Introduction to BitMEX
A Bitcoin-only exchange where coins are neither actually bought nor sold, BitMEX is insanely popular among high leverage traders, performing over one trillion dollars worth of trades over the last year alone. They offer up to 100x leverage on certain derivative products (contracts) for both long (buying) and short (selling) positions. This means that the potential to accrue massive profits with just a small amount of capital is huge. However, equally as huge is the risk of total loss of capital if you aren’t paying attention.
BitMEX is the most popular of all margin/leveraged trading-based exchanges for a number of reasons, but mainly because it has an incredible amount of liquidity and in its 5+ years of existence has proven itself to be a fair and safe exchange. People enjoy BitMEX because it is simple, secure, and pretty much anybody can register for an account (except for those in the U.S. and a few other countries) free of KYC, near instantly. Traders can get in and out of the exchange and their positions quite easily without the regulatory hassle frequently associated with operations of its magnitude.
Basics of getting started
Precautionary note: It is recommended that you have some previous trading experience before attempting to make trades on BitMEX — especially leveraged trading. This is because it is quite easy to lose your entire margin balance if the market should move in an unfavorable direction when making high leverage trades. Liquidation can happen much more easily than one could possibly expect, especially if they don’t have stops in place to prevent their margin balance from being wiped out.
BitMEX is available to users everywhere in the world except for the following countries / territories:
- Hong Kong
- North Korea
It is highly recommended that you not attempt to skirt around BitMEX’s jurisdictional restrictions as your account will be closed if it is found out you are using a VPN or otherwise masking your IP address to make it appear as if you were not in a restricted country.
How to register an account on BitMEX
Registering an account is probably the simplest part of BitMEX and only requires an email address, password, country of residence, and first / last name. After entering this info, just check the box saying that you agree to their terms of service, press “Register”, verify your email by clicking the link sent to your inbox, and that’s it — your account has been created.
How to get verified
One of the great things about BitMEX is that they currently don’t require verification or KYC from their customers in order to start trading. Occasionally, they will ask larger customers or those whom the source of funds is in question for verification, but for the most part, they don’t ask this of their users. In May 2020, rumors began to swirl that BitMEX was adding KYC, and they might very well in the future, but for now they have no verification process for new users. There’s literally no place to add KYC information even if you wanted to get a head start on the matter.
How to fund your BitMEX account
BitMEX is a 100% bitcoin-only exchange. That means they do not support fiat deposits or withdrawals, nor do they support deposits or withdrawals of any cryptocurrency besides BTC. All profit and loss (PnL) denominations are made in bitcoin, which they refer to as “XBT” (rather than the traditional “BTC”). This means that your collateral for margin trading (leveraged trading) will always be in the form of bitcoin.
To add funds to your account, first click on the “Account” menu option in the menu bar toward the top of the screen. Next, click “Deposit” under the Wallet section in the left screen column. This will automatically generate your XBT (BTC) deposit address which you will send coins to in order to fund your account. The minimum amount for your account to be credited is 0.0001 XBT, and deposits are credited to your account after 1 confirmation.
Overview of supported coins
BitMEX currently supports the following coins for perpetual contract and/or futures trading (listed along with their maximum leverage amounts) — we will explain further what each one means in below sections:
- Bitcoin (XBT): perpetual (100x), futures (100x)
- Cardano (ADA): futures (20x)
- Bitcoin Cash (BCH): perpetual (25x), futures (20x)
- EOS (EOS): futures (20x)
- Ethereum (ETH): perpetual (50x), futures (50x)
- Litecoin (LTC): futures (33.33x)
- TRON (TRX): futures (20x)
- Ripple (XRP): perpetual (50x), futures (20x)
How to trade on BitMEX
As a bitcoin-only exchange, trading on BitMEX is relatively straight-forward once you understand the basics of how it works. It is not possible to trade coins for other coins — only to use your XBT (BTC) as collateral for trades of contracts for XBT and other coins. XBT trades are paired with USD (with your XBT holdings converted into USD amounts), and all other coins are paired with XBT.
