Bitfinex Review
4 stars - "Bitfinex Review" Bitfinex Review
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Bitfinex Review

Written on: May 20th, 2015 | Author: David M
  • 24 hr volume ฿Unavailable
  • Bid $614.44
  • Ask $614.45
  • Latest trade $853.48

wire

wire

USD

BitCoin  ethereum  LiteCoin

Important info
  • Trading Fees :  Maker: 0.0-0.1%; Taker: 0.1-0.2%
  • Order types:  Market, Limit, Stops, Conditional, Duration
  • venture capital:  Self funded
  • Office location :  Hong Kong
  • Advanced :  Margin Trading, lending market
  • Email This email address is being protected from spambots. You need JavaScript enabled to view it.
  • US Customers Accepted? :  Yes
  • Institutional Accounts? :  Yes
Pros and cons
  • Leading USD liquidity, very low fees
  • Full suit of order types, margin trading and lending market
  • High level of reserves
  • Bank located in Hong Kong - higher fees for westerners
  • Not the most transparent company

HP

UPDATE (8/2): Bitfinex suffered a massive hacking attack.  (When will it end).  While the site is being brought back online (8/4) tradking will be unavailable for an indeterminate period of time - though this most likely marks the end of what was the largest USD exchange in the marketplace.  (Will this ever end?!) We recommend, as always, Coinbase for the buying and selling of bitcoin, but find yourself an external wallet to hold your coin long term.

Summary

Bitfinex is the largest BTC/USD exchange by volume and it is not particularly close, with a 50% lead over the next closest exchange. Orders are filled quickly, and at market rate.

The Bitfinex software is arguably the best in show. The standard trading is intuitive and user friendly, and a lending marketplace, which matches users who would like to trade on margin with users willing to lend them coin, is an industry first (and only), and widely used. The massive amount of liquidity allows a relatively low margin call of 15%, while still offering security to lenders that, barring a massive and sudden market movement, their investment is safe. There are often very attractive interest rates offered by users on the lending exchange.

Despite a relative non-transparent operational set up, Bitfinex is a top exchange. Their liquidity, trading platform, and impressive reserve strategy warrants consideration for Bitfinex as a primary coin exchange, regardless of where you are located.

Security

According to Bitfinex, 99.5% of client funds are held in cold storage, with the other .5%, apparently representing a month's profit for Bitfinex, stored in hot wallets to ensure operational liquidity. Cold, or offline, storage is entirely separated from any online environment, making hacking a near impossibility. In December 2014 Bitfinex integrated a multisig feature to protect it's cold storage funds. This means that multiple private keys, no doubt geographically distributed among various secure locations, are required to authenticate any transactions.

According to a an audit published in April of 2014, bitfinex has a total coin reserve of 102.82% of overall client balances. For comparison's sake - US banking requirements mandate a 10% reserve ratio of overall customer funds. (Of course, customer funds held in banks are generally insured up to a point, not the case with funds held at most bitcoin exchanges, including Bitfinex)

So, it seems that Bitfinex has a robust cold storage system, bolstered by multisig requirements. There is no such thing as fool-proof security, but this is the closest approximation to it. The hot wallet liquidity is a fraction of the overall reserves - if there were a hot wallet security breach, bitfinex would have no trouble making good on the losses.

On the client side, two-factor authentication is offered for both account login and withdrawal requests. There is a login history to check for suspicious account activity. Bitfinex claims to have "advanced verification tools" to detect if accounts have been compromised, but have not publicized exactly what/how this works.

The server-side security seems pretty top-notch, but there could be a bit of work put in on the client-side. Though server side breaches always make headlines due to their spectacular nature, client side breaches are much more common. Expanding the multisig feature to user withdrawals would be a fantastic step, as would implementing user-based cold storage with delayed withdrawals. These are features that have been popping up around the market, and bitfinex, being the leading USD/BTC exchange, should lead on client-side security as well.

On May 24th, 2015 a hacker was able to steal approximately 1500 bitcoin from Bitfinex's hot wallet, which accounted for .05% of their overall holdings.  Bitfinex was easily able to make good on the losses, and in response integrated bitgo's multisig solution to improve their hot wallet security.  There have been no incidents since.

Gravitas

First things first, Bitfinex is the top usd/btc exchange by volume, and it did not arrive there by happenstance. There is serious development capital behind the trading platform, which is explained in more detail below.

Bitfinex demonstrated that its reserve management is one of the most conservative in the market, though close to a year has passed since the last reserve audit. We are also impressed with the multisig cold storage solution utilized to protect customer funds, though we would like to see a bit more client-side protective measures.

On the other hand, Bitfinex has been very closed-lipped about the composition of the business. Bitfinex is owned and operated by iFinex Inc, which is located in the British Virgin Islands (BVI). The trading platform itself is run out of Hong Kong. There is no word on its financial backing - though judging by it's reserve strategy and trading volumes, it is most likely solvent. The founder of the company is active on chat boards, but doesn't seem to be running the show.
The trading platform has been in a beta testing period for a few years now, according to the website. Once the platform exists testing, they continue, bitfinex will operate under a fully-licensed model, presumably with a BVI license. So why is the world's largest USD/BTC trading platform still in beta?

