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BitMEX Review 2022 – Pros and Cons of BitMEX Margin Trading

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About BitMEX

Bitmex.com is one of the largest Bitcoin trading sites in the world, founded in 2014 by Arthur Hayes, Samuel Reed and Ben Delo. The Bitcoin Mercantile Exchange has gained more and more popularity over the last few years. In summer 2018 the daily trading volume surpassed 1 million BTC for the first time.

In the big Corona virus stock market crash 2020 Bitcoin was also hit hard, just like all major stocks and indices. On March 13, 2020, BitMEX reached a daily trading volume of more than 8,16 billion US Dollars, which was an amount of 1,453,998 BTC in one day.

Later in the same year, BitMEX unfortunately got in big legal trouble as they were indicted by U.S. financial regulatory authorities. The subject of the complaint was non-compliance with U.S. anti-money laundering regulations, in particular due to the lack of a KYC policy. BitMEX then very quickly began enforcing a corresponding KYC policy, with the goal of having all traders ID-verified by February 2021. BitMEX’ legal difficulties and the introduction of strict customer verification led to an immediate exodus of a large part of their traders, many of them likely migrated to their main competitors.

Current Legal Trouble

Bitmex.com is specialized in sophisticated financial operations based on margin trading, also known as trading with leverage. Before it’s legal issues it was also considered to be the number one trading platform for so-called “whales” – people who hold positions worth millions of USD daily. There is one major difference to many other Bitcoin trading sites: The BitMEX margin trading platform only accepts deposits in Bitcoin (BTC), no USD wire transfers or other fiat money deposits.

The platform is not only known for its big players but also record-breaking margin call liquidations with the single biggest worth more than $100 million. Unfortunately, being so popular has its consequences, which might lead to some significant controversies. One of them concerned U.S Commodity Futures Trading Commission investigating BitMEX, as mentioned above. As a result, if you are a resident or citizen of the U.S, the province of Québec in Canada, or Hong Kong, among others, you are not allowed to use the platform.

Email Leak Affair

Another significant BitMEX controversy up to date was a mass email leak in late 2019, which resulted in an accidental public share of the whole BitMEX email database.

Despite these adversities and despite an increasing number of competing platforms imitating BitMEX’ concept, the Hong Kong-based company had remained the world’s unbeaten number 1 platform for Bitcoin margin trading until their prosecution. Before, the trading site had always had the highest trading volume in BTC CFD trading by far.

Nevertheless, BitMEX is still among the leading Bitcoin derivatives platforms in terms of daily trading volume. Thus, the platform is still suitable for whales, thanks to its high liquidity.

How does BitMEX Margin Trading work

In this review you’ll quickly get to know the site interface, what type of transactions can be made on the platform, which pairs can be traded and everything you need to start:

Total Beginner?

If you’re completely new to the kind of margin trading BitMEX offers, our more in-depth guide for beginners about BitMEX Bitcoin Trading might be helpful for you. This post explains the Bitcoin margin trading broker’s trading concept from scratch for trading beginners, if you have no clue at all how you should use the platform and it’s orders section.

Sign Up

Let’s have a short look at how to create an account on BitMEX.

First, we have to click on the “Register” button. This will take us to the next page asking for email, password, name and country.

Create An Anonymous Account?

Unfortunately the days are over when you could trade “anonymously” with BitMEX. For 6 years traders could use the platform without ID verification and it wouldn’t even have played a role if you’d have signed up with a fake name. The only data BitMEX asked for at new user registration was an email, password, name and country.

But in 2020 the world’s largest Bitcoin margin trading platform with Bitcoin-settlement has decided to introduce KYC which applies to all customers, old and new ones. Users still have time to provide their ID documents until middle of February 2021. As of 02/15/2021 all users have to be verified or they cannot use their account anymore. Likely BitMEX had got too much external pressure from the US that don’t accept CFD trading activities, a law that applies to both citizens and residents of the US. So even when you’ve left the country you may not use a platform like BitMEX as long as you hold a US passport.

For the registration with BitMEX it is still recommended to use a dedicated email address, for security reasons. You might have heard the email leak story about BitMEX, when they accidentally sent a campaign and forgot to set the other recipients on bcc in the “to:” field. That way thousands of email addresses were spread among the users who got this email.

As many people used an email address on BitMEX that contains their real name, like firstname.surname@gmail.com, they are now of course exposed as BitMEX customers. This can be avoided if you use an extra email address that doesn’t contain your name.

After registration you will receive an email to confirm your sign up, don’t forget to click the confirmation link.

