Category Archives: BitMEX

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Coinbase 48x More Expensive to Use Than Stock Exchange

Coinbase 48x More Expensive to Trade than Traditional Stock Exchange

Self-proclaimed market analyst Alex Krüger has drawn the attention of the crypto community to a rather bizarre comparison between cryptocurrency exchanges and traditional stock markets, claiming “maker fee + taker fee” for crypto exchanges could be far more expensive at higher volume tier trading.

1/ Are crypto exchanges overcharging customers?

The average “Maker Fee + Taker Fee” in crypto SPOT exchanges (excluding Gemini) for the lowest volume tier (where most users fall into) stands at 0.33%. pic.twitter.com/tZOmGSsAzO

— Alex Krüger (@krugermacro) March 28, 2019

Krüger queried the fees levied on crypto traders as he explains in a series of Tweets how legacy financial institutions often have a flat rate cut per trade, while a typical fee cut by cryptocurrency exchanges only remains fair for lowest volume tier, and according to him, this is where most users fall into. He illustrated how brokers like Fidelity charge a flat rate of USD 4.95 flat per trade, putting the sum maker and taker fee at 0.02% for a USD 50,000 trade, and at 0.33% for a USD 2,900 trade, which can further be reduced should a trader consider brokers who charge per share rather than per trade.

According to the data he shared, Gemini exchange stands out with a sum maker and taker fee set at an exorbitant 2.00%, followed by Bittrex and Bitstamp with 0.5%, whereas Bitmex being a derivative market only charges 0.05%. Meanwhile, major US cryptocurrency exchange Coinbase Pro takes 0.40%.

In a comparison with foreign exchange markets, Krüger further cited how “an FX trader at Oanda would pay 0.008% for a round trip (in and out of a position)”, concluding that:

“Trading on Coinbase is 48x more expensive, while trading on Bitmex is 6x more expensive.”

Moreover, Krüger opined: “A cross-asset trading costs analysis should also account for spreads and relative volatility,” which invariably should impact fees levied, however, “crypto fees are generally high even after adjusting by relative volatility”.

In recent times, institutional investors have been targeted with offshoot market solutions to further attract this class of investors to the burgeoning digital asset industry. However, considering Krüger’s analyses, crypto exchanges second to huge volatility index of cryptocurrency markets may indeed be a huge deterrent for currency traders from the traditional market.

In February, Marketing consultancy Edelman published a report noting an unwavering millennials’ support for cryptocurrency exchanges, further corroborating eToro’s findings of a generational shift in trust suggesting a concrete trust in cryptocurrency market exchanges as well as a fading faith in the traditional stock market exchanges. However, while cryptocurrency trading appears to be more rewarding due to high volatility, the practical aspects of trading come with hidden fees that make it a trying first-experience for newcomers into the industry.

Blockchain technology may appear to solve certain constraints in legacy financial institutions and reduce the cost of transactions between clients, however, cryptocurrency exchanges may end up constituting a clog to the furtherance of the decentralized ecosystem as it reinvents the centralized systems obtainable in the traditional markets.

 

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German Derivatives Exchange Supposedly Considering Crypto Futures Contracts

German Derivatives Exchange Eurex May Launch Crypto Futures Contracts

German-operated derivatives market Eurex is rumored to soon turn on the futures contract faucet, releasing its own set of cryptocurrency derivative contracts. If true, the first wave of contracts will include Bitcoin, Ethereum and Ripple (XRP) coin future contracts.

Citing people familiar with the development, media outlet The Block Crypto said that the exchange is meeting with market making experts with regards to the product.

Though no official comments have been made by the firm, the move, if true, comes as no surprise seeing how it had set its target on the crypto market since 2017. In 2018, a division was set up for crypto assets and distributed ledger technology. During that period, a Deutsche Börse spokesperson reportedly told German-based news media:

“We are thinking about futures, with which private investors and institutional investors can protect existing investments in bitcoin or set for falling prices of the cyber currency.”

More so, while Deutsche Börse acknowledged the fact that they have been in touch with the space for a while now, it had only been in the “ideation and exploration” phase but will need a “centrally steered approach” for a full-scale expression of the technology in their business.

The future of the crypto derivative market continues to take shape as new players are being introduced joining others in the queue for regulatory approval. Bakkt, Seed CX, and ErisX are among those seeking to introduce new settlement types into the US market – the physical Bitcoin settlements – adding variety to already established market place for crypto futures contract offered by pioneers CBOE and CME.

