Those who want to actively trade cryptocurrencies usually end up at BitMEX. However, beginners should avoid the platform, as it is aimed more at experienced traders. We will explain everything important about BitMEX and show you how the platform works. If you want to try BitMEX you can save another 10% of the trading fees in the first 6 months with this link.
Background to BitMEX
BitMEX is said to be the world’s largest trading platform for cryptocurrencies. Every day, BitMEX trades positions with a total value of over 1.5 billion US dollars. Unlike classical crypto exchanges, BitMEX does not allow you to buy cryptocurrencies.
Investors can only bet on rising or falling prices with Bitcoin. They can do this not only for Bitcoin but also for a number of other cryptocurrencies. With a successful trade you can “only” increase the number of your Bitcoins, no matter if you trade Bitcoin or another cryptocurrency.
BitMEX was founded in 2014 by the 3 former bankers Arthur Hayes, Samuel Reed and Ben Delo. The company is based in Hong Kong and the Seychelles. Thus BitMEX is not subject to any serious regulation. This is possible because no Fiat currencies (e.g. US Dollar or Euro) are required for trading on BitMEX. Nevertheless, BitMEX does not allow all users worldwide to trade on the platform. Americans, for example, are blocked via IP filters. Nevertheless, there are many Americans who trade on BitMEX using a VPN tunnel.
The special thing about BitMEX is that you can trade there with leverage. This differs between the individual cryptocurrencies and ranges from 1:20 to 1:100 (for Bitcoin) maximum. So you can bet on a rising or falling price up to a hundred times your stake.
Which cryptocurrencies does BitMEX support?
Currently you can bet on the price increase or the price decrease of 8 different cryptocurrencies at Bitmex. However, these differ in the leverage they can be traded with.
All cryptocurrencies mentioned are traded on BitMEX with Bitcoins. So you can only deposit Bitcoins at BitMEX and not Ethereum or any other crypto currency.
Signup at BitMEX
Registering with BitMEX is very easy. All you have to do is enter your email address, a password and your name, as well as your country of origin. Then you just have to confirm your email address. Your data will also not be verified like at other stock exchanges. So you don’t have to upload a picture of your passport or ID but can start trading on BitMEX immediately.
For security reasons we recommend to activate the 2-factor authentication after registration. An attacker can then no longer log into the account with your password only.
Deposits and withdrawals at BitMEX
To trade at BitMEX you have to deposit Bitcoins. You can do this by clicking on “Account” in the menu above. You will then be shown your BitMEX Wallet. To deposit funds you have to click on “Deposit”. Then you will be shown a Bitcoin address to which you can send your credits.
Payouts work similarly. Simply click on “Withdraw” and indicate how much of your balance you wish to withdraw. But beware, compared to depositing, the withdrawal does not take place immediately. The BitMEX platform only pays out once a day. These take place every day at lunchtime (13 o’clock UTC, 14 o’clock German time).
How BitMEX works
After logging in, you can already see the BitMEX Dashboard. Now it becomes clear why BitMEX is more for experienced investors than for beginners.
To help you find your way quickly, here is a short overview of the BitMEX Dashboard. Above you can see the different tabs of the cryptocurrencies. If you click on a tab, you’ll see the price history of the respective crypto currency, as well as the order book and the last trades that were executed. What the individual contracts that are listed directly under the names of the cryptocurrencies say, we’ll come to that later. You should have noticed, however, that Bitcoin is not abbreviated with BTC in BitMEX, but with XBT. This is perhaps still important to know for the introduction.
On the left side you have the possibility to place an order. For this we differentiate between the following order types:
Limit Order: With this order you have to set at which price you want to buy or sell and only when the price is available will the order be executed.
Market Order: The order will be executed immediately at the best price currently available on the market.
Stop Market Order: This is an order that is not written to the order book. Only when the stop price is reached does the order appear in the order book and is executed.
Stop Limit Order: This order is a stop order but users can determine the minimum price at which the order will be executed after the stop price has been reached.
Trailing Stop: Here you have the possibility to place a flexible Stop Market Order. This will be executed when the price changes and the specified amount decreases or increases, depending on whether you are long or short.
Take Profit Limit Order: This order is the opposite of the Stop Limit Order. It is executed when a certain target value is reached. This way you can be sure that you will make a profit if the price rises only for a short time. Of course you can set the price at which you want to buy or sell, again depending on whether you are long or short.
Take Profit Market Order: Oh here your position will be liquidated when you reach a certain price target. But then a market order will be used. So you can’t set the price at which you want to sell.
Besides the different order types you have the possibility to bet on a rising or falling price. You do this by clicking on “Buy” or “Sell” at the bottom of the order box. As you already suspect, you bet on a rising price for a “buy” and are therefore long in position. A sell is a bet on a falling price. So you are short in position. The name “sell” comes from the fact that you are selling your bitcoins and will have to buy them back at a later date. If the price has fallen in the meantime, the bit coins you have to buy back will of course be cheaper.
As mentioned before, BitMEX is so popular with traders because you have the opportunity to trade with leverage. Many cryptocurrencies on BitMEX can be traded with 1:20, Bitcoin itself you can even trade with leverage of 1:100.
