Cryptocurrency derivatives are an ideal investment option for individuals looking to generate more returns from the crypto market. Although they appeal most to experienced traders, trading derivatives is the less risky alternative to the standard cryptocurrency trading.
Derivatives are used to hedge against risks or to speculate the price of the underlying asset. Investors are, therefore, protected from price fluctuations since they only buy the asset at the fixed price stipulated in the derivative contract. Additionally, investors don’t have to worry about asset theft/loss as they aren’t required to hold the underlying asset itself.
Given the intricacies of derivative trading, it’s highly recommended to choose a platform that’s uniquely designed to support this type of crypto trading. That said, Bitmex, Deribit, and Bybit are among the most preferred derivatives trading platforms by investors.
In this comparative guide, we pit them against each other and reviewed their ease of use, security, and liquidity to find out which one gets the job done efficiently:
Platform Stability and User Experience
When choosing a crypto derivatives trading platform, you will want to vet its ease of use and the complexity of its sign-up process. Avoid platforms with a complex user interface as they cam prove intimidating, especially to first time users.
The sign-up process for the three platforms is rather simple since all you require is a username, password, and country of residence. Bitmex doesn’t, however, process registration requests from residents of such countries as the US, Seychelles, Cuba, Iran, Syria, among others. Of course, the geo-restriction can be bypassed using a strong VPN to hide the IP address. With the other two platforms, Deribit and Bybit, users from anywhere around the world can sign up without any restrictions.
Bitmex is best operated on its official website thanks to its smart and simple layout. What’s better, users can customize the web layout and change such features as themes, text colors, and integrate different trading tools. The platform, however, has neither developed its own mobile app nor optimized its website for mobile use. Deribit, on the other hand, has a user-friendly mobile app, which is a good compensation for its relatively clunky website.
Bybit wins on all fronts as far as user-friendliness is concerned. Their desktop user interface is easy to navigate and rarely experiences downtimes, which is a common case with Bitmex. Recently, Bybit released its own app available to both iOs and Android users.
Liquidity in derivatives trading entails a lot more than just cash flow and the ability to sell options/futures in the shortest time possible. However, this is not to diminish the importance of these two factors. In fact, the two are an integral part of any trading platform since they are an indication of a healthy supply and demand.
High liquidity for derivatives allows for ultra-tight bid-ask spreads and reduced risk of slippage when executing orders. For the derivatives market to achieve high liquidity, it must have high trading volumes and create room for intense price competition between sellers and buyers.
Bitmex boasts of higher trading volumes compared to both Deribit and Bybit. In fact, as of this year, the exchange posted higher trading volumes than other top exchanges that process standard cryptocurrency trading. Due to its high liquidity, Bitmex has the tightest spread and least slippage, meaning your orders will always be filled just at the right amount. On top of that, the exchange offers a variety of futures contracts, including BTC futures, ETH futures, ETH perpetual, XRP futures, LTC futures, ADA futures, TRX futures, EOS, and Bitcash futures. This further increases its trading volume, increasing liquidity.
Deribit trades an upward of 0.5 billion daily, so its liquidity is relatively high. Perhaps if the exchange offered more trading options than just BTC futures and BTC perpetual, its liquidity would increase substantially. Launched two years ago, Bybit often struggles with liquidity issues. But the team behind this exchange, which comprises of leading crypto trading experts, is continually working to increase the trading volume and liquidity. Moreover, as the exchange gains traction in the market, it’s liquidity is bound to increase over time.
Exchanges often fall victim to cyber hacks resulting in loss of investors’ funds. When choosing an ideal derivatives trading platform, you want one that prioritizes the security of your funds.
Since it was established in 2014, Bitmex has grown to become one of the largest exchanges in the market. Due to its size, the platform is arguably a more attractive target for hackers. Impressively though, the exchange has never been hacked for the six years the platform has been active, an achievement that can be attributed to its high-level security measures.
The platform stores investor’s funds and crypto reserves in an offline and multi-signature wallet. About 95% of the funds are stored in a cold wallet to deter theft by cybercriminals. The remaining amount is stored on the platform’s hot wallet to facilitate daily transactions.
Additionally, Bitmex allows users to secure their accounts with the Google-powered two-factor authenticator.
In its short life, Bybit has managed to meet the industry-standard security protocols. Similar to the other two, Bybit maintains cold wallets where the bulk of the clients’ funds are stored. The rest of the funds are stored in a hot wallet to facilitate daily transactions. A multi-signature system is employed every time the funds are moved between the cold wallet and a hot wallet.
The three exchanges are arguably at par as far as security is concerned. But Bitmex takes the lead due to its once-per-day withdrawal policy, which reduces the risk of hackers’ interception.
The fact that the three exchanges are exclusively designed for derivatives trading makes them ideal for any investors looking to get into crypto futures contracts. However, Bitmex has the upper hand, having laid a strong foundation on all fronts since it was established. At the same time, both Deribit and Bybit give Bitmex a good run for its money, an indication that they can be trusted by investors.