AD Derivatives Podcast Feat CEO of Bitmex & Co-Founder of PowerTrade

Welcome to the AD Derivatives podcast led by Director of Derivatives; Greg Magadini.

Featuring: Stephan Lutz, CEO of BitMex, and Mario Gomez Lozada, Co-Founder of PowerTrade!

BitMEX has officially launched options.

We discuss the recent launch and the collaboration with Power Trade.

We explore the AltCoin offering from BitMEX and other unique option trading insights.

To learn more about BitMEX options visit here: https://www.bitmex.com/options

Introduction

In the latest episode of the Amberdata Derivatives Podcast, we had the pleasure of hosting Stephan Lutz, CEO of BitMEX, and Mario Gomez Lozada, CEO & Co-Founder of PowerTrade. This insightful discussion focused on BitMEX’s recent launch of options trading, the technical intricacies behind it, and the broader implications for the cryptocurrency derivatives market.

Overview of BitMEX’s Options Launch

BitMEX, known as a pioneer in the crypto derivatives space, has officially launched its options trading platform. This development marks a significant milestone, differentiating itself through several key features:

• USDC-Denominated Options: Unlike traditional options which are margined and priced in BTC, BitMEX’s options are denominated in USDC. This simplifies the pricing mechanism, making it more intuitive for users who otherwise need to convert BTC to USD.

• Multi-Asset Margining: Users can collateralize their trades with multiple cryptocurrencies. Assets deposited in the options account are automatically converted to USDC, enabling seamless trading without manual conversions.

• Low Lot Sizes: Minimum trade sizes are set at 0.01 BTC or 0.1 ETH, significantly lower than many competitors, thus lowering the barrier to entry for individual traders.

• Altcoin Options: BitMEX is pioneering the offering of options on altcoins such as Dogecoin (DOGE), Solana (SOL), alongside traditional options on Bitcoin (BTC) and Ethereum (ETH).

Strategic Partnership with PowerTrade

BitMEX has partnered with PowerTrade to leverage its advanced options trading infrastructure. PowerTrade brings:

• Experienced Risk Engine: PowerTrade’s risk engine provides robust real-time settlement systems, ensuring efficient and accurate margin calculations and fund transfers.

• Portfolio and Cross-Asset Margining: PowerTrade's technology supports complex strategies and portfolio margining, allowing users to hedge and trade across multiple assets efficiently.

Market Potential and User Adoption

The market reaction to the new options has been positive, with around 2,000 BitMex users setting up options accounts. Despite some initial skepticism, especially given Arthur Hayes' earlier stance that perpetual swaps could replicate options exposure, the convenience and specific advantages of options trading have driven significant interest.

Market Making and Liquidity

A critical aspect of BitMEX’s new offering is ensuring liquidity:

• Designated Market Makers: BitMEX has onboarded neutral market makers to provide liquidity. The collaboration ensures competitive spreads and minimizes slippage, essential for a vibrant trading ecosystem.

• Advanced Settlement System: A sophisticated real-time settlement system moves funds seamlessly between BitMEX and PowerTrade platforms, maintaining liquidity and minimizing risks.

Strategic and Market Implications

BitMEX’s entry into options trading is poised to significantly impact the market:

• Enhanced User Experience: The intuitive design and multi-asset margining cater to both institutional and individual traders, offering a seamless transition from futures to options trading.

• Broader Adoption of Crypto Derivatives: With the introduction of USDC-denominated options, BitMEX is addressing the complexity that deters new users, potentially expanding the market.

• Volatility Trading Opportunities: Options provide sophisticated tools for traders to express views on market volatility, with strategies such as butterflies and condors now more accessible.

Future Prospects

Stephan Lutz emphasized that the approval of Bitcoin and Ethereum ETFs in the US signals mainstream acceptance of cryptocurrencies, which bodes well for the derivatives market. BitMEX plans to continue innovating with additional altcoin options and further enhancements to its trading platform, aiming to integrate full portfolio margining and cross-asset margining by late 2024.

Conclusion

BitMEX’s strategic launch of options trading, underpinned by PowerTrade’s advanced technology, represents a significant evolution in the cryptocurrency derivatives market. By simplifying access and offering innovative features, BitMEX is set to attract a broader user base, driving the growth and maturity of crypto derivatives trading.