Bitfinex leads the pack in terms of liquidity, it offers margin accounts across numerous cryptocurrencies, the fees are low, and they even offer a lending market which can be used as an interesting hedge for bitcoin holders.
- Bitcoin Cash
- Ethereum Classic
Maker: 0.0-0.1%; Taker: 0.1-0.2%Trading Fees
Spot MarginMargin Trading
- Bank Wire
- USD, EUR, GBP, JPY
- Leading USD liquidity, very low fees
- Full suit of order types, margin trading and lending market
- Massive collection of cryptocurrencies
- Stopped Accepting US Traders
- Bank located in Hong Kong – higher fees for westerners
- Margin interest rates can get a bit high
Bitfinex is the largest BTC/USD exchange by volume, partially due to their excellent margin trading system that allows bitcoin holders to borrow an additional two bitcoin for every one held. This is facilitated by a peer to peer lending market in which other users lend their bitcoin out at the prevailing market rate in exchange for interest from the borrower. While the borrower controls the bitcoin, earnings on the entire position are retained, and when the loan is liquidated the value of the bitcoin in fiat – at the time it was lent – is returned to the lender, plus the agreed interest.
Bitfinex has been quick to integrate additional important cryptocurrencies and their massive trading volumes allows the use of margin on these secondary markets as well, a feature simply not possible at smaller exchanges. Capitalizing on their size and importance in the market, Bitfinex has also established a derivative market which allows for speculative trading on not-yet-released coins. This was a particularly important feature when an impending release of Segwit2X was looming on the market. While many might have been misled as to the popularity of Segwit2x due to the aggressive astro-turfing campaigns run on twitter and r/btc, the price on bitfinex of the derivative token – 15% to that of the post-split btc token – illustrated the actual market sentiment and contributed to the cancellation (thank goodness) of the ill-fated project.
Bitfinex has shut it’s doors to US traders. However, for those interested in using the margin trading service, crypto-only accounts do not require KYC verification. While we would never advocate knowingly running afoul of a brokers terms and conditions, there are many traders who do use VPNs to mask location.
In August of 2016, 120,000 bitcoin worth $72M at the time were stolen from Bitfinex. Bitfinex socialized the losses amongst customers, providing tokens representing the losses which were eventually paid back in full, though it took about a year to settle the entire loss.
Bitfinex’s integration of bitgo’s multisig wallet architecture and segregation of funds at the user level made the hack particularly infuriating. Bitgo determined that no there had been no breach of their servers. As Bitfinex controlled 2 of 3 keys required for withdrawing customer funds, it meant they had signed off on $72m worth of withdrawals without realizing that customers were being hacked, which exposed serious deficiencies in their internal risk measures.
In response to the hack, bitfinex migrated their data servers, ran a full audit, and expanded their security team. So, I guess what doesn’t kill you makes you stronger?
Opening a Bitfinex Account
Cryptocurrencies may be transferred to and from Bitfinex without going through the rather lengthy KYC process, which is described below.
Please note that all information must be in English. Non-English documents must be translated at user expense.
|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
The Bitfinex exchange is one of the top products in the cryptocurrency market. 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 on any of the 25+ markets, with five different order types (limit, market, stop, trailing stop, fill or kill).
Spot Margin Trading
The margin offered is 30%, 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. Users can lend the bitcoin to borrowers in exchangefor a daily interest rate.
At the time of writing, the “Flash return rate” is .0531%, or around 19% 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 very fine 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.
|Executed in last 30 days (USD equivalent)||Maker Fees*||Taker Fees**|
*who adds liquidity to the bitfinex ecology. **A taker is one who removes liquidity from the bitfinex ecology.
Bitfinex Might Not be For You if:
You live in the United States.
Bitfinex has closed its doors to deposits and withdrawals from verified US users. We have heard word that customers are still accessing the platform using VPNs. We would be happy to hear experiences with in the comments box.
You would like to trade with higher leverage.
While 3:1 suits for some, many traders are interested in higher leverages. Bitmex is our go to brand for bitcoin spot and futures derivatives, offering nose-bleeding leverages of 100X, though you can adjust the leverage amount to whatever you would like, from 1-100. Like Bitfinex, Bitmex is an exchange with a (low) fee-based model. They offer a transparent price index based on a blend of the largest exchanges (including bitfinex, coinbase and bitstamp).
You prefer not to deposit by bank wire or crypto.
Bitfinex accepts fiat deposits only by bank wire, and with it’s Hong Kong bank location deposit fees will be slightly higher. Check out our comparison of the best bitcoin exchanges for alternatives based on your chosen deposit option or country.
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 – but traders should consider transferring their bitcoin to Bitfinex after buying locally.