. For a buy order to be a maker order, it must be placed at below the current market price. A sell order must be above the current price.
Taker orders are charged a fee of .0750% for Bitcoin and .250% for everything else. Maker orders actually give their creators a rebate on fees. This is to reward them for adding liquidity to the market. On this platform, maker orders are rebated at -.0250% on Bitcoin and -.050% on everything else.
There is another set of fees for perpetual swap contracts on Bitcoin and Ethereum. This fee is -.0250% on maker orders and .0750% on taker orders. There is also a long funding fee of .0100% and -.0100% for taker/maker orders on Bitcoin. The Ethereum long funding fee is .0114% and -.0114% on taker/maker orders.
There are also fees in place for hidden and iceberg orders. Hidden orders pay the taker fee at all times. Iceberg orders, on the other hand, pay the taker fee for the hidden quantity of an order then receive the maker rebate for the remainder.
Withdrawal and Deposit Fees
There are no fees charged for making a deposit or withdrawal at this time. BitMEX does add in the standard Bitcoin network miner fee, based on a dynamic pricing model.
Because of their background in banking and financial technology, the founders put a high premium on security. Different from other exchanges like Bittrex and Bitstamp, notably, BitMEX operates as an entirely ‘cold’ exchange. No Bitcoin actually changes wallet addresses during trading activities. Instead, they store all investor funds in a secure offline storage.
Even here, they take it a step further than most other exchanges. Their cold storage uses a multi-signature wallet system. In order to move Bitcoin from a wallet address multiple users, with multiple authentication procedures, are required. One of these authentication methods is always connected to a hardware token.
BitMEX advertises that this makes their exchange effectively unhackable. Withdrawals are only sent out once per day, and no remote user can touch any of the funds it has custody over.
User accounts have standard security measures in place. BitMEX doesn’t require two-factor authentication but it does allow it. It also limits you to either hardware authentication or an authenticator app. This is a good move as cell phone-based authentication has proven to be vulnerable to circumvention. The user also has the option of providing their PGP public key to the platform to enable secure communication at all times.
Is BitMEX legit?
It offers a unique set of services among cryptocurrency exchanges. The only significant controversy surrounding it is the mid-2018 BitMEX admission that they run an in-house trading arm as a market maker. There were reports that this trading arm was receiving unethical benefits such as insider information, preferential fees, and higher bandwidth during heightened trading volume.
Some traders try to cry foul when their positions are liquidated but in every case, this has been carried out according to its clearly spelled out liquidation rules. The insider trading allegations are more troubling, but overall the exchange’s consistent above board behavior lead us to give it the benefit of the doubt.
The thing that allows BitMEX to stand out from the number of cryptocurrency exchanges is the sophistication of its available financial instruments. Most exchanges just allow you to buy or sell different cryptocurrencies. It mirrors the complex design of traditional futures and options trading platforms. It also gives users a vast range of possible orders.
An important thing to keep in mind is the steps it has taken to avoid manipulation. The most important thing is the use of index-based pricing. This prevents sudden changes in the market rate of a cryptocurrency from triggering automatic deleveraging and liquidation.
BitMEX also advertises the adaptability of its REST API. It offers full access to all trading features and allows any application to be built on top of its core functionality. This allows traders to run screening actions simultaneously with order placement. The most important features for our BitMEX review are listed below.
This is a well-established part of traditional finance. A futures contract is simply an agreement to buy or sell something at an agreed upon price and time. For cryptocurrency traders, it allows them to make a prediction about the price movement of Bitcoin or an altcoin and purchase a position.
This allows traders to profit even from the decline of a financial instrument in value. If you believe that Bitcoin is going to drop in value over a weeks’ time you can purchase a futures contract to that effect. If your prediction is accurate you make money. If not, you still have to sell your contract at the agreed upon price.
Perpetual swap orders are similar to futures contracts but don’t have a definite expiry date. Theoretically, you could have a perpetual swap order go on forever. These are set up with periodic balancing points at eight-hour intervals.
The important terms for a perpetual swap are funding rate and spot price. The spot price is determined based on a formula using the index rate of several other major cryptocurrency exchanges. The funding rate is based on the spot price and its variance from the index rates.
Depending if the spot price is above or below the index rate, investors who shorted the instrument pay those who took a long position and vice versa. This theoretically keeps the market balanced at all times.
The platform also has a failsafe in place if it detects anomalous price movements consistent with price manipulations. This is called ‘LastPriceProtected’ and has been brought into effect on several occasions.
The key selling point of BitMEX is the ability to trade cryptocurrency futures at very high margins. How high you ask? It allows traders who meet certain conditions to trade at up to 100x leverage.
To put that in perspective, if you had $1,000 worth of Bitcoin, 100x leverage would allow you to purchase futures with values of $100,000. it currently allows users to carry out two types of margin orders: Isolated and cross-margin.
Isolated orders are set up with a specific amount of margin assigned by the user. As an example, an isolated order with a margin amount of $500 would only be viable while that amount of margin was sustainable. Once your investment dropped in value and the margin was no longer equal to the leverage you were using, a margin call would take effect.