CBOE also wants to launch an Ethereum futures contract and is only waiting for the approval from the regulatory watchdog. So far, net sentiments from the idea of an Ethereum futures contract have been somewhat positive.

A couple of other cryptocurrency exchanges such as BitMex, CoinFloor, and Binance are already marking their space in the advanced cryptocurrency market to suit sophisticated investors. As the industry continues to mature, perhaps the market will take a complete semblance to that of the traditional financial market and may appeal to more mainstream traders and investors. Although regulation may be pivotal to this development, the CFTC has a workaround on how to allow the exchanges self-regulate in line with the stipulated financial laws, as an interim approach before a more constituted legal infrastructure is in place.

Moreover, the major contention lies in the security of services provided – the custody infrastructure and market monitoring instruments – constituting major impediments to the launch of other derivate market classes like the Bitcoin ETF, which has had many of its proposals declined or for many months under review by the Securities and Exchange Commission (SEC).

Nonetheless, it behooves any financial service operator willing to engage in this emerging market class to do a proper groundwork before launching any product into the market. As there are currently a few products, yet only a handful of institutional investors have dipped a foot in the water, although this number may be increasing steadily, still it only proves that a more comprehensive market infrastructure may be the only key to unlock the market for a full-scale adoption by institutions.

 

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BitMEX CEO: Bitcoin Is Society’s Best Hope for a Private Form of Electronic Money

BitMEX CEO_ Bitcoin Is Society’s Best Hope for a Private Form of Electronic Money

BitMEX CEO Arthur Hayes has spoken out in favor of Bitcoin, saying that the hallmark cryptocurrency is “society’s best hope for a private form of electronic money.”

The company is a cryptocurrency exchange and derivative trading platform. It is owned and operated by HDR Global Trading Limited, which is registered in Seychelles and has offices worldwide.

In a blog post published before the weekend, Haye’s latest thoughts on the industry entitled ‘Two sides of the coin: the bifurcated near-future of money’ suggested that the future of Bitcoin is ensured, commenting:

“Even in the face of the various centralized forces currently being marshaled: humanity’s bifurcated monetary future will be better than our monopoly monetary past, as some money becomes more convenient while other money becomes far more private.”

Hayes further suggested that until now, monetary systems had been dominated by monetary monopoly and a bifurcated system with Bitcoin representing the cryptocurrency industry would be the best hope for the future, despite the proliferation of alternatives such as Ether, Ripple, and others.

According to the BitMEX boss, another advantage that Bitcoin possesses when squared up against others is its security, having never been successfully hacked in its ten years of use. Painting a rather utopian picture of a background in which cryptocurrency can flourish, he went on to say that he felt Bitcoin could create an environment where individuals can work together towards a common end.

Hayes’ positive comments were made only weeks before he expressed his views about Bitcoin at the end of 2018, suggesting that it would continue its volatile bearish trend in 2019.

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“Bitcoin Babe’s” Journey out of the Dark into Light

Life for 24-year-old Australian crypto enthusiast Michaela Juric has turned itself around after escaping the darknet to become Australasia’s number one Bitcoin trader on Localbitcoins.

Six years ago, Juric, who now trades under the handle Bitcoin Babe, was struggling with depression and contemplating suicide. The darknet became a place where she spent her Bitcoin on illegal substances.

Today, she runs her Bitcoin trading business and has turned her use of Bitcoin into positives against all odds. Becoming Australia and New Zealand’s top local Bitcoins trader didn’t come without a large degree of hard work and application.  She proudly affirms:

“I originally started out day trading and after that, I moved to peer-to-peer trading. I’m the number one local trader on Bitcoins for Australia and New Zealand. Which is a pretty cool thing to be.”

Juric said it wasn’t easy getting to where she is today without any background in cryptocurrency and limited IT skills, but through cryptocurrency, she saw that she could become her own boss, which spurred her to develop her own platform as well as trade on Localbitcoins.

She likes to impress upon those thinking of embarking down a similar road, that cryptocurrency trading has no gender barriers and empowerment is simply down to the individual’s determination to get ahead and learn in the process. She says, “With Bitcoin and crypto, it’s always changing – whether it be the price or the rules or the regulations or the people. It’s evolving. It’s never a dull moment. I think that’s why I love it so much.”

