Derivatives is one of the most important components of the crypto market. It offers long and short trading, high leverages to maximize profits, and serves as a risk hedging tool.
According to recent statistics, derivatives trading makes up 90% of the trading volume in a sluggish bear market. In other words, well-developed and mature derivatives products are what exchanges need to be successful. Although most exchanges have started to offer futures trading, only OKEx and BitMEX are recognized as the best derivatives exchanges.
The derivatives products OKEx and BitMEX offer are very mature in terms of risk management, leading the industry in market depth and system design.
OKEx and BitMEX also have the largest trading volume in derivatives trading. Recently, however, BitMEX has been undergoing an investigation by the US Commodities Futures Trading Commission (CFTC). Its traders have started withdrawing their assets, leading to a severe plunge in BitMEX’s trading volume.
Its CEO and co-founder Arthur Hayes has gone silent on Twitter for more than two weeks, and was allegedly being imprisoned.
Is the winter coming to BitMEX?
A Bleeding BitMEX
Since the beginning of 2019, the US government has been clamping down on cryptocurrencies and exchanges.
Tether was accused of market manipulation by the New York Attorney General’s office(NYAG), and Binance announced its withdrawal from the US markets.
In a recent report released by Bloomberg, the CFTC is investigating BitMEX, claiming it has violated regulations by allowing Americans to trade on the platform.
Some might think since BitMEX is registered in the Seychelles, the CFTC does not have the rights to regulate the exchange, therefore this investigation would not cause much trouble for them.
The CFTC has established a dominant position in regulating the US cryptocurrency markets. For example, in March 2019, they filed a charge towards the Marshall Islands-based firm 1pool Ltd. for offering illegal transactions, and BitMEX is possibly their next target.
Furthermore, during the CFTC investigation, a large number of users withdrew their funds from BitMEX to other exchanges.
According to trading data recorded on July 13, 2019, BitMEX’s BTC volume was 195,000 and had continued to slide in the following days and took another tumble to 173,000 on July 26 – either BitMEX was cutting off its US users, or users must have sensed the looming risks and decided to pull their funds off the platform.
Apart from the dropping BTC volume, BitMEX’s trading volume also slumped.
Economist and crypto analyst Alex Kruger commented on Twitter regarding this incident, that BitMEX’s BTC volume has shed 42% following the news.
What’s more bizarre is that BitMEX still hasn’t made any official statements on the investigation, nor did they address user’s panic withdrawal.
The normally super active CEO Arthur Hayes has been quiet on Twitter since July 12, and BitMEX also stopped tweeting since July 15.
For more than half a month, there have been no updates from both Twitter accounts, indicating the platform is currently facing a huge problem.
The disappearance of the CEO and officials has undoubtedly added to users’ panic. There is even widespread news that Hayes is now being imprisoned.
Who Will Be The Last Standing Giant
Since the end of 2018, the former giant of the futures market has suffered countless problems: minimal improvement on products, decreasing market share, slumped trading volume and the disappearance of the CEO.
It seems that even if BitMEX survives this investigation at the end, it can never be as strong as before. Yet its competitor OKEx is steadily growing and continuously upgrading its products to cater for traders’ needs, and contributing to a steady climb on its trading volume.