BitMEX is one of the pioneers of cryptocurrency derivatives exchanges and is responsible for popularizing 100X Bitcoin leveraged options. The exchange is one of the first derivative exchanges to offer such a high leverage – making it infamous in the trading world. All contracts on BitMEX are based on BTC as the settlement currency, a breakthrough at the time. This was a key motivator for many traders who wanted to increase their holdings in BTC and saw opportunities to out-trade the market. BitMEX also offers trading in other cryptocurrencies such as Ethereum and Ripple, with different amounts of leverage for the respective currency.
Bitmex Trading Products
BitMEX offers Bitcoin Perpetual Futures which can be leveraged up to 100X margin. A Perpetual futures contact is an agreement to buy or sell Bitcoin at a predetermined price in the future.
Why do users trade futures contracts?
- Hedging and Risk Management – Protection of held or locked assets against market voilatility
- Leveraged trading – Increased exposure allow traders to take advantage of market flucutations
- Short exposure – traders can bet against an asset’s performance, even if they don’t hold it
Leveraged trading is a method for traders to gain additional exposure to an asset. On BitMEX it’s possible to gain up to 100X leverage, which means a 1% change in the price of Bitcoin can lead to a 100% change exchange balance (ie: double or nothing). Leveraged trading is an extremely powerful feature that allows day traders to increase their possible earnings or reduce potential risks. However, this feature has become infamous over the years as many inexperienced traders lose their entire savings due to over-leveraging. BitMEX leveraged trading has even inspired a fan made South Park parody where Kyle loses all his money to 100X leverage trading.
Where is BitMEX Headquartered
BitMEX is owned by HDR Global Trading Limited, a Republic of Seychelles incorporated entity. BitMEX offices are based in Cheung Kong Center, one of the most expensive headquarters in Hong Kong.
BitMEX has “Restricted Jurisdictions” where citizens and legal entities cannot trade from. This includes countries such as the United States and Hong Kong. If users are found to log in from a restricted country, BitMEX will immediately close the account and cancel all trades. This rule also applies to residents of a non-restricted country, hence it is important not to login to BitMEX whilst on holiday in the US. We’ve received complaints from many users who have had their accounts temporarily suspended or banned as they accidently logged into BitMEX from a restricted region.
To recover banned or suspended accounts on BitMEX, you need to contact tech support and provided KYC verification that you are trading from a permitted country.
Targeted by US Law Enforcement & Regulatory Pressure
BitMEX has been recently targeted by US Law Enforcement which has led to restrictions on US and Quebec traders.
“BitMEX has banned all US traders since 2015, and has been proactively closing accounts since guidance was obtained by US regulators, in particular the Commodities and Futures Trading Commission (CFTC),” said Joe Coufal, whose firm Wachsman represents the cryptocurrency exchange, in an emailed statement. “BitMEX has always retained the right to close any accounts and to liquidate any open positions were trading participants has given false representations as to their location or place of residence.”
Trading Engine Failures and Force Liquidations
BitMEX has been often criticized for having overloads on their trading engine which fails to take user instructions during times of extremely volatility. This has led to users having too much exposure to an asset without the option to liquidate – thus losing money in the process. In order to deal with the overload issue, BitMEX has a Load Shedding policy which queues outstanding requests instead of executing it immediately. BitMEX claims this is a necessary evil as an overloaded trading engine that doesn’t take any orders at all is far worse.
Overall we’re not impressed with BitMEX’s performance under stress. In fact many of our readers have complained about BitMEX and have suffered financial losses as they couldn’t execute their trades.