Which one is better? Manipulative BitMEX or low liquidity, hard-to-use Deribit?

The full review of the high leverage crypto exchange king BitMEX and its top contestant Deribit. The Pros, Cons And The Final Verdict is here.

DERIBIT VS. BITMEX EXCHANGE

BitMEX is currently the most popular exchange for trading cryptocurrency with leverage. BitMEX started in 2015 and since then it was the only, major, high-leverage crypto exchange out there. Until now…

Recently, especially in the 2018. more and more BitMEX users started complaining and suspecting their platform to be rigged, and some new high leverage crypto exchanges like Deribit started popping up.

Deribit seems to be the leader of the BitMEX opposition.

Deribit claims to be designed to address all of the BitMEX flaws and provide a trustworthy, safe high leverage crypto trading platform.

I decided to not trust either of them and to do a full side by side comparison.

Bitmex vs Deribit Account Opening

In this comparison, you will get to know everything you need to know to be able to decide if Deribit is better than Bitmex or not, from their safety, volume, user interface, registration process, etc.

Let’s start with BitMEX. If you already don’t have an account there, I recommend you to open it using this registration link: http://www.bitmex.com/register/5hjsJw which will give you 10% off all fees for 6 months. This might not seem like a big deal for you now, but actually, it accumulates, saving you quite a bit. BitMEX applies their fees on the entire leveraged position, so if you invest 0.1 BTC and short it with 20x leverage, it means your margin is 2 BTC and you will pay the fees on the 2btc margin.

This link uses their marketing scheme to your advantage because it gives you a privileged account without any downside. And if you trade regularly it can easily turn into thousands of dollars within 6 months in savings. I rather spend it with friends than leaving it on the table in their excess fees.

Deribit started as Bitcoin Futures and Options trading platform on summer 2016. They are based in Amsterdam (Netherlands). Deribit is currently the only platform that offers Bitcoin Option trading and the second biggest (after BitMEX) excuangethat offers Bitcoin Perpetual Swap Contracts.

To register for Deribit, I got you this privileged link registration for reduced fees under the best terms Deribit ever offered: https://www.deribit.com/reg-2515.4121

Use it as even if they shut it down, the privileged account will remain.

You can register and trade on both Bitmex and Deribit without revealing your identity. Both exchanges only require a username, password, and country of residence. However, American residents have one aggravating circumstance. They can access Bitmex only with VPN because BitMEX got forbidden for US traders due to aggressive US laws that makes exchanges not wanting to risk it.

CONTRACT OPTIONS

First, let’s see what coins and contracts can you trade on BitMEX…

BitMEX offers

· Bitcoin Perpetual Swap contracts (XBTUSD)

· 4 Bitcoin futures (XBTZ18, XBTH19, XBT7D_D95, XBT7D_U105)

· Ethereum Perpetual Swap contracts (ETHUSD)

· Ethereum Futures (ETHZ18)

· Cardano Futures (ADAZ18)

· Bitcoin Cash Futures (BCHZ18)

· EOS Futures (EOSZ18)

· Litecoin Futures (LTCZ18)

· Tron Futures (TRXZ18) and

· Ripple Futures (RPXZ18)

Deribit offers

· Bitcoin Perpetual Swap contracts (BTCUSD),

· Two forward month contracts (Bitcoin Futures) — currently one for December 28th expiration and another for March 29th, 2019 expiration,

· Bitcoin Options (Deribit is the only exchange that offers Bitcoin Options)

Both platforms have Testnet versions.

There is no ID verification registration needed for using either BitMEX or Deribit.

SAFETY

First of all, it is very important to know that BitMEX is based in Seychelles where they don’t have to pay taxes as they would be obligated in the US. Also, nobody controls BTC, so, it will stay the wild west.

However, BitMEX trading engine is the first of its kind. It is written in kbd+ which a tool frequently used by major banks in high-frequency trading applications. They are protecting their data with AWS (Amazon Web Services) Cloud Security.

BitMEX provides PGP encryption for all automated emails, two-step verification process and also bug bounty program to make sure that there are no vulnerabilities in the code and updates.

