According to recent statistics, crypto-derivatives trading makes up 90% of the trading volume, in notional value, in crypto trading market – comparing with spot trading. The domination of crypto-derivatives prove this kind of leveraged instrument is playing a fundamental role in price discovery process of cryptocurrency market. And it gradually becomes an important piece in a mature and well-balanced marketplace.
Currently, the two largest digital asset exchanges that provide crypto-derivatives trading, OKEx and BitMEX, hold a decisive position in crypto-derivatives market and each has its own competitive edge. Recently, a blog posted by Hasu, an independent crypto researcher, stirred up a heated discussion regarding concerns of trading in BitMEX. Since every decent trader would wonder the best trading venue on these highly-leveraged instrument, this article is going to compare the two largest crypto-derivatives exchanges in the world in virtues of Hasu’s opinions.
The BitMEX’s bitcoin perpetual swap alone is now trading at around $1-2 Billions notional per 24 hours, while OKEx’s BTC futures is currently trading around $1B per 24 hours.
|24H trading volume (USD)||OKEx||BitMEX|
Aside from Bitcoin, OKEx showed a better volume in other altcoin futures trading comparing with BitMEX.
Market depth showed similar distribution as well. Whilst BitMEX’s bitcoin swap is showing decent market depth, the orderbook is relative thinner for altcoin futures on OKEx.
BitMEX has been known for its fast matching engine and its well-documented, feature-rich API. Comparably, OKEx’s API documentation is apparently less clear and somehow misleading to new traders. Trading on OKEx requires on time in terms of API development and hands-on experience. Yet OKEx’s API has greatly improved its communication and endpoint design in the updated version of V3 API.
Yet the fast, KDB+ based matching engine of BitMEX has its apparent trade-off and shortcoming as well. Despite BitMEX’s claim on serving high-frequency trading, the platform seems experienced overload issues quite frequently (sometime 2-times a day), especially in time that the market is volatile – the same time that is so critical for traders to login and flat or amend their heavy leveraged positions. OKEx comparably handled capacity and scalability much better than BitMEX – though their matching engine is slightly slower. As a trader who are running market making strategies, OKEx’s server seems response quite healthily for us to cancel and re-post orders during volatile market – for most of the time.
Hasu’s blog has already fully illustrate the proprietary ‘market-making’ bot that is suspiciously trading against its customers. The market-making ‘bot’is especially obvious during the time when BitMEX’s platform is experiencing server overload issue. While most of their customers cannot access to the account, the orderbook is still functioning. We can only expect BitMEX offer some kind of superior gateway to a selected group of user -most likely including the BitMEX themselves – to potentially gain unfair advantage over the others.
That raised serious allegation to BitMEX’s client in respect to market integrity, especially you know the Exchange is equipped with proprietary trading desk with an incentive to trade against their client. And as a client you can never beat an Exchange in terms of speed, information asymmetries, and front running. And BitMEX could be done so easily by triggering a series of cascade liquidation amidst the server overload.
In the traditional market, relatively speed and data advantage could be gained by collocated server(s) closer to Exchange’s matching engine with dedicated network configuration and setup. Exchange could also offer premium type of data with richer information and faster market data. However, traders have to pay a heavy price on these premium features and the price tag are very transparent. It is questionable if BitMEX is selling these kinds of premium access to their friends or internal traders and that might ultimately deteriorate market fairness and integrity.
OKEx comparably does not have such questioning. Their market did stop quite completely while their server has problem. Despite its reputation on potential wash-trading, OKEx’s futures market is known to be liquid, clean and OKEx is not trading against their clients.
BitMEX is found by a group of professional traders therefore it’s understandable that the platform is nicely designed as a trading venue for professionals from user interface to API architecture. From product perspective we can feel BitMEX is an API-oriented platform – most of data point are recorded in database and retrievable via their API. And that is the reason why the professionals love to start building their crypto trading strategies in BitMEX first. Yet the shortcoming is also obvious in a market where there are only one type of market participants – the market is very sticky and competitive.
Whilst in OKEx is meant to design for retail traders from day 1 – the day back when they were called and migrated from OKCoin (one of the biggest crypto-exchange in China). OKEx put many efforts in building their web and mobile trading interface for manual traders. OKEx’s users have a vibrant retail trading ‘groups’ scatting in telegram and wechat discussing market trend and signals. Their marketing team occasionally launch trading campaign targeting retail and manual traders. Per market microstructure perspective, OKEx’s futures look a lot less efficient than BitMEX.
BitMEX, on average, is charging a net of 2 to 5bps, whilst on OKEx is charging on average a net of 1 -2bps to the market. OKEx has an undeniable advantage on fees over their competitor.
Commission fee on BitMEX
Commission fee on OKEx
The high taker fees on BitMEX makes running active arbitrage strategies almost impossible. While OKEx‘s fee is lots more balanced resulting a variety of strategies become feasible on OKEx market.
BitMEX’s founder is known to be a true believer of original bitcoin. The idealism reflected to BitMEX’s platform in result client can only deposit and trade in bitcoin for all listed instruments. For instance, if you would like to hedge your EOS spot exposure on BitMEX, you have to convert or arrange BTC to open a short position in EOS futures. This added extra complexity in calculation if you are looking for a hassle-free hedge. While OKEx’s futures are traded and settled in the underlying – EOS futures is margined, traded, and settled in EOS – it is easier for trader to handle their maths on OKEx.
Aside from this, OKEx is also a handful exchange in the world that offer both spot and futures with sheer liquidity. You can trade at leverage and short liquid token pairs on spot market. Trader can run a large variety of trading strategies just on OKEx. For instance, index arbitrage by utilizing the cheap funding facilities on OKEx is a solid and via strategy.
BitMEX and OKEx are both excellent derivative platforms. Their strength and weakness are as well obvious. Despite its reputation for OKEx on alleged clawback, wash-trading and societal loss, OKEx does deserve more credit on its vision of building a complete crypto-finance ecosystem, stability of their API and platform, and well-balanced market profile. As a trader it is always a fun place to trade and hedge token exposure. BitMEX also deserves more credits on its commitment on serving professional crypto traders, despite the platform showed difficulty in self-proved its integrity and fairness. We are looking forward to seeing the healthy competition of the two largest crypto-derivatives exchanges to benefit the crypto industry.
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