Choosing an appropriate cryptocurrencies exchange for leveraged trading is hard – as there are barely any of them. However, the selection between the few options can often make or break a traders career before it’s even started. With the continued growth of cryptocurrencies and the emergence of multiple exchanges, finding the perfect exchange is often a daunting task, especially if you want to trade with leverage. In the recent past two particular exchanges have gained significant prominence in the industry, they are BitMEX (as market leader) and Deribit (as new challenger). In this article, we are going to look at a critical comparison between these two exchanges.
BitMEX or Bitcoin Mercantile Exchange is peer to peer trading platform that allows leveraged contracts in Bitcoin. BitMEX combines margin trading and derivatives of crypto assets for traders. The company was founded in 2014 by HDR Global Trading Limited and is currently the world’s largest Bitcoin futures and derivatives market by trading volume. It has its headquarters in Hong Kong, China.
Deribit which is coined from both Derivatives and Bitcoin is a futures and options trading platform utilizing Bitcoin exclusively for depositing, withdrawals and trade collateralization. Deribit was founded in 2016 and has its headquarters in Amsterdam, Netherlands.
The Battle Between Bitmex and Deribit
BitMEX was one of the first exchange platforms to launch perpetual swaps for its users. After every 8 hours, the system calculates a time-weighted price versus a post price presentation if the result is a premium, the traders in the long position pay traders in a short position. Consequently, taking a long position is less attractive and hence the premium is reduced. Conversely, if the result is discount the traders in a short position pay those in long, hence attracting buyers and consequently raises the price. These perpetual swaps are aimed at providing the benefits of future without expirations.
Similarly, Deribit’s perpetual swaps are conducted in the same manner with a slight distinction. Instead of paying out at intervals of 8 hours active positions receive continuous payouts based on the premium or discount versus the spot price. Overall, the Deribit system allows for smoother adjustments between contract deviations and the underlying spot price.
Order execution and transaction speeds
The average time taken to execute an order at Deribit is only a couple of milliseconds, in comparison, BitMEX takes 20 to 40 time longer during a stable market. The difference increases considerably when there are high volume trades being executed. Test have shown that Deribit can perform an average of 1000 orders in a trading block per second. In contrast, BitMEX performs 500 orders per second.
Pump and dump allegations
For a long period, BitMEX has faced grievous accusations of price manipulation through pump and dump. A recent example is that of August 22, 2018, where the company had scheduled maintenance for its engines. Shortly, after BitMEX went under maintenance Bitcoin was pumped by 10%, liquidating numerous shorts. On the same day, BitMEX reported a DDOS attack that resulted in 5% dumping. A thing that might puzzle the most of its user, how a company of this size cannot afford servers that handle the amount of transaction when the action happens. The notorious “System Overload” is an issue most of the BitMEX users might have experienced when the action starts – if you failed to set up your stop-loss before placing your actual order, it can REK you forth and back. On the other hand, Deribit remains quite credible and have not faced such allegations since they began operations. One has to consider that Deribit faces much lower amounts of traffic and the brand is less known than Bitmex – the market leader. Hence, it is hard to compare this point, as only the future will show how Deribit behaves to attacks once the volume and brand awareness is granted on a similar level.
BitMEX boasts the enviable position of being the most liquid crypto-derivatives exchange in the world today. Due to its high liquidity BitMEX has some of the tightest spreads and least slippage in the market. Currently, BitMEX executes a phenomenal number of up to 400000 BTC a day, in comparison to Deribit 10000BTC. Additionally, BitMEX offers a wider variety of product to trade in such as XBT Perpetual, ETH Futures, ETH Perpetual, XRP Futures, LTC Futures, ADA Futures, TRX Futures, EOS Futures, XBT Futures, and Bcash Futures. Deribit only allows BTC Futures and BTC Perpetual. This is one of the biggest issues with Deribit. Low liquidity means you orders are less likely to fill and the price action might be skewed to an extent. Also, the missing altcoin futures is a big drawdown for Deribit.
The BitMEX user interface is largely user-friendly and simplified. The interface allows users to drag and drop orders around charts. This makes it increasingly simple to execute and stop orders. Overall, this is an increasingly vital feature since the difference between making a profit or a loss in the volatile world of cryptos is timing. You can also customize the layout to your preference in BitMEX. Deribit user interface is rather clogged and users have to navigate and click around in order to edit positions. There is much air on the upside for improvement when it comes to the Deribit UX – especially new traders will find it hard to navigate and set up orders properly. BitMEX in comparison is a very nice piece of web development and makes it easy to find your way into leveraged trading.
Trust, Payouts and Account Closing
Due to the nature of the products, you won’t be able to make use of the services of these both companies everywhere in the world. BitMEX excludes US customers and makes use of Geo-Blocking for American traders. They have clearly defined rules in regards to that.
Deribit in comparison does not allow traders from the US and from the Netherlands (their actual country of origin). However, according to their TOS they are very unclear how to they deal with a breach of this rules and theoretically it could turn into a complete loss of your funds and they keep the right to report you to authorities.
Overall, Deribit offers users with ultra-fast transactions, advanced perpetual swaps, and enhanced trust and credibility. On the other hand, BitMEX provides users with a seamless user interface and TONS of liquidity. As things stand BitMEX still remains the market leader – their UX and the available liquidity is much better and this is a make or break factor to many. The liquidity issues of Deribit makes it a bit dangerous to trade there, as you never know if a trade might get filled or not. On top of that, it is a vicious circle as if the UX is hard to get for the masses, the lion’s share of leverage traders will stay away. Hesitating traders results in low liquidity. Low liquidity is feared by pro traders which would actually make use of the platform. However, if Deribit can overcome the challenges with UI and liquidity it’s might become a real challenger to BitMEX – right now it is a pretty boring competition and we’d need to see how Deribit would perform in the conditions BitMEX faces.