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Deribit.com Review 2022 – Pros and Cons of Trading on Deribit

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Deribit was founded in March 2015 by John Jansen, and started operating in June 2016. Jansen teamed up with Marius Jansen, Sebastian Smyczýnski and Andrew Yanovsky. Deribit is a CFD trading site, meaning that no actual crypto purchase takes place.

Even though exact data about daily trading volumes are not publicly shared, Deribit has historically been criticized because of its low liquidity. In September 2017 a faulty liquidity algorithm caused the company to take a loss of 60 BTC (more than 200,000 USD at the time); since then, the numbers have slightly improved.

A possible cause for the smaller user base and volume is the site not taking deposits in any currency but Bitcoin. Bitcoin is also the only tradable asset besides an internal token called Dericoin, whose availability is restricted to their test platform.

The company behind the Bitcoin Futures trading platform, DRB Panama Inc., is based in Panama, operating under that country’s laws. The platform serves customers all over the globe, with the only restriction being the legal status of Bitcoin in their respective lands.

Products Offered By Deribit

Deribit focuses on offering bitcoin and ether perpetual contracts and futures with up to x100 leverage as well as BTC and ETH options with x10 leverage.

Perpetual BTC And ETH Contracts

Perpetual contracts are a derivative product to an underlying asset, where you don’t buy it, but rather speculate on a future price. Deribit offers bitcoin as well as ether trading, with up to x100 leverage against U.S Dollar. All transactions are based on deposited bitcoin that serves as collateral.

BTC And ETH Futures

Futures work similarly to perpetual contracts, but with the difference that the buy/sell agreement concerns a predetermined price at a specific time in the future. Deribit enables you to speculate on the direction of the price both of bitcoin and ether with x100 margin, based on your bitcoin deposit.

What Makes Deribit Special – BTC And ETH Options

Unlike other exchanges, Deribit offers BTC and ETH options with a maximum x10 leverage. Buy purchasing calls or puts you recieve the right to buy or sell a given amount of crypto at a specified price over a certain amount of time. Futures offered by Deribit can be traded on x10 leverage, both BTC and ETH.

Using The Deribit Website

Demo Account?

A demo platform exists, where you can create an account to get used to the site before moving to real trading. The process is independent of the main platform, so even if you already have an account there, you must sign up again in order to use demo features.

Anonymous Account?

The completely BTC-based experience makes the site fertile ground for using anonymous accounts. The site does blacklist some temporary email services, but slightly less predictable ones (such as getairmail) can still be used. Verification is completely optional, but by accepting the Terms & Conditions you give them the right to impose limits on your account and request your identity verification at their sole discretion.

However, any citizen or resident of the USA is prohibited from using the platform.

Signing Up

The process is extremely easy, you only have to fill a four-field form (email, nickname and password twice) and click on the submit button. The confirmation email usually arrives within seconds, and a single click is enough to confirm the account.

Social login is not available, also, every time you visit the “account” page (such as right after login in), you are advised to set up 2FA (or, at least, SMS verification) if it has not been activated.

Verification does not offer an added advantage, but proceeding with it will prevent any future limitation due to suspicious (anonymous) activity.

Demo Trading

Within the trading platform all customers enjoy the same benefits, with verification not making a difference in the privileges granted to a particular user. However, a second type of account is available, which gives access to the testing website, where a bogus currency called Dericoin is used to simulate trading.

The regular and the testing platforms are independent, meaning that credentials for one of the sites are not valid on the other (unless, of course, accounts with the same user / password combination had been registered).

Using The Site: Funding The Account

Deposits are limited to Bitcoin, with the process being standard: generating an address (or recycling an existing one) and sending a few coins on its way. A warning is given suggesting not to transfer less than 0.001 BTC; no fees are charged for depositing, besides what was already paid to the network (miner’s fee).

Fees

Charges for trading depend on the type of trade, with options having a 0.04% or 0.0004 BTC / option contract fee, and Futures a differentiated commission which depends on the role played by the user (makers receive a 0.02% rebate for contributing with liquidity, while takers have a 0.05% deduction for subtracting it).

A second fee is called “delivery fee” and is executed at expiration. It is defined as half the corresponding taker’s fee (0.025% and 0.02%, respectively). Fees for options are effectively capped at 20% of their value, meaning that they cannot under any conditions exceed that line.