Bitcoin Babe is on the right track as Beno Delo discovered for himself, the latter becoming the UK’s first crypto billionaire at the age of only 34. The difference is he got there in only four years due to the success of BitMex which he co-founded in 2014, estimated to now be worth USD 3.6 billion.

Delos secret, according to him: “It feels mad… I have just had my nose down in a start-up for the past four years. It has been non-stop. I was doing 18-hour days at one point. We have all had to make enormous sacrifices to build BitMex.”

This story has a certain irony as Belo’s role model when starting up was billionaire investor Warren Buffett, who famously referred to Bitcoin as “probably rat poison squared”.

 

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BitMEX Launches Venture Capital Arm

Seychelles-based BitMEX is launching a venture capital (VC) arm called BitMEX Ventures, which will invest in blockchain and cryptocurrency-related projects worldwide.

BitMEX is the largest cryptocurrency derivatives exchange in the world, with daily volume consistently in excess of USD 1 billion, more than any single spot cryptocurrency exchange. There was a day when BitMEX’s volume hit BTC 1 million Bitcoins, which was USD 8 billion at the time, the all-time record for any cryptocurrency-related exchange. Traders can leverage their accounts up to 100 times and the platform collects millions of dollars in fees per day from trading and margin lending. Already, BitMEX has purchased the most expensive office space in the world; now it appears it will also be using its profits to enrich the crypto space.

Kumar Dandapani will be the Global Head of BitMEX Ventures and Maxim Wheatley will be in charge of global seed funding and partnerships. BitMEX Ventures’ first investment is Blockfolio, an app which manages cryptocurrency portfolios. BitMEX Ventures is preparing to make another investment into FRST, a cryptocurrency data technology company.

The crypto space has been waiting patiently for institutional investors; many experts believe the next big cryptocurrency rally will be sparked by an influx of institutional capital. BitMEX has grown so large that it can be considered an institutional investor and, unlike traditional institutions, it has expertise.

Other cryptocurrency companies that have launched VC arms include Coinbase, which launched in April 2018 and already has 20 companies in its portfolio. Huobi, among the top spot cryptocurrency exchanges in the world, launched Huobi Labs which has dedicated USD 1 billion for investment into blockchain startups. Likewise, Huobi’s primary competitor Binance has launched a USD 1 billion blockchain investment fund.

With the biggest crypto companies seemingly wielding significant strength in investment, the importance of institutional investors – whose funding is anticipated by some to have a huge impact – could be diluted. The potential for an internal positive feedback loop is appearing, where big companies can invest the capital needed to get startups off the ground, then some of those startups might become institutional investors with VC arms, replicating the cycle.

 

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Study: Ethereum ICOs Have Cashed Out as Much as They Raised

A report published by BitMEX on Monday shows that blockchain startups hosting initial coin offerings (ICOs) and raising funds in Ether (ETH) have now cashed out just USD 11 million short of what was raised.

The research indicates that the 222 startups that were tracked managed to raise USD 5,463 million or around ETH 15 million via ICOs by September 2018, while USD 5,452 million was sold in the same period. The projects are said to still hold ETH 3.8 million – a quarter of the number of tokens originally raised.

Despite a rocky year for ETH, the data indicates that most of the startups managed to sell at a profit compared to its worth when they acquired it, and have a substantial amount of unrealized gains. The paper reads: ”Of the Ethereum still held by the projects, even at the current USD 230 price, projects are still sitting on unrealized gains, rather than losses.”

The research indicates that the ICOs still have net gains of around USD 93 million regardless of Ethereum’s value being put to the test this year, but this is because most of the funds were gathered prior to 2018: “It may surprise some that ICOs are still in a net unrealized profit situation, but many of the Ethereum balances were built up before the price rally at the end of 2017,”

BitMEX does acknowledge that the totals it published may reflect a lower amount than alternative sources due to its focus specifically on ETH balances and not funds raised in alternative forms.

The data project is also recognized to be slightly contorted by the EOS project, which accounts for 70% of the USD equivalent in ETH that was raised, although BitMEX says that without this data, a similar outcome is still met.