The alternatives, as we see them, are: 1) They have forgotten to update their "about us" section for a few years now. Possible, but not likely. 2) They are still actually in beta. This could be the case, but it undermines faith a bit in the stability of their platform if the development team, after years, is not ready to release the platform from beta. 3) Most likely, in our opinion, is that the platform is kept in beta to stall licensing and all the book-opening, record-sharing that goes along with it.

And this is basically the one frustrating issue with Bitfinex. They seem to operate a bit out of the shadows. Nobody is really certain of their funding. They aren't open about their operations, aside from the audit done immediately following the collapse of Mt. Gox. That is not to say that Bitfinex should not be trusted or traded with - it is simply a point against them in our opinion.

Opening an account

For an operation that has been less than forthright concerning their own management and business composition, BitFinex sure does require a boat load of documentation to trade with them.  Cryptocurrencies may be transferred to and from Bitfinex without going through the KYC process, which is described below.  Please note that all information must be in English. Non-English documents must be translated at user expense.

  Individual Corporate
Personal details Standard biographical information Standard biographical information
Proof of identification Two forms of identity documents: passport, national ID, driver's license N/A
Proof of residence Utility bill, tax statement, service bill, licensed company N/A
Bank statement Bank statement from account from which first wire is sent.  Name and statement date clearly visible Details of bank from which business will be conducted.  Company bank statement with address visible
Verification form Signed statement confirming the validity of information and documents uploaded Signed statement confirming the validity of information and documents uploaded
Corporate information N/A Details of incorporation - 13 different documents including: ownership structure, certificate of incorporation and business registration, 20% shareholders and director list, certificate of good standing, authorized signature list, officer's register

 Completion of the KYC process entitles users to deposit and withdraw fiat currency as well as utilize Tether, an amazing technology that was recently integrated.

Bitfinex software review

Bitfinex is a trading platform every bit as sophisticated as those found in the forex and equity markets. It's high level of liquidity ensures quick order filling at market rate. The combination of these two factors make bitfinex the benchmark for professional traders.

Bitfinex's user interface is fantastic. The exchange display offers a quick, two click option to place buy or sell bitcoin, litecoin or dart orders, with five different order types (limit, market, stop, trailing stop, fill or kill). Due to the high level of trading liquidity, bid/ask and order counts are displayed in real time, and users can literally watch the market dance whilst determining when to place an order.

tradescreen

Trading functionality

Bitfinex has a margined trading feature in which users can trade bitcoin with a 3:1 leverage, or 33%. There is a 30% margin requirement, meaning that the overall equity in a user account must equal at least 30% of the amount borrowed. A margin call is made at 15%, at which point positions will be automatically liquidated to ensure the trader does not default on the margin loan.

That margin loan is granted through a lending marketplace. Essentially, users are given the option to lend the capital required by other clients to trade on margin. In exchange, lenders are given a daily interest rate, which is set within the bitfinex trading platform. Bitfinex calls these arrangements "swaps".

swaps

At the time of writing, the "Flash return rate" - or, the average interest that is currently being charged on all CFDs - is .0248%, which annualized comes out to 9.05%. The average variable rate, which is calculated by averaging the daily rates over the previous 90 days of activity, is .067%, or 24.55% annually. Lenders may determine the daily rate at which they are willing to lend capital on the platform; any rate below 1% will automatically be accepted by borrowers, though the best rate is naturally taken first.

A pretty amazing return, but at what risk to the lender? Naturally, the borrower is rewarded for any gains of the underlying asset minus the interest payment. Conversely should the market move against the position the lender is theoretically protected, as a 15% margin call is forcibly executed. The borrower thus covers the entire loss, and is still on the dole for the interest payment which is automatically deducted from his account equity.

However, should the market turn in a dramatic and very quick fashion, trading activity might dry up, and there could be no takers to execute the margin call trades. In this situation, the lender might lose some, or all, of the lent assets.

Fee structure

Executed in last 30 days (btc) Maker fees* Taker fees**
0 or more traded 0.1% 0.2%
500 or more traded 0.08% 0.2%
2,000 or more traded 0.06% 0.2%
5,000 or more traded 0.04% 0.2%
15,000 or more traded 0.02% 0.2%
25,000 or more traded 0% 0.2%

*A maker is one who adds liquidity to the bitfinex ecology.
**A taker is one who removes liquidity from the bitfinex ecology.

[open account]

Mobile

The website is mobile-friendly and responsive. Complete functionality is available from handheld devices, with buttons optimized for small screens and fat fingers.

Support

Support is email only. Additionally, they have an official forum if one wishes to air publicly any question or concerns, which can be accessed through their support page. Generally, emails are responded to within 12 hours, though it can take much longer. Bitfinex has gotten the reputation of having extremely rude and unprofessional support staff - but this is mostly due to a particular outspoken representative who has since toned it down.

Bottom line

Bitfinex offers a fantastic product. The trading platform is one of the best in the market, and the lending marketplace is a unique and valuable feature. With high liquidity and very low fees, Bitfinex is a destination site for bitcoin traders, and rightfully so.  The only downside is that bank location is not ideal from a fee perspective - unless you happen to live in China or Hong Kong - and the KYC process is particularly burdensome.

Visit Bitfinex

Bitcoin Price (USD): 853.48