Ethereum – BitMEX Blog The official blog of BitMEX, the Bitcoin Mercantile Exchange. Wed, 28 Feb 2018 17:21:12 +0000 en-US hourly 1 Ethereum – BitMEX Blog 32 32 78374597 Spray and Pray, The ICO Investment Strategy Tue, 15 Nov 2016 09:11:38 +0000 img_vuve

Because most professional money managers are just as clueless as their clients, Spray and Pray is one of the most effective investment strategies. Once a hot new promising sector is identified, spreading an equal amount of capital amongst applicable companies is often better than attempting to pick winners. The digital currency Initial Coin Offering (ICO) market is no different.

ICO’s are red hot. Armed with a whitepaper and a slick minimal looking web page, teams can amass millions of USD in a matter of minutes. Last week Golem, a distributed computing platform, held a sale of $8 million worth of tokens. They sold out instantly.

Traditional money managers are beginning to take interest. Small funds are opening around the globe with a mandate to invest in new and promising ICOs. I compiled a list of all the ICO’s since and including Counterparty that have completed a subscription round and listed on a secondary market.

The ICO Process

  1. A team will either have a proposal for what they will build, or a finished product ready for market.
  2. The native token that powers the application will be offered for sale to the general public.
  3. A subscription schedule will be announced. Investors send Bitcoin or Ether to an address, and in return will receive tokens.
  4. Once the subscription period ends, the tokens will be distributed in the days or months to follow.
  5. Once distributed, the token will be listed on a secondary market where it trades freely.


Spread a pool of capital equally over a basket of ICO’s. Sell the token a month after it lists on a secondary market. Across a portfolio, this strategy will yield a positive return. Below is a summary table of the portfolio’s performance.

Total USD Raised $192,111,911
Total USD Raised ex. DAO $63,141,251
Number of Deals 10
Average XBT ROI 186.06%
Average USD ROI 165.27%
Biggest XBT Gainer Ethereum
Return 944.00%
Biggest XBT Loser Synereo AMP
Return -93.48%
Win % 60.00%
Loss % 40.00%

Your portfolio would have returned 186% in Bitcoin terms, and 165% in USD terms. That is an impressive return considering that only 60% of deals where profitable one month after the secondary market listing. The results were skewed due to the massive gain on Ethereum. As with any asset, it pays more to be long than short.


Performing in-depth due diligence is difficult in this new industry. Many projects have no commercial product ready. Investors’ investment decision is based on a conceptual whitepaper, and their assessment of the integrity and strength of the team.

A team’s technology may never ship. A team may disband before completion of the project. A team may pivot and release a completely different product. You are not buying equity in the team, but rather a native token used to power an application. The legal protections and disclosures necessitated for equity IPOs are not present.

This is why Spray and Pray is an appropriate strategy. Instead of picking winners, assume that some investments will be duds and a small minority will be super novas. On average, I believe a portfolio of ICOs will outperform.

Because most investors are not technically savvy enough to make a serious long-term call on the viability of a particular application, a shorter time horizon is prudent. Ride the FOMO wave and exit the ICO at a healthy profit immediately after it lists on a secondary market.

Why ICOs Are Hot

According to Bloomberg global equity IPO 1H2016 deal volume was $46.6 billion. My study evaluated 10 deals worth a combined $192 million. In only 6 months equity IPO deal flow was 2,430x that of ICO deal flow over the past 32 months.

The big difference between IPOs and ICOs is the type of average investor who participates. Only large asset managers get access to the best IPOs. Ever wonder why Och Ziff calls up a human to trade stock instead of using a computer? If you do not pay the large investment banks, your fund will not get an allocation of the hot deals. Bankers intentionally underprice issues to generate a first day pop to enrich their high fee paying hedge fund clients.

Usually the retail tranche is tiny and massively oversubscribed in any IPO. Additionally, the minimum order size might be in the thousands of USD, which is unaffordable for the vast majority of the global population.

ICOs due to the low minimum subscription size are accessible to anyone holding Bitcoin or Ether. ICOs also don’t require you to have a brokerage account. ICOs are perfect for small retail investors who are locked out of the IPO market due to their inability to open a brokerage account or to afford the minimum ticket size.

There is a massive pool of money globally that needs to invest and save. Those who are technologically savvy have understandably gravitated towards these new types of projects, and the new way of funding them. The insatiable demand for positive yielding investments in the face of negative and low interest rates is why even mediocre projects will continue to sell out within minutes.