BitMEX Margin Trading Review – How to Navigate:

This is the main screen. On the left side, there is a panel where you can place an order, check your current position and see contract details. (We’ll be back on that later). In the central platform area the BTC deposit address of your account is placed (BitMEX only accepts deposits in BTC). On the top right, you can access your account & security options, where you can set a two-factor authentication.

On top in the middle, the other cryptocurrencies which you can trade on Bitmex.com are displayed as tabs. Your trading history is on the bottom of the platform interface, with the current positions on the first tab and the active orders on the third:

The arrangement of those widgets within your account can be changed by clicking on the button placed right on the top bar (to switch from basic to advanced display). This gives you full control of what you want to display.

Contracts / Trading Products

Perpetual SWAPs: On Bitmex.com you can trade 3 different derivatives products. Perpetual swaps, which are similar to futures contracts but without settlement date, so they stay open till the trader decides to close them.

Bitcoin Futures: The Bitcoin Mercantile Exchange is one of the few Bitcoin margin trading brokers offering real Bitcoin Futures contracts as well. BitMEX futures contracts are denominated as XBTZ19 and XBTH20. You can read the details about those products within the “contracts” section on the website.

Options: The third type of trading product the cryptocurrency margin broker offers has been added to the platform in 2018: Upside & Downside Profit Contracts. Those are basically call and put options. Pro traders rather use those to get an impression of market sentiment. For trading they are highly risky and really difficult to understand in detail, especially for people who’ve never traded options.  Traders who enjoy to gamble might be interested in such instruments.

How To Make A Deposit/Withdrawal:

To make a deposit, select “Account” in the top bar and then “Deposit” within the drop down menu. This will open a QR Code window to complete the transaction.

The Bitcoin margin trading broker only accepts deposits and withdrawals in Bitcoin. If you don’t own Bitcoins yet, you have to purchase them in another exchange. To make a withdrawal, you have to insert the amount and BTC address to complete the transfer.

How To Analyze The Graphs

For each currency pair which they support, BitMEX margin trading provides a chart section with a lot of features, so traders don’t necessarily need to use another professional charting tool parallel.

You can see the bitcoin chart on the advanced interface; you can expand it, leaving only the left panel visible or even create a new window for it:

The chart section offers all tools you need to analyze the price action. You can set different time periods, change the type (line, candlesticks, and more), apply several indicators on it (in this example, we have Bollinger Bands, and EMA applied on the chart, and Chaikin Money Flow under the graph).

How To Place An Order On BitMEX

After your deposit is confirmed by the Bitcoin network, you arrange the trading platform widgets according to your personal preferences and make chart analysis with the tools available; finally you will be able to actually place orders on the BitMEX margin trading platform.

You Can Use Several Order Types:

• Limit (the order is fulfilled if the given price is achieved);
• Market (the order is executed at current market price);
• Stop Limit (like a stop order, but allows you to set the price of the Order once your Stop Price is triggered);
• Stop Market (this is a stop order that does not enter the order book, remain unseen until the market reaches the trigger);
• Trailing Stop (It is similar to a Stop Market order, but here you set a trailing value that will be used to placing the market order);
• Take Profit Limit (this can be used, similarly to a Stop Order, to set a target price on a position. In this case, you want to gain, and not to cut your losses);
• Take Profit Market (same as the previous type, but in this case, the order triggered will be a market order, and not a limit one)

Where To Check Your Orders And Current Position

All your orders can be easily viewed in the trading platform interface. There are tabs where you can select your Active Orders, see the Stops placed, check the Orders Filled (total or partially) and the history log. On the Active Orders and Stops tabs, you can cancel any order that you want, by clicking the “cancel” button.

You can also see all your currently open positions, with an analysis if it is in the black or red.

How BitMEX.com Price Is Calculated

The BitMEX .BXBT price is tracked every minute, and it’s a fully composite index with the price being calculated from multiple sources. As for now, the platform is using data from nine different exchanges: Bitstamp, Binance, Bittrex, Gemini, Coinbase, Huobi, Itbit, Kraken, and Poloniex.

The index price is calculated and published every 5 seconds as a weighted average of the last known price from each exchange. Does it mean that the price on this platform is similar to other exchanges at all times? It depends. As BitMEX enables their traders to use high leverage, sometimes liquidations might lead to short, noticeable price differences despite the controlled liquidation process implemented by the platform, both on the long and short side.

How To Use The BitMEX Leverage Section

Hint: DO NOT USE leverage if you are a beginner. Bitcoin Margin Trading is only recommended for experienced traders, because of the risk of higher losses. You should really know what you are doing when lending money for bigger positions.