Note that when trading on BitMEX, you are not actually purchasing any coins but rather opening positions on what are known as contracts. For example, the most popular trading instrument is XBTUSD, which is a perpetual contract priced on an averaged index of bitcoin prices from other exchanges. When you open an XBTUSD trade, you are purchasing contracts, with each contract being 1 USD worth of bitcoin. This particular form of contract never expires (which is why they are called perpetual contracts).
To begin trading, click the “Trade” menu option in the top menu bar to be transported to the trading screen. Shown by default is the XBTUSD perpetual contract under the Bitcoin tab. You will notice that directly under the tab are 3 trading options: Perpetual and 2 futures options (currently they are Sept 25 and Dec 25). You can click the futures options if you would rather trade futures contracts than perpetual contracts. Other coins (represented by tabs to the right of the Bitcoin tab) have perpetual and/or futures contracts options for trading.
Perpetual Contracts vs. Futures Contracts
The main difference between the two types of contracts is that Perpetual Contracts never expire, and Futures Contracts have a fixed expiration date. This means that Futures Contracts positions must be closed before the expiration date or else they will be closed and settle at the price at that date. Perpetual Contracts are designed to more closely mimic the spot price of the underlying coin being traded whereas a Futures Contract is an agreement to buy or sell a coin at a predetermined price in the future (even though no coins are actually being bought or sold).
If the Futures Contract price of a coin is currently higher than it is for the Perpetual Contract, it means that the majority of traders are planning on the price of that coin going up in the future. Conversely, if the Futures Contract price is lower than it is for the Perpetual Contract, it means that the majority of traders are planning on the price of the coin going down in the future.
Positions opened using either type of contract carry the risk of being liquidated (wiping your trading balance out in its entirety) if the price should move too unfavorably in one direction or the other.
Trading screen components
BitMEX provides its trades with a large wealth of information which they can use to make informed trades and stay informed about ongoing trades. Every window within the trading screen can be customized, moved, or expanded. In the left column is the Place Order screen, followed by a leverage slider to set the amount of leverage you want to have available, followed by Contract Details which give basic information about the contract you are currently trading.
To the right of this column are 5 trading information windows which can be moved by clicking in the title header area and dragging it to a different portion of the screen. They include:
- Orderbook. Current listing of buy and sell orders that are rapidly fluctuating and can be grouped by different orders of magnitude.
- Chart. Trading chart with several different customization options, including candle interval, candle type, TA indicator overlays, comparison tools, drawing of trend lines, addition of text, snapshots, setting of style / scale / background, etc.
- Depth Chart. Displays the cumulative totals of both buy and sell orders across the closest portions of the orderbook.
- Recent Trades. Trades made by all users, listed by time and displaying type (buy or sell), price and volume.
- Positions / Order History. Here you can keep track of your open positions and view closed position, as well as keep track of orders, stops, and fills.
The types of Buy (long) or Sell (short) orders you can place on BitMEX include:
- Limit. This is for placing an order at a price other than the current market price (below for buying and above for selling). Limit orders can be set as GoodTillCancel (open until filled completely), ImmediateOrCancel (after partially filled, the unfilled portion is cancelled), or FillOrKill (must be filled completely or the order will not execute). A price and a quantity need to be entered for these types of orders.
- Market. This is for placing an order at the current market price. Your order will be filled at the best available price(s), depending on the size of your order. Only a price needs to be entered for this type of order.
- Stop Market. This is a market order that executes only after the price has reached a specific value. Stop Market orders can be placed according to Last price (last price traded on BitMEX, the default option), Index price (last price on the reference exchange), or Mark price (last price on an index of exchanges). Advanced types of Stop orders include Stop Limit, Trailing Stop, Take Profit Limit, and Take Profit Market.
Leverage (margin) trading
Before placing an order, adjust the amount of leverage you wish to use for the trade using the slider below the Place Order screen. The higher amount of leverage you choose, the bigger your trade is capable of amplifying, and the smaller your margin from liquidation becomes. This means that the potential for profits to be made on small amounts of funds is extraordinary if you make winning trades. Losses, however, can be equally as catastrophic if the market should turn against you.