BitMEX keeps all their assets on cold storage (offline Bitcoin Hardware wallet, inaccessible to the hackers) and they believe in rigorous and conservative security measures.

Deribit keeps the majority of its assets on a cold wallet and 1% of the total reserves are kept on a hot wallet that makes immediate withdrawals possible.

As of today, both BitMEX and Deribit had never been hacked.

BitMEX provides optional PGP encryption for all automated emails, Deribit doesn’t offer that yet.



BitMEX Controversy

Unlike Deribit, BitMEX has been surrounded with controversies. Some of which are outlined in this post at the most popular bitcoin signals service Blockchain Whispers.



BitMEX controversies include:

· Bitmex System overload — during the highest volumes of trading, and usually when traders need to make rapid decisions, BitMEX’ system will freeze not allowing you to enter at the peak or close your position when it starts going in the opposite direction. BitMEX system overload ended up costing its users a lot of money especially in the moves where Bitcoin would go both sides liquidating both longs and shorts. It seems system overload was super profitable for BitMEX that is why they didn’t bother to fix it even after multiple complaints. They only, at the pressure from their users implemented that you can close position using their open positions bar that will not freeze. I wonder why a 2 billion dollars+ exchange a day (the volume with which BitMEX boasted)… didn’t manage to fix the technical glitch that costs their users their entire portfolios.

· Insider Stop Hunt — Their insider traders can see your orders, liquidation points and where it is the most profitable to get you stopped. This one is not verified, obviously, but frequent BitMEX users have witnessed that their stop gets touched and then goes the other way. It wouldn’t be suspicious if on other exchanges the wick wouldn’t be smaller or different.

· Their ability to close, liquidate, freeze your position at their convenience — What many users fear is if they by some luck manage to enter 100x at the very bottom or top of the bitcoin, carrying it… that their position might get frozen, closed early etc. So far, the author of this text, didn’t have any negative experiences on that regard, I did have two occasions where they shut my account down, but they would allow me 7 days to close my positions. I did hear though of a trader who got his position closed and funds held for months. Don’t know how it ended.

USER INTERFACE

BitMEX may, for an inexperienced trader, at first, seem a bit overwhelming with all these little checkboxes and order options and seem too complicated for use but once you watched a basic BitMEX tutorial and you get to know their interface you will be grateful for all these options you have available.

I personally like the BitMEX’s layout better than Deribit because I find it simpler (for now). You can easily see the tab of each coin and underneath the coin tab all derivatives of that coin.

Order form widget is always at the left, fixed and it doesn’t go anywhere when you change the instrument tabs. It stays at the same place while you changing the charts between Bitcoin, Ethereum or Tron for example.

The cool thing about BitMEX is that you can rearrange the widgets, hide them, change their size and make, for example, the chart box bigger if you want to see it better and hide the recent trades if you don’t look at them. This way your screen is never cluttered with things you don’t need.

You can expand the chart in full screen and use all the usual features Trading View charts have.

In BitMEX you can easily change your entry, target or stop loss price by sliding the price in the live chart which can be useful.

In BitMEX you can change your orders by drag&drop on the chart directly

Now, let’s see how Deribit looks like:

Deribit user interface

I find Deribit’s interface a little bit unorganized. When I logged into Deribit for the first time, I was wondering why did they placed Bitcoin perpetual swaps under the futures summary until I realized only first widget changes when you click on a different tab.

I must say, it took me a lot less time to figure out how the BitMEX’s exchange works then to figure out how the Deribits exchange works although the BitMEX looks a lot more complicated then Deribit at first.

The section where you place your order in Deribit is fixed along with order book an recent trades, but you can’t see your account balance (cash balance, margin balance, PNL, etc.) and BTC chart on the same page, under the same tab, because they divided account balance into the ’Account summary’ tab and the chart into ’Chart summary’ tab.

It is not that bad but it is too “not logical“ for me personally.

I mean… I really don’t get why didn’t they just copy BitMEX’s layout so everyone knows how to use it from the start. Easier for them, easier for us.

Deribit also does not allow rearranging anything and that would be a nice feature to add.

You can choose between light and dark theme on both platforms.

