Category Archives: BitMEX

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BitMEX Sets 1 Million Bitcoin Daily Trading Volume Record

The Bitcoin Mercantile Exchange (BitMEX) has set a world record for the most trading volume in a single day on a cryptocurrency related exchange. On 24 July 2018, 1 million Bitcoin contracts worth over USD 8 billion were traded on BitMEX. This is more volume than all the other Bitcoin exchanges in the world combined.

A new BitMEX (and industry) record: 1,000,000 XBT (> $8BN) traded in the last 24 hours!

— BitMEX (@BitMEXdotcom) July 25, 2018

BitMEX doesn’t offer trading of actual Bitcoins. Instead, as a derivatives market, it offers XBT contracts that represent Bitcoins. CoinMarketCap doesn’t include BitMEX’s volume in Bitcoin daily volume numbers, nor does it rank BitMEX among other Bitcoin exchanges that trade actual Bitcoins. Binance, which has the first ranking on CoinMarketCap, has a relatively low trading volume of USD 1.5 billion in the past day. FCoin has a daily trading volume of USD 1.6 billion, but it generally isn’t included in the rankings since it uses transaction fee mining which causes volume numbers to be inflated via wash trading.

Bitcoin’s overall daily volume on 24 July 2018, excluding BitMEX, was USD 7 billion. This represents a significant volume surge to levels not seen since April and May 2018 when daily Bitcoin trading volume exceeded USD 10 billion at times. The current volume spike is coinciding with a strong Bitcoin rally that has brought Bitcoin’s price from USD 6,200 to USD 8,500.

Although the current volume numbers for Bitcoin are impressive, especially on BitMEX, daily Bitcoin trading volume is still far lower than the all-time highs near USD 23 billion in December 2017 and January 2018 when Bitcoin’s price rallied to USD 20,000. Total cryptocurrency daily trading volume hit USD 70 billion around the same time.

Since BitMEX is a derivatives market, it allows for short selling, and actually offers leveraging up to 100x. When this volume record was set on 24 July, there was a strong upward price movement, so most traders were probably leveraging long.


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Is Derivatives Trading Harming the Bitcoin Market?

BitMEX, short for Bitcoin Mercantile Exchange, consistently has the highest trading volume for any cryptocurrency exchange by far, such as USD 2.5 billion in volume versus Binance’s USD 1.3 billion on July 5, 2018. However, BitMEX is usually excluded from cryptocurrency exchange ranks because it primarily trades derivative contracts that represent a certain amount of bitcoin instead of spot trading actual bitcoins.

BitMEX offers up to 100 times leverage, meaning customers can invest the USD equivalent of 1 bitcoin into their margin account and buy 100 BTC worth of derivatives contracts. This means that BitMEX can ‘print’ 100 times more bitcoins than they really have, which is obviously dangerous.

Customers have the choice of going long or going short. When going long, the customer holds onto the Bitcoin contracts, and if the market goes up then they gain money. If a customer is going short they sell the contracts immediately and the USD goes into their margin account, and if the market goes down they buy the contracts back for less money to repay the loan and keep the USD profits.

Therefore BitMEX provides a mechanism for people to place large bets on the Bitcoin market declining. Theoretically, whales with large amounts of bitcoin and other influential people can collaborate to drive the market down and make huge profits by using maximum leverage on their short sells.

The 2008 global financial crisis provides an excellent example of how derivatives trading can be extremely harmful. Derivatives based on real-estate mortgages proliferated in the years leading up to 2008 and soon comprised a large fraction of the assets that banks, corporations, and investors held. Housing prices declined and homeowners defaulted, causing derivatives backed by real-estate to become worthless. Many people had unknowingly put a large amount of their life savings and retirement funds into these derivatives via their financial advisors, and lost their money.

The derivatives market collapsed, and banks stopped trading with each other because banks usually offered derivatives as collateral for loans. The resulting financial crisis was the worst since the Great Depression and was only stopped by world governments printing trillions of dollars in fiat to bail out the corporations and banks, at the expense of the people.

The lesson of this story is that derivatives can appear to have value and be considered an asset but actually have nothing backing them. BitMEX has up to 100 times more contracts than the actual amount of USD deposited on the exchange, which could lead to a disaster if Bitcoin’s price goes up and BitMEX is forced to pay out the contracts. BitMEX doesn’t have the USD to honor the contracts and would have to shut down.

This makes it suspicious that Bitcoin’s price has been going down so consistently while BitMEX volume has rapidly increased. This is the market situation BitMEX needs to survive, and the question whether such players are attempting to manipulate the cryptocurrency’s price is something that crops up in everyone’s mind now and then.

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CEO of BitMEX Says Bitcoin Will Hit USD 50,000 By End of 2018

The Co-Founder and CEO of BitMEX, Arthur Hayes, says Bitcoin will hit USD 50,000 by the end of the year after possibly bottoming out in the USD 3,000 to USD 5,000 range. He says Bitcoin is just one positive regulatory decision away from a massive rally. That piece of positive news might be a Bitcoin exchange-traded fund (ETF) being approved by the Securities and Exchange Commission (SEC).

Arthur Hayes says a Bitcoin ETF would allow ‘real’ money to enter the Bitcoin market since institutional investors will be able to easily invest in Bitcoin on mainstream stock trading platforms, as opposed to the present day where buying Bitcoin is a completely different process than buying stocks. Cryptocurrency expert Michael Strutton has a similar forecast, saying that when the first Bitcoin ETF is approved by the SEC Bitcoin’s price will hit USD 35,000.

BitMEX is technically the largest Bitcoin exchange in the world with USD 618 billion of trading volume in the last year, and 3 times more liquidity than any other exchange. However BitMEX offers derivatives contracts that represent Bitcoin rather than trading Bitcoin itself, so BitMEX is usually not counted as the top cryptocurrency exchange since they aren’t trading actual bitcoins.

Arthur Hayes says BitMEX’s volume has tripled during the Bitcoin price decline in 2018. BitMEX offers clients up to 100X leverage, facilitating short selling, so BitMEX clients actually make more money when the market is declining. It is possible that the large and persistent amount of short selling on BitMEX could be a contributing factor to Bitcoin’s price decline.

Also, contrary to popular opinion, Arthur Hayes favors volatility, and he says the decrease in volatility as Bitcoin’s price has declined is bad for business. This is probably because BitMEX’s leveraged trading feeds on volatility. In general, it is recognized that less price volatility makes Bitcoin a better currency.

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