BitMEX vs FTX Review: Which margin exchange is better?
If the roller-coaster ride of the super-volatile cryptocurrency markets isn’t exciting enough, you can pile on more risk by using margin. FTX and BitMEX both provide margin trading, also known as leverage. Let’s take a look at these exchanges and compare what they offer.
Background – Introduction to Derivatives Trading
The idea is simple. Instead of buying 1000 dollars of crypto, you can use your 1000 dollars to put a deposit down on 10,000 dollars worth. This is 10x leverage. You could make ten times as much profit in a trade, but you could also lose ten times as much.
Typical Wall Street stocks move by a fraction of a percent each day, so leverage makes sense. You can boost a 0.5 percent price change into a handsome 5% profit using 10x margin trading. My options trading mentor loved pointing out that, “A top 100 stock will make it onto the TV news if its share price moves by five percent in a day. If it moves ten percent, it’ll probably be the headline.”
Here’s the rub. Just today, several cryptocurrencies I hold have moved by double percentage figures. If I had 10x leveraged positions in the wrong direction, my entire holdings of these tokens would be gone forever.
This is known in the business as a margin call, or getting ‘REKD,’ and it’s a horrible experience. Nothing hurts more than having a flash crash wipe out your entire position, only for it to shoot back to where it was moments later. Cryptocurrency prices are dangerously volatile.
You can, however, speculate on both a price rise (a long position) and a fall (a short position). A long position is easy – simply buy a contract for the leveraged asset you like. In the traditional method of creating a short position, the market maker borrows the asset and sells it at the market price then writes you a contract. Your obligation or option is to re-buy the asset and return it by the end of the contract. If the price goes down, you can pocket the difference. If it goes up, you need to pay the difference.
The leverage is created by having a large amount of an asset in each contract, but only demanding a small deposit to buy the contract.
BitMEX vs FTX – Trading Experience
Both are great trading platforms from a look and feel perspective, though BitMEX is a little more hectic. FTX gets my vote when I use one of the night modes, but personalizing your perfect trading window is super easy on BitMEX. There’s not much in it, but FTX looks more sophisticated.
The maximum leverage is 100x on BitMEX and 101 on FTX. Again, FTX has notched it up by 1, but using the FTX margin is not intuitive. You input how much you’d like to borrow and it will figure out the leverage requirement based on your account size. This could lead to mistakes for the beginner.
BitMEX works the other way round and has a sliding bar to define the precise leverage rate you want. This protects the trader from entering a hugely leveraged position by making a typo. Everything else is comparable, but these are billion-dollar online businesses, so you’d expect them to get the user interface right.
Available Contracts and Coins
The main derivative trades are Perpetual Contracts, Options Contracts, and Futures Contracts. Derivatives were originated as a hedge against unpredictable markets, a kind of insurance policy from back in the day. Here, they are being used to create leverage.
To oversimplifying things –
- Options contracts need not be settled unless the holder wishes to, but there is a time limit.
- Futures contracts have to be settled by both parties at an agreed time.
- Perpetual Contracts are like Futures contracts that run indefinitely, or until they are settled. They trade like a leveraged version of the spot market.
BitMEX provides perpetual swaps both for BTC and ETH, with standard futures contracts for BCC (Bitcoin Cash), LTC (Litecoin), ADA (Cardano), EOS, TRX (Tron), XRP (Ripple), Doge, DOT (Polkadot), Link (ChainLink), XLM (Stellar), and UNI (Uniswap).
FTX has these and more options, with dozens of 3 x leveraged tokens in perpetual swap contracts. Between the perp swaps and leveraged tokens, they have over 150 futures markets to choose from. You can also buy contracts for indices (aggregated groups) of altcoins. FTX wins this one easily.
Like regular trading, you will be charged for both buying and selling assets at the market price. Unlike regular trading, BitMEX orders placed above the lowest sell price or below the highest buy price will be paid a ‘maker fee.’ This quirk is to encourage traders to place orders early, increasing liquidity.
Their basic fees are as follows –
- BitMEX charges a 0.075% taker fee and pays a 0.025% maker fee.
- FTX charges a 0.07% taker fee and a 0.02% maker fee. There’s a 0.1% fee for minting and redeeming their leveraged tokens, with a 0.03 daily management fee.
Again, it seems FTX looked at what BitMEX offers and added a bit on top.
Deposits & withdrawals
This is a major win for FTX where you can deposit funds in stable coins like USDC, PAX, TUSD, and Tether. FTX also supports Bitcoin, Ether, Litecoin, and Bitcoin Cash. BitMEX only deals with Bitcoin, and withdrawals are made just once per day. FTX allows you to withdraw your funds at any time.
Security and Trustworthiness
Both BitMEX and FTX have solid reputations and have never been hacked – yet. BitMEX has a longer history, but they each have very profitable reputation-based businesses to protect. I am sure they are both impeccably trustworthy, but the real question is how secure are they? Bear in mind that there is no financial oversight or regulation you can access if things do go wrong.
Started in 2014, BitMEX has 7 years in the business compared to FTX’s 4. FTX is backed by Almeda Research, a well-respected trading infrastructure provider. They both look like very solid platforms. I wouldn’t entrust my life saving to either, but for small speculative amounts, I would have no hesitation about using them both.
FTX’s most highly leveraged trades incur premiums on their fees. These are sent to an insurance fund. BitMEX uses the profits from its Liquidation Engine to top up its insurance fund. But don’t be misled.
These insurance funds do not protect you from going broke should a leveraged trade go against you. These are to prevent ‘Claw Back’ when other people’s positions go bust.
There is no KYC requirement on BitMEX but FTX has mandatory KYC for withdrawals over $1000.
Know Your Customer rules are an attempt to prevent criminal activity such as money laundering. US regulations require financial services companies to do basic identity checks before individuals can use their services. This is typically a home address confirmation, a linked bank account, and an official photo I.D.
A cynical person might think that it’s used by the government to track exactly what everybody is doing with their assets. Either way, BitMEX wins this one if you are concerned about privacy.
Available in the US?
Neither BitMEX nor FTX are available to US citizens. but don’t despair, you can still find leveraged trading on Kucoin. You could use a VPN or Proxy Server to spoof your I.P. address and access BitMEX from a ‘different region.’ Be warned, the US authorities would take a very dim view if they found out.
Native Token Availability and Benefits
Exchange tokens have become a big deal. They have various uses, but accessing reduced trading fees is the most common. FTX has its native FTT token which also trades on other major exchanges, such as Binance, Huobi, CoinEx, BitMax, and Bitfinex.
If you bought some BNB (Binance Coin) to reduce your trading fees back in 2017, you will have seen the value increase 60x. This reflects the success of the platform. As the network grows, so does the value of the exchange token. FTT is currently trading at $55 per token, up from $6 at the start of the year.
Other benefits of holding and staking FTT tokens include increased referral rates, maker fee rebates, extra voting rights on FTX governance issues, enhanced airdrop rewards, and limited free withdrawals for ERC20 tokens.
Customer Support and Education
You can get an explanation of all BitMEX trading features here. It’s pretty comprehensive and is tailored for BitMEX users. FTX’s version is found here and is also excellent. It breaks down all aspects of margin trading into fine detail.
You can email FTX support directly, but there are also multiple Telegram communities covering all major languages. They have an active presence on most social media platforms.
BitMEX also has Telegram groups and a social media presence on Reddit, Weibo, and YouTube. You can email support through the email widget on their website. There is also a BitMEX knowledgebase page for FAQs.
A Final Word of Caution
I believe margin trading on crypto is too risky, but if you are keen to try I would advise learning about the topic before you start. Crypto exchange platforms will often have a short competence quiz you must pass before margin trading, but the answers are all available online. It’s not a serious attempt to prevent novice traders from getting hurt.
I won’t go any deeper into derivative contract types as there are so many variations on this simple theme.
Many of us fondly remember this year’s Gamestop short squeeze. That was when short-selling came to the public’s attention.
What about the financial crash of 2008, with its Collateralized Debt Obligations (CDOs) and the Credit Default Swaps (CDSs)? People have less fond memories of that debacle. As I mentioned previously, there‘s a good reason there are movies called “The Big Short“ and “Margin Call.”
Indeed, financial history is littered with the corpses of those who tangled with derivatives they didn’t fully understand. They were all trying to make a quick buck. Again, do your due diligence, and please don’t get REKD.
In case you want to compare with other exchanges, check this out:
- ByBit vs FTX: Which Exchange Is The Right One For You?
- FTX vs Binance
- FTX vs Coinbase
- BitMex vs Binance Comparison
- BitMex vs ByBit – Comprehensive Exchange Comparison
- BitMex Alternatives and Competitors
CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com