Using The Platform: The Dashboard

There are separate pages for futures and options. The former are available in monthly and quarterly periods; the supported order types are limit, stop limit, post only and hidden.

Futures require the user to specify the future price and, the number of contracts or the amount of BTC he is willing to invest. Leverage is set by default, with an initial value of 20x (i.e. slightly more than 1/20th of the entered value must be owned by the user, at least).

Opening a future position, you can observe the default 20x leverage.

On the other hand, options are organized and displayed in a table. To open one the user simply has to click on the desired price and fill in the necessary parameters.

Open positions can be edited or cancelled at any time with a single click, using the options at the rightmost part of the table of active orders.

Charts are also available to aid the trader, including candlestick charts, futures charts, historical volatility and a few others directly taken from Tradingview. Given their source, these charts are highly customizable and interactive.

Using The Platform: The App

Besides having a responsive website, the Deribit team has been focused on developing native mobile apps for iOS and Android. At the moment of writing this review (mid. December, 2017) the first of the two had already been published on iTunes.

The app lets the user carry on with the main tasks allowed by the platform from their iPhone, iPad or iPod. iOS 9.0 or later is required for the app to work.

Security On Deribit

In the short period of time that Deribit has been in the market, it has successfully managed the security of the platform, not having faced a single hacking issue to the date.

Data is transmitted to and from the site securely, over HTTPS and the underlying SSL protocol. At least 90% of the funds are held in cold storage, but a public address associated to the wallet has not yet been provided.

2FA can be configured on the security page, under the account menu. Email notifications are available and enabled by default, informing the user of relevant events that occur with his account (such as a login).

Withdrawals and deposits are logged, and a visible history is kept for the user to check for suspicious activity. The site comes with a default session length (it can be removed, however caution is advised) and the possibility of setting IP pinning.

On the other hand, SMS alerts are not available, and there is no option either to PGP-encrypt the emails received from the platform.

Deribit Insurance Fund

Deribit has a special insurance fund in place that aims to cover all losses of bankrupt traders, preventing profitable investors from suffering from the so-called socialized losses. The company claims that the fund is sufficient enough to prevent any customer from going bankrupt.

A socialized loss occurs when a given trader executes an overconfident trade, putting the entire margin trading system at risk. The biggest force-liquidated position to date occurred on similar to Deribit exchange, where one trader managed to stake futures worth over $416 million. After the position was liquidated, the trader was not able to fully repay borrowed money. Because of that, the exchange had to tap into the profits made by other traders that benefited directly from those contracts. Deribit insurance funds make sure that the funds of the customers won’t be stolen by the exchange to cover someone else over-leveraged positions.

Deriebit’s fund is created by income generated form BTC and ETH liquidation orders. In the case of bitcoin, it’s 0.50% of the transaction, and 0.90% for ETH futures nad perpetual contracts.

User Experience

Most users praise the low fees charged by the site (which have been completely waived at times), but criticize the lack of liquidity that the platform portrays and the huge size of the spreads that derive from it.

Due to several reasons (including but not limited to it being relatively new, accepting only BTC and the liquidity issues), the user base is still small compared to other trading platforms. This has been quoted as a potential issue for newcomers when asking for opinions about Deribit on the Internet.

Deribit has built confidence around its users by honoring losses, such as the nearly one quarter million USD earlier this year (2017). Because of that, no scam or fund-thieving accusations against the company are found on the internet.

Another feature valued by some of the customers, especially the tech-savviest ones, is the existence of an API, which enables automatizing the trading process with relative ease.

The alternatives offered to get in touch with the support team are live chat  and email communication, with the latter having a specific contact address depending on the issue. They also have a strong presence on social networks, particularly on Twitter.

Pros

• Anonymous accounts allowed.
• European Vanilla options available.
• Fast trading.
• Low fees.
• Solid security.
• Test platform for getting used to the site.
• Experienced broker

Cons

• Android app still in development.
• Bitcoin-only site.
• Liquidity issues.

Conclusion

Deribit is a young site which has proved to have what it takes to compete head to head with the biggest trading sites. A larger user base wouldn’t hurt Deribit, in fact, investors seeking for liquidity are better off going somewhere else.

The site remains a great alternative for Bitcoin traders, and only them, because altcoins or fiat money are not available and no announcements of changing that in the near future have been made.

On the other hand, simple concepts are often more successful than more complicated ones, so maybe the platform is exactly doing the right thing for their long term success.