As teams realise that creating a native token for their application is an easy way to raise money without selling equity, ICO projects will flood the market. However at the same time, traditional money managers will begin allocating funds towards ICO investments. They cannot ignore a new asset class that historically has performed well.

Supply of and demand for ICOs will ratchet higher. Over the next 24 months, ICO deal flow will grow aggressively.

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Announcing The Launch of Ether Classic 5x Leveraged Futures Mon, 25 Jul 2016 06:36:03 +0000 ETC is a special chain quoting the Ethereum Classic pre-fork chain, which is the chain created by the original Ethereum code as it existed before the hard fork.

ETC has proven a very popular digital currency right out of the gate. As a result, BitMEX is pleased to announce the world’s first Ether Classic futures contract, ETC24H.

ETC24H Contract Details:

  • Each contract is worth 1 ETC
  • The underlying is the Poloniex ETC/BTC exchange rate
  • Margin, profit, and loss are all in Bitcoin
  • Leverage of 5x
  • Expires each day at 12:00 UTC, based on the 11:30 UTC to 12:00 UTC time weighted average price of ETC/BTC
  • More details

Traders can go long or short ETC24H using only Bitcoin. No ETC is required.

To begin trading, deposit Bitcoin to your BitMEX account. Then you can place buy or sell orders on ETC24H.

Trade Lisk With Leverage And Bitcoin Thu, 26 May 2016 16:57:41 +0000 http://7764289A-759B-417B-84A7-4912C164259B Lisk trading launches Friday, May 27 at 12:00 UTC.

Have you heard of Lisk? It’s the hottest new altcoin. It just completed its Initial Coin Offering, raising US$6 million. The coin is now trading on the secondary market. Trading volumes and the price are surging.

Essentially Lisk is a clone of Ethereum, but the scripting language is JavaScript. Whether you are a super bull or think Lisk belongs in a landfill, BitMEX now offers a way to speculate on Lisk using on Bitcoin.

Introducing LSKXBT

LSKXBT is a leveraged trading product that allows traders using only Bitcoin to go long or short Lisk with up to 3.33x leverage. The leverage will increase as liquidity improves.

Each LSKXBT contract is worth 1 LSK, and quoted in XBT. The underlying of LSKXBT is the Poloniex LSK/XBT exchange rate.

LSKXBT does not have an expiry date. Buyers will receive the Poloniex LSK funding rate (when it becomes available, currently set at 0%), and pay the XBT funding rate. Shorts receive the Poloniex XBT funding rate, and pay the LSK funding rate. Read Swaps 101 to learn more about how it works.

Going Long LSKXBT

If you have some Bitcoin, you can go long LSKXBT with leverage.

You want to go long 10,000 LSKXBT contracts. The current price is 0.0001 XBT. The Bitcoin value of 10,000 LSKXBT contracts is 1 XBT. Because BitMEX offers 3.33x leverage, you only have to put up 30% * 1 XBT or 0.3 XBT to go long 10,000 contracts.

The price increases to 0.0002 XBT. Your profit is (0.0002 XBT – 0.0001 XBT) * 10,000 contracts or 1 XBT.

Going Short LSKXBT

If you have some Bitcoin, you can go short LSKXBT with leverage. There is no need to borrow LSK to short it. That’s one of the main benefits of trading BitMEX products.

You want to go short 10,000 LSKXBT contracts. The current price is 0.0001 XBT. The Bitcoin value of 10,000 LSKXBT contracts is 1 XBT. Because BitMEX offers 3.33x leverage, you only have to put up 30% * 1 XBT or 0.3 XBT to go short 10,000 contracts.

The price decreases to 0.00005 XBT. Your profit is (0.00005 XBT – 0.0001 XBT) * -10,000 contracts or 0.5 XBT.

Start Trading Today

To start trading, all you need is a BitMEX account and Bitcoin. The Lisk market opens tomorrow (Friday May 27) at 12:00 UTC.

Register Here

Start Trading

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Swaps 101 Fri, 06 May 2016 12:05:07 +0000 http://FA277E63-94E4-406A-8ECD-F890EB4C5F7F  

I Want A Ferrari

I like cars. I would really like to experience the thrill of driving a Ferrari, but I really don’t want to own a car. People who own a Ferrari but don’t drive it often might want to earn some income by loaning out their car.

