It has been an exciting year for bitcoin futures platform BitMEX. They have made some system changes which have launched them to the largest bitcoin futures site outside of OKCoin. This was after they had struggled in early 2015 with lower leverage products that did not quite catch on. In addition to speculation and hedging bitcoin futures contracts, BitMEX is branching out to allowing counterparty speculation in traditional markets like the Chinese A50 FTSE Index. Get a 10% discount on fees for 6 months trading these products by signing up using this link.
They also have an exclusive line of products from ETH Ethereum speculation using only bitcoin to now trading the China index! This is one of the more novel use-cases for bitcoin, to allow international investors to access markets that normally would not be available to them.
We found the new developments at BitMEX really interesting so we asked to have a discussion with Arthur who was kind enough to agree to a Q&A, which you can read below:
Bitcoin Futures Guide: Futures vs. Forwards: why does BitMEX call them futures when they aren't centrally cleared? Do you find the distinction to be substantive or academic?
Arthur: The first Bitcoin futures exchanges that started in 2010 technically offered forwards, but they called their product futures contracts. By the time we launched in 2014, traders knew what a Bitcoin future was and to call it something different that is technically correct would confuse them.
Bitcoin Futures Guide: When will BitMEX be able to serve US traders? When you stopped serving US traders, how much of your customer base was lost? Do you consider them to be a significant part of the global bitcoin speculation/hedging industry?
Arthur: We will serve US customers when the money and time spent getting the proper licenses is worth the revenue. Currently the majority of traders are located outside the United States.
Bitcoin Futures Guide: How has it been to pivot from an exchange focused on low leverage guaranteed-settlement contracts to a higher leverage more Chinese-style socialised loss system? Is this just the reality of the market now?
Arthur: We have grown exponentially since we pivoted to focus on retail traders. Our 100x daily Bitcoin / USD futures contract has become a flow monster. The reality is that people are using Bitcoin as a means of speculation on digital currencies and other financial assets. The commercial uses of Bitcoin are not large enough to warrant a liquid hedging market.
Bitcoin Futures Guide: Have you been disappointed with the lack of success in the hedging series of contract (XBU)? Why do you think there is such little interest in "real" bitcoin hedging products? Will bitcoin ever mature, as a market, to this level?
Arthur: We started BitMEX on the premise that institutional traders would flood into the Bitcoin market and require traditional derivative products. That was an incorrect assumption. We aren’t disappointed; we are happy that we were able to pivot our business and become successful before we ran out of money. There is little interest in traditional derivatives because the majority of Bitcoin users and traders want highly leveraged speculation products. There will be a place for traditional products, but it might be a few years before there is enough demand to create a liquid market.
Bitcoin Futures Guide: As BitMEX has grown, have you faced any increased risk of attacks related to hacking or DDoSing? Has your security scaled along with your volume?
Arthur: As we grow the risks to security grow as well. Our CTO and COO take security very seriously. In terms of customer funds, we use multi-signature wallets throughout the exchange and process all withdrawals manually. We conduct real-time auditing of the entire exchange, and if 1 satoshi is missing or not properly accounted for, the exchange will suspend. This ensures that any mistake or bug is caught well before it snowballs into a problem that could threaten the existence of the exchange. Our CTO takes the security of our web services very seriously. We operate a bug bounty program and continually patch our web services to cover any discovered vulnerabilities.
Bitcoin Futures Guide: You've now developed a fully functional exchange with advanced order types and a really dynamic and smooth UI and full API. It is by far the best bitcoin derivatives platform on the market now in 2016. This is a great achievement which took the better part of 2015 to complete. What is your focus now for the rest of the year, considering the platform is nearly fully developed at this point?
Arthur: The focus is liquidity. Our goal for 2016 is to reach total daily trading volume of $100 million. That would be a 25x improvement from where we are today. We will get there by offering new and innovative access products. Our BitMEX China A50 Index Futures contract is an example of that. BitMEX’s goal is to allow anyone, anywhere, the ability to trade anything with Bitcoin.
Bitcoin Futures Guide: Could you tell our readers who may just be more into bitcoin rather than traditional financial products why they should be interested in trading your new China A50 Index product?
Arthur: China is the 2nd largest economy in the world with one of the most volatile and important stock markets globally. However, it is almost impossible for non-Chinese and Chinese retail investors to trade China with leverage. Using the BitMEX China A50 Index Futures contract, users with as little as 0.04 Bitcoin can trade a product that tracks the 50 largest Chinese companies by stock market capitalisation. This product trades 24/7 and is accessible to anyone with Bitcoin.
Bitcoin Futures Guide: Any final notes or announcements or anything you'd like to be included?
Arthur: We have just launched a 48 hours Bitcoin / USD futures contract with 100x leverage. This contract becomes the daily contract after 24 hours. It is suitable for traders who would like to roll their daily Bitcoin futures contracts and keep a constant exposure.
There you have it. Really impressive what the guys at BitMEX are doing. They recently pushed some great new UI features which make trading on their platform easier than ever too, see them here.
This is a really exciting year for the bitcoin derivatives industry. Learn more about how to trade bitcoin futures here, and get started with trustworthy teams like BitMEX now!
This is a really exciting year for the bitcoin derivatives industry. Learn more about how to trade bitcoin futures here, and get started with trustworthy teams like BitMEX now!
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