 

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BitMEX New Offices Among Most Expensive in the World

The Bitcoin Mercantile Exchange (BitMEX), a top crypto derivatives exchange, is leasing some of the most expensive office space in the world. It is moving into the Cheung Kong Center in Hong Kong, which costs HKD 225 per square foot, or USD 29 per square foot per month. The space BitMEX has leased is on the 45th floor and is 20,000 square feet, so this comes out to USD 580,000 per month and nearly USD 6.9 million per year.

The Cheung Kong Center also has offices for Bloomberg, Barclays, Bank of America, Goldman Sachs, and La Ka-Shing who is a billionaire with a business empire. Perhaps this clustering of financial powerhouses in the same building will prove beneficial for the exchange’s operations long term.

This is perhaps a strange time for BitMEX to be buying some of the most expensive office space in the world, considering the entire crypto market is in a bear market which has seen Bitcoin decline from USD 20,000 to USD 6,000 in less than a year, and declines for other cryptocurrencies have been even more extreme. However, BitMEX trades Bitcoin and Ethereum derivatives contracts that can be used to go long or short. Additionally, it offers 100x leveraging.

This makes BitMEX and its traders in a prime position to profit from volatility. It doesn’t matter if the market is going down, as long as the market is volatile BitMEX makes tremendous profits, and the crypto markets have been defined by volatility in 2018. BitMEX has seen rapidly growing volume in 2018 despite the bear market. For example, as of this writing on 23 August 2018, BitMEX has USD 3 billion of trading volume, which is quite common. BitMEX’s volume has exceeded USD 6 billion on record days.

It also seems strange from a geopolitical standpoint that the largest fiat to crypto related exchange in the world is moving to Hong Kong. To clarify, BitMEX has the most volume by far out of any crypto exchange but they trade derivatives, not actual cryptocurrency. Although Hong Kong has an autonomous government that is more favorable towards crypto than China, it is still a territory of China. China has banned trading of its native currency, the CNY, to crypto. More recently, it has blacklisted practically every crypto exchange website.

It is not disclosed if this office in Hong Kong will be BitMEX’s headquarters. Right now BitMEX is incorporated in the Seychelles.

 

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BitMEX CEO Dismisses Ethereum as “Double Digit Shitcoin”

The CEO of BitMEX, Arthur Hayes, has said that “Ethereum is a double-digit shitcoin“. He predicts that it will fall below USD 100 when everyone decides to sell all at once.

Ethereum is already on an extreme downtrend, having dropped from USD 1,400 to less than USD 260, before bouncing back up slightly to USD 290 as of this writing on 16 August 2018. Bitcoin has declined sharply too in the same time from USD 20,000 to USD 6,400, but this is a 68% drop versus Ethereum’s 79% drop.

BitMEX, the largest crypto derivatives exchange in the world with USD billions of trading volume per day, listed Ethereum contracts two weeks ago. These are perpetual swap contracts that exchange Ethereum derivatives for USD, similar to the most popular Bitcoin derivatives product on BitMEX. Currently, the daily volume on BitMEX is ETH 800,000, about USD 250 million. This is nearly on par with Binance’s and Bitfinex’s ETH 1 million of combined trading volume during the same time. Perhaps BitMEX is on track to become the largest Ethereum exchange in the world, although once again this is a derivatives market and not physical cryptocurrency.

The timing of Ethereum being listed on BitMEX and the sharp decrease in its price might not be a coincidence. Ethereum was steady near USD 470 prior to the listing and has dropped nearly 40% since trading started on BitMEX. The possible connection is that BitMEX offers short selling and leveraging, allowing traders to make bets that Ethereum will drop and then multiply those bets. The end result is a massive amount of bets that Ethereum’s price will drop and then it did drop, so these short sellers made huge profits.

The fact that the CEO of BitMEX is now saying Ethereum is going to drop below USD 100 suggests that traders on BitMEX will maximize short selling Ethereum, which could make this a self-fulfilling prophecy. The Ethereum market is smaller than the Bitcoin market and easier to manipulate, and BitMEX is sizable enough that it has definitely influenced Bitcoin’s global price. The quarter-billion USD of Ethereum volume on BitMEX per day is only a small taste of what BitMEX is capable of.

The CEO of BitMEX speculates all the venture capitalists will sell at the same time. The huge amount of short selling on BitMEX has the potential to initiate, accelerate, and propagate the crash of Ethereum. Of course, BitMEX traders can go long on Ethereum too and bet that it will rise, but with the CEO of BitMEX calling for sub-USD 100 prices, that is less likely.

 

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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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