So far the theory, who is new and inexperienced in this area should never trade with leverage of more than 1:5, no matter which cryptocurrency. You can set the leverage in the field below the order box.
A lever allows you to trade with a position that is greater than your actual balance. So assuming you have 1 bit coin, you can trade virtually with 5 BTC (called XBT by BitMEX) at a leverage of 1:5. So if the Bitcoin price rises by 10% you won’t gain 0.1 BTC, but 0.5 BTC.
The problem is that you can be liquidated much faster. To stick to our example with the leverage of 1:5, we would lose our entire bet if the price fell by 20%. Our Bitcoin is then gone. Now it should also become clear why you shouldn’t trade with a leverage of 1:100, because you will be liquidated if the price drops by only 1%.
Perpetuals, Futures and Other Contracts at BitMEX
The most popular trading instruments at BitMEX are perpetuals. In principle, these are Bitcoin contracts with an unlimited duration. So you could theoretically stay in one position forever but you pay (or get) funding every 8 hours. How this is composed we will explain later in more detail in the section Fees.
The Bitcoin Perpetual contracts are traded on BitMEX in US dollars. So you have to indicate how much US Dollar you want to invest in a position. The smallest value is 1 US Dollar. Although we are talking about US dollars here, all credits at BitMEX are underlaid with Bitcoins, so please don’t let this confuse you.
To determine the current Bitcoin price now, BitMEX uses an index price, which is composed of the BTC price of Bitstamp, Kraken and Coinbase Pro. This ensures that we also have a fair market price at BitMEX.
Example calculation for a perpetual contract:
Assuming a trader goes long with 10 XBT at a Bitcoin price of 4,000 US dollars (no leverage). Then the trader buys 40,000 contracts. Because 1 Contract is with Bitcoin equal to 1 US dollar. If the price of Bitcoin now rises to 5,000 US dollars, the trader makes 2 BTC profit. So from now on he has 12 BTC. In the end, he could not only profit from the Bitcoin price increase, but also increase his number of Bitcoins.
In addition to perpetuals, BitMEX also trades futures with a limited term. The futures contracts usually expire at the end of each quarter. This means that when you buy a futures contract, your position is automatically closed at the end of the term. In the end you bet on the futures what the price will be at the end of the contract. You can also go long or short here. In contrast to perpetuals contracts you don’t pay (or get) funding every 8 hours for futures contracts. So it’s usually more lucrative to keep them longer term.
Of course trading at BitMEX is not free of charge, you also pay fees here. What is free at BitMEX, however, is the deposit and withdrawal of credit and the storage of your Bitcoins. If you enter however a position BitMEX charges fees. These are broken down as follows.
Basically BitMEX distinguishes between a maker and a taker fee. You pay the maker fee for a market order and the taker fee for a limit order. It is therefore cheaper to place a limit order that is not executed immediately than to use a market order.
Besides the Maker and Taker Fee there is also a Funding Fee for Perpetuals, which is due every 8 hours. However, this is not necessarily the value indicated in the table, but depends on whether more investors are long or short. So it can happen that in a long position you get or pay fees every 8 hours. Depending on the current market situation. The current funding rate is always displayed in the upper right corner of the dashboard at the perpetuals. There you can also see when it is due.
For future contracts, a settlement fee is due at the end of the term (only for BTC).
Who wants to save fees can register with this link and saves 10% of the trading fees in the first 6 months.
For BitMEX there is currently no app available. The website is optimized so that you can use it on your smartphone without any problems. Basically you can do everything you can do on your computer on your smartphone. Only the chart is a little less recognizable on the smartphone and not necessarily suitable for important investment decisions.
BitMEX Testnet (Demo Account)
If this is too complicated for you, you can open a Testnet account at BitMEX. With this account you don’t do live trading, but trade with Testnet Bitcoin. This will help you to get familiar with the platform. You can find the BitMEX Testnet under: Testnet.Bitmex.com
In the context of BitMEX, bots are often spoken of as well. There are countless of them. In addition, everyone has easy access to BitMEX API and can easily connect a bot to BitMEX. We have already tested countless BitMEX bots and couldn’t find any that have managed to deliver continuous profits. Many bots are dependent on prices falling or rising over time. But if the price remains at a similar level (flat) for a long time, the bots won’t work anymore. Nor do you need to assume that there are good arbitrage bots available to the general public.
Is BitMEX safe?
Before you send your credit to BitMEX, the question is whether the platform is secure. Considering the fact that BitMEX trades over $1 billion worth of cryptocurrencies every day, BitMEX does a lot to protect investors’ assets. The majority of BitMEX’s trading assets are in cold storage and therefore cannot fall victim to hacker attacks. Beyond that only once on the day assets are dispatched. You must confirm the transfer thereby not only on the platform, but also again by an email confirmation. So it is not enough if someone only has access to your BitMEX account. Nevertheless you should activate the 2 factor authentication in any case. Then you can not only log in with a password, but you also need the Google Authenticator Code.
Until today BitMEX has not been hacked. This is of course very positive, but does not exclude 100% that something can happen in the future, even if the risk is very low.