BitMEX is a peer 2 peer (p2p) cryptocurrency trading platform that offers users the ability to trade with leverage or margin of up to 100X. The BitMEX cryptocurrency exchange uses Bitcoin as the base currency. This means all profits and losses are calculated and paid in Bitcoin, even while purchasing or selling altcoin contracts. BitMEX is a crypto-only exchange which means users can not use “Fiat” currencies for funding accounts, deposits, or withdrawing.
XBT Perpetual Contracts
A Perpetual Contract is a derivative product that is similar to a traditional Futures Contract, but has a few differing specifications:
The most traded asset on the BitMEX exchange is the Bitcoin Perpetual Contract – XBTUSD
These contracts are created to mimic a margin-based spot market, with the goal of trading close to the underlying reference index price. The main determining factor in spot price is a mechanic called “Funding”.
When trading these types of leveraged positions a trader must consider the following:
- Position Marking – These use the Fair Price Marking method to determine the mark price. The Mark Price in turn determines profit and loss values as well as liquidation prices.
- Initial & Maintenance Margin Levels – These levels will determine the amount of leverage a user can trade with, as well as the price point where liquidation would occur.
- Funding – Payments exchanged between buyers and sellers. These are scheduled at 8 hour intervals. If the funding rate is positive, it will require long positions to pay shorts the current rate, and vice versa for negative funding rates.
Margin Trading Using BTC
BitMEX offers leveraged trading up to 100X on some assets. This means that investors are able to buy as much as 100 Bitcoin Contracts using only 1 single Bitcoin to back the investment.
High leverage can mean high profit for investors, but the risk for high losses and liquidation increases as well. Be sure to understand how margin trading works before investing in contracts with high amounts of leverage.