BitMEX CEO Arthur Hayes Says ‘We Don’t Trade Against Customers’

Kevin O'Brien

The CEO of BitMEX took time to defend his company from a rash of online criticism in an interview with Yahoo Finance UK.  

Responding to a variety of allegations put forth in a blog post published on October 22nd, Arthur Hayes said BitMEX does not give anyone special access, does not engage in trading against customers, and makes no money when trades are liquidated.

The peer-to-peer bitcoin futures trading platform has rapidly become a heavy player in its market since being founded in 2014.  

However, it has been in the headlines recently due to an anonymous Medium post that made a number of pointed allegations against the exchange.

‘Exploring The Biggest Concerns’

In late October, “independent cryptocurrency researcher” named “Hasu” wrote a long-form Medium post that made a number of allegations reportedly based on customer suspicions.

In the post, Hasu alleged BitMEX secretly trades against customers, gives preferred access to specific traders once servers come back online, and collects money once it liquidates the positions of clients.

Another allegation leveled by Hasu was that BitMEX places excess margin into an insurance fund.

At the start of the post, Hasu wrote how BitMEX has a “hard time acting ethically once it gets in their way of making more money.” He said this was an issue because it “doesn’t submit to any regulator” since it is based in the Seychelles.

Towards the end, Hasu listed a number of suggestions BitMEX could take. These included the construction of a colocation center where clients could physically connect to servers, putting a hard cap on the company insurance fund, and allowing “products like Ups and DOWNs to be traded against other users.”

Hayes Responds 

According to Yahoo Finance UK, Hayes said BitMEX does not trade against clients even though it has a market making desk. According to Hayes, the purpose of the desk is to provide market liquidity.

Hayes also said the desk remains in complete seclusion from “the rest of the employees.”

When asked about the weaponization of server issues, the CEO said the exchange does not give anyone special access and noted how the biggest priority for the company was to tackle ongoing problems with servers, since BitMEX often gets more orders than it can handle.

Hayes also remarked the company does not “make money when people get liquidated.”

In a November 12th Tweet, Hasu wrote how Hayes “denied my concerns” and did not talk about the suggestions to “ameliorate the concerns going forward.”

In a follow up, Hasu explained how “we need more transparency around these issues, especially the fund and desk.”

Bitfinex Wants to Offer 100x Leverage For Crypto Derivatives Trading

Michael LaVere
  • Bitfinex will offer 100x leverage trading for cryptocurrency derivatives
  • According to the exchange's CTO, the hedging product is "ready for prime time"

Cryptocurrency exchange Bitfinex revealed it wants to offer derivatives products with up to 100x leverage for cryptocurrency traders. 

Hedging On Cryptocurrency Derivatives

Chief Technology Officer Paolo Ardoino told The Block on June 25 that the cryptocurrency exchange was ready to ship a 100x leverage product for certain users. According to the post, the project has been under development for some time and is “now ready for prime time.” 

The product was referenced in last month’s whitepaper published by Bitfinex for its $1 billion private token sale of LEO, stating

“Qualified Bitfinex account holders will be able to trade a new hedging product through a derivatives wallet.”

The whitepaper originally claimed that the new hedging mechanism would be released by the end of June, a timetable that fits with Ardoino’s “ready for prime time” statement. 

Ardoino confirmed that only “verified” customers will be allowed access to the product, given the risks involved in such highly leveraged trades. 

The CTO also took to Twitter to quell user concerns over Bitfinex’s existing 3.3x margin trading. Ardoino explained 100x leverage will be “optional,” and that their current leveraged trading products will be unaffected by the release. 

Big Risk, Big Reward

Bitfinex is looking to compete with rival exchange BitMEX, who already offers 100x leverage through its bitcoin perpetual swap contract. However, Bitfinex claims its product is designed as a legitimate hedging tool for clients, rather than a gambling mechanism. 

Max Boonen, CEO of trading firm B2C2, believes the product will only appeal to retail hedgers, as large investors will shy away from the risks involved in 100x trading. 

According to Boonen, 

“There’s nothing wrong inherently about 100x. But as a commercial hedger you want lower leverage margin. The larger investor wouldn’t want to take the risk of 100X, typically. They don’t want to go balls to the wall.”

The cryptocurrency derivatives market has been heating up. Last week bitcoin-bull Mike Novogratz’s Galaxy Digital announced plans to offer cryptocurrency options contracts.

Binance has also reportedly been exploring futures trading. On June 24, Binance CEO Changpeng Zhao tweeted the exchange had executed its first margin liquidation for a BTC short.