ADVANCED OPTIONS

There are some advanced options that you can find on BitMEX platform and Deribit doesn’t have them. Most of those features Deribit is aware of and is working on integrating them, but it will take some time, for sure.

The first thing that I see is, you can’t close your position if it went south immediately on Deribit as you can close it on BitMEX, with one click in active order summary box.

One button click on BitMEX to close your active position or cancel your order.

On Deribit you can’t change the target price or change the stop loss price by sliding it on the chart. Deribit plans to add TradingView chart soon and also make a drag and drop option possible.

Below you can see how it looks on BitMEX right now. You can click on your target line, for example, drag it up or down and drop it onto the price you wish to sell/buy the contracts. (That is not possible when there is some erratic price action, of course)

BitMEX allows you to see your orders directly on the chart and modify them.

The third thing is, BitMEX has integrated trailing stop. Deribit doesn’t offer trailing stop yet, but they told me it is on their high priority list.

I doubt that Deribit will stay behind BitMEX for too long, but these things are really helpful so you better be knowing you won’t see them on Deribit exchange right now.

LEVERAGE OPTIONS

As you could see in the previous screenshots, BitMEX has leverage scale on the left where you can adjust leverage that you want (you can also put 18x leverage or 62x for example by clicking on edit icon right beside the scale and writing the exact leverage you want).

BitMEX allows you to choose any leverage from 0–100x for Bitcoin Perpetual Swaps, up to 50x for Ethereum, 33.3x for Litecoin, and max of 20x leverage for the rest of the altcoins (Cardano, Bitcoin Cash, EOS, Tron, and Ripple).

On Deribit, leverage is functioning a bit different. It’s all cross leverage on Deribit i.e. your whole account is used as margin. The only way you can isolate margin for now is specify the amount of contracts you wish to use and set the stop-loss on the account so that it gives you the risk and the leverage you desire. It is basically the same thing, just more visual on BitMEX.

An isolated margin is when you isolate the certain value of your portfolio that can be leveraged for a leveraged position. Let’s say you’ve got 1 BTC as balance. With isolated margin, you can isolate 0.1 BTC from the 1 BTC and apply 1–100x leverage to the isolated margin position. Your maximum loss is now the isolated margin if you get liquidated.

Bitmex’s one contract is equal to $1, but Deribits one contract is equal to $10.

One useful thing that Deribit lets you do is to measure your order size in bitcoin by first typing how many BTC’s you want to enter the trade with and then it shows how many contracts that will make, unlike in BitMEX where if you, for example, wish to short 15 BTC’s, you will need to edit the number of contracts until it reaches your desired value in Bitcoin. That saves a lot of time when you are in a rush to enter the trade fast.

The minimum order size on Deribit is one contract ($10).

The minimum order size on BitMEX is one contract ($1).

FEES

Not that long ago, Deribit had 30% cheaper maker/taker fees for Bitcoin Perpetual contracts than BitMEX and everyone was saying how Deribit has low fees. Then they raised them and right now, they are the same as BitMEX’s fees:

Maker Rebate: 0.025%

Taker Fee: 0.075%

If you don’t already have an account on BitMEX, to be able to save 10% on fees, which eat a serious amount of your portfolio when you sum it all up, I recommend you to open it using this registration link: http://www.bitmex.com/register/5hjsJw which will give you 10% off all fees for 6 months.

The similar kind of Deribit account I negotiated for you, so you must register a new accout using this link: https://www.deribit.com/reg-2515.4121

FUNDING RATE

BitMEX basically looks at how far out of whack price is on a minute by minute time frame, and averages that value out over an 8 hour period to come up with their funding rate. Only the individuals currently holding a position at that 8 hour mark are paying or receiving the funding rate at BitMEX, causing price to sometimes become distorted as people rush to enter positions and capitalize on ‘free money’ or you get others trying to exit their positions right before this 8 hour mark to avoid having to pay the funding rate.

Bitmex also always defaults to starting at a 0.01% funding rate — so the longs always pay the shorts by default if nothing happens. It’s like a built-in interest rate on holding a long Bitcoin position on their exchange.

