Founded in 2014 by three former bankers, BitMEX is one of the most reputable exchanges operating today. The company is registered in the Seychelles with its main operations operating out of Hong Kong. BitMEX (short from Bitcoin Mercantile Exchange) specializes in margin trading and derivatives.
Margin trading can be very risky, making this platform unsuitable for beginners. So make sure you fully understand the concepts of leverage and derivatives before getting involved in this type of trading. In this BitMEX review, we will go through all the key facts you need to know before you start trading on this platform. Hopefully, by the end, you will be able to determine if this platform is right for you.
Margin trading and leverage
Before we continue, let’s take a look at what margin trading is. In short, it is a type of trading using borrowed funds, usually from the broker, that allows you to place more orders than what you would be allowed with the funds in hand. Margin trading allows you to leverage your funds, magnifying your return on trades. On the other hand, your risk of loss is also magnified since leverage works both ways. Sudden price drops can wipe out your funds in a flash.
In the simplest terms, margin creates leverage, which is expressed in trading as a ratio. The ratio multiplies the buying power of your funds. For example, a simple 2:1 leverage ratio means that you get twice the buying power of the funds in hand.
Essentially, $100 of funds margin traded at 2:1 leverage gives you the ability to make $200 worth of trades.
Profit and loss are equally affected by leverage. At 2:1 leverage, a 50% increase in price will put you at 100% profit ($100); but a 50% decrease in price puts you at 100% loss. But at 10:1 leverage, it only takes a 10% price decrease to wipe out your funds.
Remember, the higher the leverage you choose, the more you are borrowing (and the more you are trading on margin). Depending on your leverage and requirements, you will have a set of shifting balance totals on BitMEX, such as Wallet Balance, Margin Balance, Position Margin, Order Margin and Available Balance. Please ensure you understand how your leverage affects all these balances before entering any trades. Refer to the BitMEX Margin Term Reference to understand how the totals add up.
Margin trading is typically the realm of highly-experienced traders and institutional entities. Individual traders, especially inexperienced ones, should stick to trading without leverage until they are comfortable and familiar with the technicals of trading a volatile asset like cryptocurrency.
Setup and verification
Opening an account is pretty simple and is not very lengthy. All you have to do is enter your email address, country of residence, and full name. After you confirm your email address, you are ready to start trading. Unfortunately, users from the USA are not allowed to use this platform, as well as those located in the following countries or territories: Cuba, Crimea and Sevastopol, Iran, Syria, North Korea, and Sudan. Although identity confirmation is not required, BitMEX reserves the right to ask you to verify your identity at any time.
Purchase and fees
When you enter the website, you may find the interface a bit dated and overwhelming but you will find all the information a standard trading platform typically does. All profits and loss are expressed in Bitcoin, so for deposit and withdrawal, you can only use a Bitcoin wallet. To deposit Bitcoin, go to the wallet in the upper right field that shows your available Bitcoins, click ‘deposit’ and you will see the wallet address. There is a minimum deposit amount of 0.0001 BTC and it be reflected in your account after 1 network confirmation. Withdrawals are checked manually once per day, and the amount is not limited.
BitMEX is one of the rare exchanges that provides up to 100x leverage for Bitcoin, meaning that you can buy contracts worth 100 BTC, backed by only 1 Bitcoin. But as we have mentioned before, this can be very risky, especially with such a volatile market like Bitcoin.
The platform itself does not charge deposit and withdrawal fees, you only have to pay the minimum Bitcoin network fee which is set dynamically based on blockchain load.
BitMEX fees range between -0.05% and 0.075% depending on the type of contract, the type of currency you are trading, and whether you are a taker or a maker. Here is the list of all BitMEX fees.
Contracts available on BitMEX
Contracts available on BitMEX are Perpetual contracts, Futures, Upside, and Downside profit contracts.
• Futures contracts can be defined as an arrangement between the two parties to trade a certain currency or commodity at a predetermined price at a particular time in the future. On BitMEX, futures contracts are available for all supported currencies.
• Perpetual contracts are one of the most popular contracts on BitMEX. Similar to futures, it is an agreement to trade commodities or currencies at a predetermined price but unlike futures, there is no date at which the contract expires and there is no settlement. This type of contract requires that each trader hold enough Bitcoins to cover their orders and this is how its value is maintained. Perpetual contracts on BitMex are only available for Ethereum and Bitcoin.
• Upside profit contracts rely on a potential upside in the price of the underlying asset. A trader pays a premium on the trade date in order to receive the difference between the underlying instrument settlement price and the price on the maturity date if it turns out to be positive. Otherwise, no payment will occur. This contract is only available for Bitcoin.
• Downside profit contracts are similar to Upside profit contracts, but they rely on a potential downside in the price of the underlying asset. On BitMEX this contract is also only available for Bitcoin.
As we mentioned earlier in this BitMEX review, for withdrawals and deposits you can only use Bitcoin. However, currently, users can buy and sell derivatives of the following cryptocurrencies:
• Bitcoin Cash
• EOS Token
Privacy and security
BitMEX is considered a secure exchange, with no reported hacks to date. Its bug bounty program is a display of how much they care about the security of their platform. Nevertheless, you should never leave idle funds on any exchange.
BitMEX uses multi-signature deposit and withdrawal schemes, and all withdrawals are checked manually. No private keys are kept on the cloud, and for bulk funds they use cold storage. They have an email notification system, so every time you log into the platform, an email is sent to you. Additionally, they have optional PGP encryption for automated emails and support two-factor authentication.
BitMEX’s customer support is available 24/7 and can be reached via submitting an online form, or through their live channels on Telegram, Weibo, Wechat and IRC. You can contact support on their official Twitter and Reddit channels as well. Their response time is about one hour and they appeared to be pretty helpful and professional. BitMEX also has an extensive FAQ page and Knowledgebase, including guides with examples.
BitMEX review summary
BitMEX has proven itself to be a reliable platform that puts security as a top priority. They have been around for some time now, and their high trading volume gives them additional legitimacy. BitMEX has not been connected to any controversy and its founders are transparent about their names and biographies.
You may find the platform a bit complicated and difficult to use, so it is clearly better suited to experienced investors. The fees are competitive and public confidence in the platform is generally positive. They have pretty good leverage options, which can be profitable but are inherently risky.
We hope that you have found the information that you were looking for in this BitMEX review. We have only covered the basics, so before deciding whether to invest in this platform, make sure you understand all the possible risks, and that you clearly understand what you are getting yourself into. If you are familiar with this kind of trading already, and you are considering trading on BitMEX, you can sign up here.
You can also check out our other reviews here.
Disclaimer: BitcoinNews does not provide any warranties towards the accuracy of the statements in the above BitMEX review. Any content on this site should not be relied upon as advice or construed as providing recommendations of any kind. It is your responsibility to perform your own research on the platform. Trading and investing in cryptocurrencies involves considerable risk of loss and is not suitable for every investor.
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Image Courtesy: BitMEX