For example, if you have 1 XBT and you choose 10x leverage, you can make a trade up to 10 XBT in size. However, this also means that you only have 1/10th of the price margin available to your trade. So if you have 1 XBT worth of collateral in your account, set the Leverage at 10x, and open a Buy position which is 100 XBT in size, your position will be liquidated if the price of XBT should fall 10%. Likewise, if you set the Leverage to 100x with the same 1 BTC and open a Buy position that is 1,000 XBT in size, your position will be liquidated if the price of XBT falls just 1%.
This is why it is very important to have a firm strategy in place before attempting to margin trade, which may frequently involve employing various Stop or Limit orders in other direction of your initial order to assure your trading balance does not get liquidated if the market suddenly turns against you.
BitMEX trading fees
BitMEX offers a flat maker/taker fee model which actually issues rebates (negative fees) for those who place maker orders. For the perpetual contracts (available for XBT, BCH, ETH, XRP), the maker fee (limit orders) is -0.025%, and the taker fee (market orders) is 0.075%. This means that it is possible to earn tiny amounts of XBT by placing limit orders. For traditional futures trading (available for all coins on BitMEX), the maker fee is -0.025% for XBT and -0.05% for all other coins, and the taker fee is 0.075% for XBT and 0.25% for all other coins.
In order to accrue maker fee rebates, you must place a limit order that is currently below market price for long (buy) positions and above market price for short (sell) positions. To do this, check the “Post-Only” box in the Place Order screen. This will assure that you cannot accidentally place a limit order at current market price.
The only other fee that BitMEX charges is a funding fee on perpetual contract orders. This is not a fee so much as a charge paid from some customers to others based on a Funding Rate used to keep the trading price in line with the underlying reference price. When the Funding Rate is positive, those with long positions will pay those with short positions. When it is negative, short positions will pay long positions.
How to make a withdrawal
To make a withdrawal, click on the “Account” menu option and then the blue “Withdrawal” button. Here you will enter your withdrawal destination address (BTC addresses only), the amount to be withdrawn, and the Bitcoin Network Fee you wish to use. BitMEX recommends a minimum withdrawal fee of 0.001 XBT (BTC), but will let you set the fee as low as 0.0003 XBT.
These recommended and minimum fees are dynamic, meaning they will change according to what average fees are currently being paid on the Bitcoin Network. If you want your withdrawal to be confirmed ASAP, it is recommended that you pay the recommended fee (or higher). If you don’t mind waiting for a few blocks (or more) to receive your withdrawal, it is OK to use the minimum fee.
BitMEX has never been hacked and is considered to be a very safe and secure handler of customer funds. In addition to two-factor authentication (2-FA), BitMEX provides the following security options for its users (which can be found in the “Security Centre” portion of the “Account” options):
- PGP Email Encryption. Use this to add your PGP Public Key, which will be used to encrypt all emails sent from BitMEX to your email address.
- IP-Based Access Restriction. Turn this on to close all sessions when a new IP address is detected to have logged in to your account.
- Safe Session Duration. Turned on by default, this will cause your trading session to expire 10 minutes after you have closed the exchange browser window.
BitMEX does have a trading app for Android which can only be downloaded from its website. It is not optimized for mobile trading but it is possible to get the job done if you absolutely need to trade on the go. According to most reviews we’ve read of the app, it sounds like it is probably just better to stick to the desktop/laptop version of the exchange, or if on a mobile device, the mobile browser version.
Advantages of BitMEX (over competitors)
- Extremely liquid orderbooks for all supported trading options.
- Makes high leveraged trading relatively simple compared to other exchanges.
- Easy to register, doesn’t have a KYC process.
Limitations of BitMEX
- Not available for customers in the U.S.
- No account separations for funds, which makes it easier to lose your entire balance during liquidation.
- No fiat support; not possible to deposit or withdraw coins other than BTC.
Wrapping it up
In all, BitMEX is probably the very best – and definitely the most popular – at what they do, which is high leverage trading. It’s definitely not for everybody and it is certainly recommended that you have a decent amount of trading experience before jumping into it. By focusing on a select area of service and delivering an extremely high quality product in that area, BitMEX has developed quite a reputation for itself over the years, becoming a bigger powerhouse in the cryptocurrency industry with each passing year.