Deribit calculates the funding rate by taking the measurement of the funding rate (how far their price is out of line from index price) multiple times per second and people in long and short positions are being paid/making payouts at all times as the funding rate demands as the price gets too low/too high. It is happening constantly, always working to push the Deribit exchange price closer to the Index price.

This avoids the people piling into positions/trying to rapidly exit positions at the 8-hour mark that takes place on BitMEX, which avoids price distortions that that can cause. It also doesn’t allow people to simply exit positions to avoid payment/enter positions only for enough time to collect payment.

Deribit also doesn’t have the default 0.01% funding rate as BitMEX has, it simply adjusts at all times as necessary as price moves, but on the other hand, Deribit takes 0.03% Liquidation Fee for the liquidation and those extra fees are an income for the insurance fund.

LIQUIDATION AND THE INSURANCE FUND

BitMEX is very shady when it comes to offering fair trades without cheating and is especially well known for counter trading their own clients even though they never admitted it (what a surprise, right?). I am pretty sure every trader that was ever in any BitMEX trade and wanted to change their position while the big move is happening got BitMEX’s „Order Submission Error“ and was unable to do anything besides watching their position being liquidated.

BitMEX’ infamous ‘System Overload’ message which funds their insurance fund like crazy and the reason why so many users got liquidated and lost their entire positions.

In other words, what that notification basically says is „Please be patient until we are collecting all the money from our client’s liquidations. Try again later.“. If you want to exit your trade at that moment, change the stop loss or change the leverage in any significant price action your hands are tied.

You can look at your ROI and think in your head „This is the LAST time I am trading on this scam exchange!“ But then, tomorrow you see how alluring the leveraged trade looks and you enter the trade again hoping for making a profit.

Not to mention their sudden, unexplained spikes up or down just to liquidate bulls or bears is their best way of making money. They earn on their client losses. Sounds harsh but it is true.

If BitMEX is able to liquidate the position at better than the bankruptcy price, the additional funds will be added to the Insurance Fund which steadily grows every month. If BitMEX is unable to liquidate the position at the bankruptcy price, BitMEX will spend the Insurance Funds on aggressing the position in the market in an attempt to close it.

Just in March 2018. they had around 6.000 bitcoins. Today, at the end of 2018., they have a gleaming amount of almost 20 thousand bitcoins in their Insurance fund. Yes, twenty thousand bitcoins.

BitMEX Insurance Fund at the end of 2018.

What is Deribit’s Liquidation Policy?

Deribit works with the auto-liquidation system. That means that as soon as you don’t have enough equity to maintain your position, a part of your position will be closed in the market. At this moment the liquidation orders sent to the market are up to 10% of your position or a minimum of 500 contracts of $10 each.

This happens in real time at a speed of 1 round per second, such that the maintenance margin of an account can only be higher than the margin balance of an account for a fraction of a second. (provided there is a liquid market that makes it possible to liquidate at all). As soon as maintenance margin is again lower than equity, liquidation will stop.

And, as I said earlier, they also charge the Liquidation Fee of 0.375% for the Bitcoin Perpetual Contract of which 0.3% goes to the Insurance Fund. They also earn on their client losses but, so far, they have not been accused of the price manipulations as BitMEX had. That, of course, doesn’t mean they will not start doing unethical work in the future but we can hope they won’t.

Deribits Insurance Fund currently has 54 BTCs.

Deribit’s insurance fund is significantly smaller than BitMEX’

LIQUIDITY

Liquidity is one of BitMEX’s biggest allies. BitMEX it is the most popular exchange for leverage trading and therefore home for many, many traders. BitMEX has 24hour volume of around 746,725 XBT (Bitcoin). We took today’s volume just to give it as an example of their volume. That amount is subject to change and sometimes is smaller, sometimes bigger but the point is it is huge in comparison with Deribits volume.

Deribit, however, has 24hour volume of around 17,387 BTC, which is 90% less than BitMEX.

We do not know, how big the percentage of wash trade is present on BitMEX though.

MOBILE APP:

Here Deribit wins. BitMEX currently does not have a mobile app.

Deribit has a mobile app for IOS and Android, and here is how it looks: