BitMEX, the big boys playground. I’m sure you’ve probably heard of it by now. It is the biggest cryptocurrency margin trading platform.
If you’re new to the crypto space or trading in genral, it might not tell you much.
So what exactly is BitMEX?
BitMEX stands for Bitcoin Mercantle Exchange, it was founded in 2014 in Hong Kong by three bankers, Arthur Hayes, Samuel Reed and Ben Delo.
You don’t trade currencies on BitMEX, you trade futures contracts, which basically means you bet whether the price of Bitcoin or other currencies will go up or down. If you think it’s gambling, well it’s not, there is risk involved just like at everything, but it’s not gambling as long as you know what you’re doing.
As of right now BitMEX is the biggest cryptocurrency margin trading platform ever built. It has an average daily volume of almost $2 billion, which is almost 300,000BTC daily trading volume.
What is margin trading?
Margin or leverage trading is when you borrow money from the broker to open a position. The way it works is like this, let’s say you have $1,000 in your trading account. On BitMEX you have a choice of using a margin anywhere from 1x to 100x.
What this means is that you can open a position worth 1 to 100 times larger than you can afford. If you chose to use a leverage of 10x for example, you’d have the buying power of $10,000, meaning – you could buy $10k worth of bitcoin or other currency with just $1,000 of your own money.
Now lets see why it’s a good idea to use leverage on your positions.
Right now the current price of Bitcoin is $6441, so $1,000 worth of Bitcoin equals to 0.1555BTC, if you were to use a 10x leverage you would be able to purchase 1.555 Bitcoin.
Now let’s say the price of Bitcoin goes up to $7000, that is a 8% increase, so if you take the leverage into account, that percentage goes up to 80%. Which means you just made $800 on your $1000 investment. Not bad, right?
Don’t forget it was only a 10x leverage, BitMEX allows you to use as much as 100x which in this case you would make 800% ROE on your investment. This is why so many traders use leverage for their trading. It allows you to use more money than you currently have and make much bigger profits than if you were to just use your own budget.
But there is a bad side to this as well. You can make money 100x faster, but you can also lose money 100x faster.
Because you’re using more money than you have there is something called a margin level / margin call, on BitMEX it’s just called liquidation price, which as the name suggests it’s a price at which your position gets liquidated. Why you might wonder, it’s because you are pretty much risking the money that the broker gave you and of course the broker doesn’t want to lose any money so that’s why there is a liquidation level in case your position goes in the oppisite way that you’ve bet, if you the price fall below this level you lose all the money that you used for this trade.
Using the Bitcoin example I used before. Let’s say you purchased a long position on Bitcoin worth 1.555BTC at a price of $6441 with a leverage of 10x. The liquidation price for this position would be set at $5883. This means that if the price of Bitcoin falls below this price, you will lose all the money you have put into this position.
The liquidation price depends on the leverage used. Higher leverage means smaller liquidation price. If you used 100x leverage for the same position, your liquidation price would be at $6409. As you can see there is not much room for error if you want to use higher leverage, that’s why if you are a beginner high leverage is not advised.
BitMEX leverage and liquidation levels
BitMEX offers different range of leverages for different cryptocurrencies, Bitcoin has the highest range where you can use anywhere from 1 to 100x leverage. Where as Ethereum only allows leverage of up to 50x. Below you can see the leverages you can use for each of the avaiable currencies on BitMEX:
- Bitcoin: 1x / 3x / 5x / 10x / 25x / 50x /100x
- Ethereum: 1x / 3x / 5x / 10x / 25x / 35x / 50x
- Cardano : 1x / 2x / 3x / 4x / 5x / 10x / 15x / 20x
- Bitcoin Cash: 1x / 2x / 3x / 4x / 5x / 10x / 15x / 20x
- EOS Token: 1x / 2x / 3x / 4x / 5x / 10x / 15x / 20x
- Litecoin: 1x / 2x / 3x / 5x / 10x / 25x / 33.3x
- Tron : 1x / 2x / 3x / 4x / 5x / 10x / 15x / 20x
- Ripple: 1x / 2x / 3x / 4x / 5x / 10x / 15x / 20x
Now let’s look at the liquidation levels for leverage of up to 100x on Bitcoin, you can assume the numbers are pretty much the same for each of the currencies.
- 1x leverage – 49.87%
- 3x leverage – 24.71%
- 5x leverage – 16.3%
- 10x leverage – 8.66%
- 25x leverage – 3.37%
- 50x leverage – 1.46%
- 100x leverage – 0.5%
What does this mean? It means that the percentage you see for each leverage is the liquidation percentage, if the price moves this percentage in the opposite direction than your position you will lose all the money you’ve put into that position.
As you can see there is not much room for error with high leverage, Bitcoin moves few percent up or down every single day so if you’re not experienced enough and you don’t know what you’re doing, you’ll probably lose money. That’s why I suggest you stick with the lower leverages.
BitMEX trading platform
In this section of the article I will review the entire inferace you see when you first login to BitMEX, it might look a little bit complicated for a beginner so I’ll try to describe each section as best as I can.
This is the main menu of BitMEX. Strarting from the left:
Trade – this is where all the trading happens and this is the current page that you see on the screenshot above.
Account – this is your wallet page, you can deposit or withdraw your Bitcoin from this page. BitMEX only accepts deposits in Bitcoin and therefore Bitcoin serves as collateral on trading contracts, regardless of whether or not the trade involves Bitcoin. Once you deposit Bitcoin here it will be converted into XBT which is the BitMEX’s version of BTC. On the account page you can also check your current balance, open position, margin used, transaction history and you can use the sidebar of the left to change your settings or preferences etc.
Contracts – the contracts page is where BitMEX describes each of the trading contracts avaiable on their site, they go into the details of how they, how they are calculated, what margins are allowed etc. If you’re new to BitMEX make sure to read what they have to say to you have at least a basic understanding of how these contracts work.
References – this page is like a beginners guide, it shows you how to get started with BitMEX and tells you how everything on the site works.
API – APIs are mostly used for a third party to have access to your account, do not give your API key to an unauthoriezed party. If you’re using a bot or other website for analysis or something like this, make sure it’s a trusted party before setting up the API key.
Next on the right you see a Total and Avail, this is where you can see your total balance (including your open positions) and your available balance (minus your open positions), as I stated above BitMEX displays your Bitcoin as XBT instead of BTC.
Next you see this megaphone looking icon, that’s where all the notifications are shown.
Next to you see a flag, that’s where you can change the displayed language. As of now BitMEX only supports English, Chinese, Russian, Korean and Japanese.
Next is the support page where you can submit a support ticket to BitMEX or check out their knowledge base page where they have answers to most of the common questions.
The last thing on the right is where you can see your user name and if you click on it a window with a few options shows up. You can change the display currency there, you have a choice between XBt, uXBT, mXBT and XBT. You can also chose a basic or advanced dashboard layout or simply change your theme from light to dark.
Those are all the available currencies you can trade on BitMEX and all the available contracts. As you can see there are many different tabs under the Bitcoin tab, there is a Perpetual (100x), DOWN Sep 21, Up Sep 21 etc. Those are the contracts you can trade for Bitcoin. I advise you stick with perpetual contracts only, these contracts are the easiest to trade, they have no expiary dates etc. The other contracts you see are time based and they have an expiray dates and overall they are harder to trade.
Also in this section on the very bottom on the right side you can see a “customise” dropdown menu, you can use this to add or remove any section of the dashboard that you want or down want to see. As you can see on the image above each section has an “x” in the corner to remove it from the dashboard, if you remove it by accident you can bring it back in the customise tab. When it was my first day on BitMEX I accidently removed the chart from my dashboard and it took me like 10 minutes to figure out how to bring it back so yeah haha, there you go.
If you’re thinking of using BitMEX I assume you already have some sort of knowledge about limit or market orders or stop loses so I won’t go into that. But if you look at the Buy and Sell buttons you’ll see a few things. On the image on the right you on each button you see a “10000 @ 63452“, this simply states how many contracts you are about to buy and at what price.
Below there are few things that might confuse you. I’m gonna start from the beginning, if you look at the leverage, I selected 100x. This is the leverage that I want to use for this transaction and as you can see I want to purchase 10,000 contracts.
Now if you look at the Available Balance I only have 0.0001 XBT which is not enough to open this position but I’m only doing this for the demonstration’s sake.
Above there is the Order Value which in this case is 1.5743 XBT, this is the amount of Bitcoin you’re buying for the price of 10,000 USD.
Now the important part, the Cost which on the example on the right is 0.0181 XBT. This is the equivalent of $100, this is how much of your own money you will have to invest in order to open this position. You can visualise how the leverage works now, for $100 I can open a position worth $10,000.
Section four on the image above shows your current open position and your current leverage for this position. The leverage slider you see is also used to select your desired leverage to open a position. The amount of contracts idicates how large your position is and the ROE is the Return Of Equity which is pretty much your current profit or loss percentage. ROE displayed isn’t always so accurate because this is calculated using the BitMEX’s average market price and not the current price on BitMEX, if you look at section 6 on the image the graph has a blue moving average on it. BitMEX using this average to calculate your ROE, but as you can see the current price of XBT on BitMEX is a little bit lower than that so your ROE in reality is a little bit smaller. In section 6 I will describe more in details on why they do this.
This is an orderbook just like any other orderbook on other exchanges. It shows you all the buy and sell orders and the amount of volume there is for each price level. This might help you indicate whether the price will move up or down depending on the amount of volume on either of the sides.
BitMEX takes their chart from TradingView which is a very advanced platform on which you can analysie you graphs etc. But the chart that is displayed is not a Bitcoin chart, it’s a XBT chart specifically used for BitMEX, you can search for it on TradingView as “Bitcoin / US Dollar Perpetual Inverse Swap Contract” or just “XBT / USD ” and search for BitMEX in the drop down that shows up. Anything you can do on TradingView you can do in BitMEX which is very helpful if you do day trading.
One thing you can note about the chart is that blue moving average. This is the average price of Bitcoin taken from Bitstamp and GDAX. BitMEX uses this to prevent manipulaton on their platfrom and prevent their users from having their positions liquidated. Let’s say you have a short position open for Bitcoin and your liquidation price is at $6300 and the price of XBT dropes to $6290 but the moving average price is at $6310 your position would still be safe and you wouldn’t get liquidated, the only way you get liquidated is if the Bitcoin price on BitMEX and the moving average drops below your liquidation price.
This is the depth chart which pretty much display the information from section 5 but in the form of a chart so you can have a better read on the size of the orders at different levels.
This section shows you all the recent trades that were made. It shows you how much someone purchased or sold contracts and at what price. It’s a good indicator to see if any large orders came in or not (I’m talking about those orders in millions) as this might show you if someone is trying to push the price in a certain direction. All the small orders between 1-999 contracts are usually made by bots so don’t worry about them too much.
In this section you can check out your current open positions, closed positions, active orders that have not been filled yet, your stop limits, fills and order history. It might look a little bit confusing if you look at it for the first time. So let me describe the open position you see on the above image.
- Symbol – the contract you have purchased. The green strip on the left indicates that it’s a long position, it’s red for a short position.
- Size – the amount of contracts purchased.
- Value – the amount of contracts purchased in Bitcoin.
- Entry Price – the price at which you have purchased the position.
- Market Price – this is the average market price for Bitcoin which is the average taken from Bitstamp and GDAX and it’s the moving average price I described earlier on the chart.
- Liq. Price – the price at which your position will get liquidated.
- Margin – this is the leverage used.
- Unrealised PNL (ROE%)– this is the profit or loss on your positions in Bitcoin with a percentage next to it. As you can see I managed to catch a 20% profit on this $1 test position haha. It’s easy to make profits like this with 100x leverage, but it’s not for beginners.
- Realised PNL – this is the total amount of fees that will be taken away once you close your position.
- Close Position – Here you can set a price at which you’ll close your position or you can just click the Marketbutton and BitMEX will put your position up for sale at the market price.
As the name suggests, it’s a Trollbox. For trolls. Not for you. Most people there have no idea what they are talking about and they will mess with your head, I always leave it closed. Just stick to your own strategy or your own analysis and forget that chat even exists. Unless you have any questions about the platform. Usually there is at least one moderator online that works in the customer support and he or she will answer any questions you might have.
You can clearly notice after this review, that BitMEX is not a platform for any amateur trader, definitely not for someone who is new to cryptocurrencies. BitMEX is a platfrom for experienced traders only. If you’re new to the crypto space just stick with an exchange like Binance.
Bitcoin is a very volotile asset so when you want to trade it with a margin you have to be extra careful otherwise it’s very easy for people to blow their entire accounts.
You also have to be aware of the fact that you are not buying the underlying asset and are entering a derivative trade. This is not the platform that you will use for any sort of “buy and hold”, you are only buying a contract.
With that being said, for those traders who are familiar with margin trading, risk management and technical analysis, then BitMEX is one of the best options.
They have an advanced security, a very responsive customer support team who you can chat to 24/7 in the trollbox and a trading engine that is almost unrivalled.
If you are going to use BitMEX, make sure that you are aware of the risks that come with margin trading and of course, never risk more than you can afford to lose.