The broker platform allows its traders to leverage their position. Leverage is the ability to place orders that are bigger than your current wallet balance. This could lead to a higher profit in comparison when placing an order with only your wallet balance. Trading in such conditions is called “Margin Trading.”

Inside margin trading, you have two sub-types: Isolated and Cross-Margin. The latter type of trading should be made with extreme caution because you can lose all your wallet money, and not only the money used to place the order. In the first type, you can select the amount of your wallet you want to use to hold your position after the order is placed.

On BitMEX trading platform you can set your leverage level by using the leverage slider.

We have to say that for total beginners using the platform can be a bit tricky since the system works differently to other broker platforms. Therefore we’ve created an in-depth beginners guide for how to actually use it. On BitMEX, different to other brokers, you generally always trade on margin, no matter if you choose leverage or not. Our beginners guide shall help you understand why that is.

Another useful guide we’ve written is one particularly about margin trading strategies to use in BitMEX.

Margin Trading Fees:

The taker fee is 0.075% which gets multiplied with the leverage. So 10x leverage would cost 0.75% fees.

BitMEX Security & Emergency Measures in Times of Extreme Volatility

Insurance Fund

BitMEX has an insurance fund that is designed to ensure that winnings can be paid out as safely as possible. Those who trade on BitMEX do not trade directly with the broker, but with other traders, since it is a P2P trading platform. Longs are thus offset directly against shorts, the platform only provides the technical framework for this, so to speak. However, there is not always a balance between longs and shorts; in fact, large differences can arise. It can happen that winning positions exceed the losing positions by a massive amount, and the losing positions would be far from sufficient to pay off the winners. So that successful traders can actually receive their profits, even if the counter positions do not bring enough capital, there is the Insurance Fund. This fund must therefore complete legitimate profits, at least as far as the size of the fund allows.

Auto-Deleveraging

If the Insurance Fund is emptied (which rarely happens, but is possible), a drastic emergency measure called Auto-Deleveraging is used. In this measure, profits of successful traders are partially used to compensate for the losses of the losers. The leverage of winning positions is reduced, so you get less than you would be entitled to if there are too many losses on the opposite side. This happened, for example, in March 2017 in a spontaneous market crash caused by the rejection of the first Bitcoin ETF.

The BitMEX Insurance Fund currently comprises about 34000 BTC. For comparison – that sounds quite a lot, considering that the maximum BTC supply ends at 21 million. However, this figure must be compared with the actual trading volume of the platform, which is currently around 1 trillion USD per year due to the leverage positions.

Protection Against Price Manipulation

BitMEX protects its users from liquidations that could be triggered by pumps or dumps of large positions by aligning the price that triggers liquidations with the market price of large the spot exchanges mentioned earlier above.

Critics Of BitMEX

BitMEX is one of the most controversial trading platforms out there, with many advocates as well as critics. It’s mostly known as the world’s biggest “casino” as trading with high leverage can result in significant gains or loses within seconds.

That being said, most of the negative opinions come from inexperienced traders who lost all their funds. As the platform is suitable for large position trades, that can experience liquidations over $100 million while offering iceberg orders, trading in such an environment can be quite challenging, especially if you plan to scalp or day-trade. Therefore, the platform is only recommended to professional margin traders with lots of experience and it’s definitely no playground for newbies in the field of cryptocurrency margin trading or for trading with leverage in general.

The biggest BitMEX controversy to date is the significant email leak that happened in the first week of November 2019. During that time, most of the platform users received an email that informed them about upcoming changes to the weighting of platform indices. Because of mistake, everyone could see other user’s addresses in the “To:” field. Because the email was intended to every BitMEX customer, the majority, if not all, emails were leaked. The bad news is even more impactful if we consider that for many customers, the leaked email addresses can be probed to gain access to other exchanges.

This example shows how useful it can be to use a newly created non-personal e-mail address like trader123@protonmail.com or similar just for Bitcoin trading sites. If such an email leak should ever happen again, nobody will be able to connect the email to your name. But using an email containing your name is never a good idea in cases where privacy is important.

On this reddit page you find some criticism and opinions about Bitmex, so be aware of brokers having up and downsides and always some unsatisfied customers as well.

Further Information

Read this article to understand trading on BitMEX:
https://www.bitcointradingsites.net/bitcoin-trading-on-bitmex/

Read this article to learn BitMEX Trading Strategies:
https://www.bitcointradingsites.net/bitmex-trading-strategies/

The BitMEX.com platform has a “References” section which covers any questions from a platform overview up to detailed explanation and examples of each order type or trading fees.

We hope this overview helps you to get started quickly on BitMEX.com Bitcoin trading site!