Cross-margin orders automatically rebalance a margin using all the funds in an investors account. If you placed that same $500 margin set up as a cross-margin order and the value went down, it would automatically transfer funds from your account to the order to rebalance it.
There are significant risks involved with cross-margin orders. If you don’t pay careful attention, you can find your entire account drained by a single poorly planned order. This is especially true at the high margin levels it allows.
Since it was created to replicate the sophisticated trading options available in the traditional financial markets, it allows a wide range of order types. These include:
- Market Orders
- Limit Orders
- Stop Orders
- Trailing Stop Orders
- Take Profit Orders
- Hidden Orders
- Iceberg Orders
- Post Only Orders
One of the biggest controversies surrounding BitMEX is liquidation of user positions. Liquidation is a standard part of any type of margin trading but has caught some crypto traders unaware.
Standard margin liquidation is quite straightforward. If any position you have dropped below the maintenance margin requirements for the order, you must add additional funds to it in a margin call. This raises you back up to the correct margin position and preserves the order.
It also provides clear guides on what will cause a liquidation order.
BitMEX does a reasonably good job providing customer support for a cryptocurrency exchange. That’s a big advantage given crypto’s overall abysmal reputation for customer service and support. It provides a comprehensive series of articles that guides users on pretty much every aspect of its exchange.
This includes things like signing up and funding, choosing an order type, and a crash course in margin trading. If you find yourself confused on a major point or need to seek help, you have several options depending on your language and location.
Support is available using the standard help ticket system. You can also contact them for multilingual support through Weibo, WeChat, IRC, and Telegram.
Ease of Use
BitMEX will be instantly recognizable to any experienced trader. If you’re just getting into trading though, there’ll be a steep learning curve. The trading window is made up of several blocky areas presenting information. To frequent users of cutting-edge trading software, this will probably look a bit dated. You can view the trading window in either dark or light mode. The information presented includes all the standard trading data. You’ll see orderbook on the left, chart and depth chart in the middle, and recent trades on the right.
At the bottom is a series of tabs that let you view your personal information. This includes things like open and closed positions, stops, active orders, and fills. The left-hand side is where you can place an order. You can choose the order type and the amount of leverage you would like to use.
It currently doesn’t provide either an Android or IOS app. There are several apps available for download from third parties but we never recommend logging into any financial service provider through a third party application.
It definitely can’t be called widely user-friendly. It’s certainly not easy for beginners. Taking into consideration its intended audience of sophisticated traders, it provides all the features they’re looking for.
BitMEX is one of the easiest exchanges to get trading on. Signing up takes just seconds and funding goes through after a single confirmation on the Bitcoin network.
The first step to trading is to register by signing up. All you need for this is an email address. Because it doesn’t require any identity verification, you can use secure/anonymous email services as long as you have access to the inbox.
Select register on the homepage to get started. A window will pop up asking for an email address, secure password, your country of residence, and your full name. If you select the US there will be a disclaimer letting you know that you can sign up but that you won’t be able to trade.
You can get around this using a VPN based outside the US, but we can’t recommend this if you are a US citizen. There are specific regulatory and reporting requirements that US citizens have to meet when dealing with financial transactions.
Fund Your Account
Funding your account is even easier than creating it. Navigate to your account homepage by clicking on your username in the top right corner of the screen and selecting Account & Security.
Once there, click on the deposit button on the left-hand side of your screen. The deposit window is very straightforward. There will be a bitcoin wallet address and QR code available. Put this into your sending wallet and begin the transfer. Make sure you only send Bitcoin to this address. Any other cryptocurrency transferred to BitMEX will be irreversibly lost.
There isn’t any fee to deposit funds into your account but you will need to cover the Bitcoin network miner fee.
Trading on BitMEX
Now that your account is up and running you can make your first trade. Since you’ve decided to use BitMEX as your exchange you’re probably interested in leveraged trading.
Go to the homepage while signed in and click on the trade button in the top left area of the screen. This will open up the main trading window and guides you to select the cryptocurrency you wish to create an order for. Once you’ve chosen your desired currency you can decide what kind of order you want to place and the level of leverage you’d like to use.
It allows you to place many different kinds of orders with varying levels of leverage. Choose an order type, input a quantity and limit price, then use the leverage slider to choose the margin you’d like to trade at.
Depending on the order you placed it will be carried out or wait for specific circumstances to occur.
Withdraw Your Cryptocurrency
Withdrawing your Bitcoin is just as easy as depositing it, though with several more layers of security. You have to provide a destination wallet address, the amount you wish to withdraw, and then confirm your two-factor authentication code.
It only processes withdrawals once a day, with a daily cutoff time of 13:00 UTC. This helps prevent compromised accounts from immediately being drained of funds.
BitMEX is a sophisticated trading platform with excellent liquidity and useful features. In this BitMEX review, we have learned that it provides extremely good security, pretty good customer support, and an easy sign-up process. Privacy advocates will love its lack of KYC identity requirements but US citizens probably won’t enjoy some of the hoops they have to jump through to use it.
The only real downside is a significant risk that highly leveraged trading implies. Beginner traders and those just looking to buy a few Bitcoin should probably choose a different exchange.
For experienced investors and those looking to execute complex strategies, BitMEX is an excellent choice.