I would be willing to pay a rate of interest, to drive a stranger’s Ferrari for a short period of time. I am willing to swap an interest payment, for the use of a Ferrari.

Altcoins Are Like Ferraris

Traders love altcoins because they have extreme volatility on the up and downside. Savvy traders can earn substantial sums trading altcoins in a short period of time. However, most traders have no interest in holding or storing altcoins. They just want to participate in the price performance of the coin.

As a result, most altcoin traders prefer to trade on margin. To go long they pledge Bitcoin as collateral, borrow additional Bitcoin and buy the altcoin of their choice. To go short, they pledge Bitcoin as collateral, and borrow the altcoin to short it. In both cases, the traders must pay interest to the lender of Bitcoin or the altcoin.

Just like the Ferrari example above, traders swap interest payments for the performance of the altcoin. Traders have no interest in owning the coin, but they obtain the same economics through a swap.

BitMEX Swap Basics

BitMEX swaps mimic the exchange of cash flows and price performance inherent in trading any currency pair. Every currency pair consists of a base and quote currency. The base currency comes first then the quote currency in any currency pair code. For ETHXBT, ETH is the base currency and XBT is the quote currency.

Imagine you want to buy ETH. You first need to borrow XBT to exchange it for ETH. The person lending you XBT will charge you a rate. Once you have purchased ETH, you can lend it out to someone else.

In this example, as a buyer of ETHXBT, you pay the XBT (quote currency) rate and receive the ETH (base currency) rate. The opposite is true if you wished to sell ETHXBT.

To perfectly replicate the action of borrowing and lending the base and quote currency, buyers of BitMEX swaps must pay the quote currency rate and receive the base currency rate. Sellers of swaps must pay the base currency rate, and receive the quote currency rate.

BitMEX does not operate a lending market for either the base or quote currency, so the rates reference an external third party market.

Buyers and sellers swap interest rate payments for exposure to the underlying asset. Buyers of ETHXBT are long and profit from a rise in price; sellers of ETHXBT are short and profit from a decline in price.

The net of the base and quote interest rates is the Funding Rate. The Funding Rate is charged each day at the Funding Timestamp based on the value of the position. It’s just like a bond. If you hold the bond on the coupon date, you get a payment. If you do not, you get nothing. If you buy ETHXBT and sell it before the Funding Timestamp, you are not eligible to pay or receive the Funding Rate.

Swap Boxes And Arrows

BitMEX Swaps Flow

The diagram above shows the interest payments and performance obligations for buyers and sellers of ETHXBT.

How Are Swaps Valued?

BitMEX intends for swaps to mimic margin trading. Swaps are valued at the prevailing spot price of the underlying asset. For ETHXBT, that is the ETH/XBT exchange rate on Poloniex.

To ensure that the swap’s price does not deviate greatly from spot, each week unrealised profit will become realised at the prevailing spot price. That allows profitable traders to either withdraw their winnings, or either re-leverage them on additional contracts.

Is There Leverage?

Of course, this is BitMEX. Because no physical asset changes hands, BitMEX is able to offer very high leverage on swaps. If two traders wish to trade an ETHXBT swap worth 100 XBT, each side must post at least 4 XBT of margin. If the price declines or rises by more than 2%, the long or short trader will be liquidated. For more information, please refer to the Liquidation document.

How Long Do Swaps Last?

The beauty of BitMEX swap contracts is that there is no settlement date. As long as you can afford to pay the daily funding rate, and the spot price does not touch your liquidation price, you can keep your swap. If you wish to close your swap, trade out of your position in the open market. Buyers close their swaps by sell; sellers close their swaps by buying.

Let’s Trade

ETHXBT is BitMEX’s first swap product. It allows traders to trade the ETH/XBT exchange rate with up to 33x leverage. Traders do not need to own or borrow ETH to trade ETHXBT. Margin, profit and loss are all denominated in Bitcoin.

Trade ETHXBT Today!


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Crypto Trader Digest – Mar 28 Mon, 28 Mar 2016 23:33:41 +0000 http://81D634D2-D61A-459E-B0A8-9C14FD85D16C I Think I’m Turning Japanese


Japan is the unorthodox monetary policy guinea pig. A future of tentacle porn and massive money printing awaits all developed nations. After over two decades of print and pray (maybe try just the tip?), Japan has arrived at the final solution: helicopter money.

