The shift in the cryptocurrency market in 2018, following the rise of Bitcoin to new heights and then a massive bear market after the run-up, has significantly changed the way traders approach making profits.
Gone are the days when easy money was gained by just setting up a mining rig with 8 GPUs and having it burn through kilowatts of electricity every day.
In the space vacated by the gold rush, a sign of maturity in the market has appeared. Just like we see in more traditional financial markets, mercantile exchanges have emerged, offering access to many of the same financial instruments that we see in regular currency markets.
At the top of the heap is BitMEX, which has earned a large slice of this new market.
Tens of billions of dollars in Bitcoins have been traded on the exchange since its launch in 2014.
You may be wondering, "What is BitMEX?" In this BitMEX trading review we are going to dive in and take a close look at each system feature. The goal behind BitMEX is to allow traders access to leveraged trading options. One shortcoming of traditional Bitcoin buying, and selling is that it doesn't offer traders much of a way to trade on futures (contracts for assets bought at agreed prices but paid for and delivered later), because of their personal belief that a bear market is coming.
By issuing futures, traders can profit from the swings in the market, rather than just buying Bitcoin, crossing their fingers and hoping the trend goes upward.
If you're unfamiliar with the concept of leveraged trading, the idea is that a small deposit in your account gets the chance to trade on significantly more units of the currency in question. The money you deposit into your account is collateral. It secures you that your bet won`t go wrong.
So, how do you to trade on BitMEX? There are different currencies and different levels of leverage. Only the biggest names are traded, including Bitcoin, Litecoin, Ethereum, Cardano, Bitcoin Cash, EOS Token and Ripple.
All deposits, however, must be made in Bitcoin. Leverage levels varies based on the crypto in question, from 10x to 100x. This means that, for example, a deposit of one Bitcoin would allow you to make trades on futures of up to 100 Bitcoin.
BitMEX has a standard registration website that allows users to sign up using an authentic email account, and verification of the account is required.
BitMEX doesn't accept users from the U.S.
But first thing first. Let's start from the registration step and then elaborate our Bitmex tutorial. Upon your first sign-in, you'll see an interface that offers access to market info, account info and trading tools, just like any traditional trading platform. The first two are self-explanatory, so we'll focus on the trading tools for the sake of this BitMEX tutorial.
You'll see buttons to places orders, manage them and get an overview of your current positions. Just like the normal trading platforms, you can place, limit, market, stop market, trailing and profit-taking orders.
When thinking about what BitMEX is especially good at, it's auto-deleveraging system makes it advantageous. Essentially, it will automatically deleverage positions to ensure that all orders close, regardless of market volatility.
The bottom line about Bitmex risk management is that it has the virtue of ensuring that traders don't get wrecked on huge downturns, too.
If the movement of the market hits the total you've leveraged, the contract will be terminated, and no proceeds returned. Be aware of this, and do not risk any amount you're unwilling to completely lose if you've guessed wrong on a contract.
The first question many beginners have is how to use BitMEX to turn around a profit. As the case with normal currency trading, the answer is to follow the trends at purchase contracts that anticipate the movement of the market. There are definite risk management concerns, and losses are something that traders should have an eye on.
The biggest advantage of using BitMEX is that it allows traders to stay active and profitable in a bear market. For example, folks who were trading on the 2018 decline of Bitcoin from its peak near $20,000 USD the whole way to the $6,000 mark were able to short the market, while folks who had simply been sitting on Bitcoin in their wallets got hosed.
Conversely, those who kept shorting Bitcoin expecting it to go to zero would have taken hard hits once the cryptocurrency found its floor and bounced back up into the mid-$6,000 range.
Notably, there are no fees for using BitMEX itself. You will, however, be expected to pay the normal fees for the transfer of Bitcoin into and out of your account.
It's important to understand exactly what a profit or a loss looks like when trading on BitMEX. If you place an order for a contract predicting the market will go up over a period of time and it does, the profits for the amount gained will be credited at the end of the contract. This means if you traded one BTC at $6,400 on leverage and the price of Bitcoin rose to $6,500, the $100 difference would be converted to Bitcoin and deposited into your account.
Let's say you used $100 worth of Bitcoin as leverage at 10x and did so expecting the market to fall for the period of your contract. If the market goes up, you'd be credited the difference between the rise and your initial $100 investment. If the rise were equivalent to a $10 shift, you'd only get back $90 of your investment. This is capped at losing the entirety of your investment, so it can't go negative. The most you could lose in this scenario is the initial $100.
Becoming familiar with the question of how to use BitMEX is essential, before you decide to get heavily into trading, especially with leverage.
The first step in learning is to place the simplest possible order - a market order. This means putting in a set amount in U.S. dollars, and then the contract system will purchase as many units of the cryptocurrency as it can obtain on the current market for that amount.
The first thing you may notice is that the platform converts the amount you're purchasing into XBT. This is an older symbol for Bitcoin, different from the BTC symbol that has come into common use. All funds placed onto the platform are denominated in Bitcoin, and it is the only cryptocurrency you may use to make a purchase.
When you move into the trading dashboard, you'll need to select the expiry date of the contract. This is the end date at which your project will play out. You will enter a quantity of Bitcoin to trade, and the price will be shown in USD. You may then click the "Buy/Long" button if you believe the market will go up or the "Sell/Short" button if you believe it will go down.
Bitmex selecting leverage is what can get many beginners confused at times.
The BitMEX interface uses a slider that maxes out at 100x, and you'll also see a heat meter above it that's intended to express the corresponding risk level. Users can click on the bubble above the amount of leverage they wish to use for each contract.
You can also choose a higher or lower leverage amount, but be aware that the more aggressive figures, such as 100x, will expose you to greater risk of losing your entire position, as even a small movement against your position may lead to it being closed. If you're purchasing at 10x leverage, you can place an order for 10 times that amount.
An order for $6,000 worth of Bitcoin would have to be backed by $600 on your actual account, but a $600 fluctuation for the term of the contract would lead to it being de-leveraged and closed.
The bottom line of trading on the BitMEX platform is that it gives you more flexibility as you watch the market move up and down. Rather than setting up what you feel will be a down market, you can try to profit.
The necessity of exchange platform like BitMEX is out there and it is the evidence of cryptocurrencies beginning to mature when traders demand more robust tools to pursue profits under all market conditions.
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