Helicopter money, or basic income as many governments label it, is an attempt to jump start spending by handing cash directly to consumers. Instead of enriching only those who hold real assets (stocks, bonds, and real estate) via central bank bond buying, Japan will hand out vouchers to low-income young people so they may purchase “daily necessities”.

Helicopter money is nothing new. Some European countries have experimented with this flavor of money printing as well. The difference is that Japan has the world’s largest government debt load as a percentage of productive output. The BOJ puts other central banks to shame in their attempts to reflate a dying economy and country.

Japan produces some of the world’s most delicious produce (make sure it’s not from Fukushima), but imports virtually all of its energy needs. Abe-san and Kuroda-san’s policy of massive money printing trashed the yen, and made life for ordinary Japanese citizens very expensive. First it will be young poor people, soon it will be most able-bodied adults who will receive some form of government handout. The only result will be a cheaper yen, and rampant energy and food inflation. Even though Japan has a healthy farming sector, farmers still need to consume imported energy to grow and transport their crops.

Japanese housewives are renowned for their penchant to speculate in foreign exchange. What happens when they discover Bitcoin and other digital currencies? They can be bought over the internet (Japan has the world’s fastest internet after South Korea), and instantly they can protect and store their wealth. While the USD is the cleanest dirty sheet, it will get trashed as well vs. gold, digital currencies, and other real assets once Grandma Yellen goes negative.

Most of you aren’t Japanese; however that doesn’t mean BitMEX doesn’t have a way for you to profit from Kuroda-san’s freebasing habit. In the next few weeks, in cooperation with Quoine (the largest Bitcoin / Yen exchange), we will launch a daily Bitcoin / Yen futures contract: XBJ24H. Japanese traders will have direct access to XBJ24H through their account with Quoine, and BitMEX will also offer the product via our platform.

Japan Goes Full Krugman: Plans Un-Depositable, Non-Cash “Gift-Certificate” Money Drop To Young People

Brexit Maybe?


The odds of Brexit are climbing, averaging 35% across various betting platforms. Some unofficial polls put the “Leave” vote above 40%. The referendum will be held on June 23rd.

Brexit would be catastrophic for the EU project. EU skeptic parties continue to poll better and better. If one of the richest countries in Europe leaves the EU project, the calls for Portugal, Italy, Greece, and Spain (the PIGS) to exit from their citizens will gain force.

All of the PIGS have massive debt problems. Either they continue suffering from high unemployment, or devalue and accept their old domestic currency. These are the only options to regain competitiveness vis-a-vis ze Germans. After 7 years of “austerity” the plebes are fed up. However, they have been sufficiently scared about the possible post-EU apocalypse to vote themselves out of the Euro. That all changes if Brexit occurs.

The Bitcoin rocketship will ignite if the odds increase further. To gain an appreciation for the positive price effect, chart Bitcoin during the Grexit saga last summer. Brexit is still too far in the future and the odds too low to be on many traders’ radars yet. It is the perfect time to go Bitcoin volatility if one believes that the likelihood of Brexit will increase.

The BitMEX Bitcoin / USD September futures contract, XBTU16, is the ideal product to trade. It settles well after the referendum date. If Brexit does occur, the whole of Europe will decend into chaos over the summer. Greece is out of money again, surprise surprise. They will be back at Merkel’s feet begging for more cash this summer. Maybe this time around the population will follow through on their threat to leave the Euro, and redonominate their debt into Drachmas. These fears will multiply and cause a bid for safe-haven assets like Gold and Bitcoin if Brexit occurs. The aftermath will be more wild than the Brexit vote itself. These fears will be priced into markets if the odds of Brexit increase. That is why a contract like XBTU16 that expires in the fall will be bid up if the odds of Brexit increase.

XBTU16 currently trades at a 62% per annum (PA) premium. Historically, three and six month BitMEX contracts have traded between 40% to over 100% PA premiums. If the Brexit odds increase, XBTU16 is poised to trade at the upper end of that range. In order to isolate the XBTU16’s premium, buy XBTU16 vs. short selling spot Bitcoin.

Brexit Referendum Betting Odds

NYT Kneels At The Alter Of Ether


I wanna get down on my knees and start pleasing Jesus, I wanna feel his salvation all over my face!

— Faith +1

Ethereum is on the warpath and is zeroing in on Bitcoin.

A recent article published by the New York Times (NYT) describes it as a Bitcoin 2.0, a new currency that can overcome obstacles which Bitcoin can’t. Having risen by nearly 1700% in the past three months from trough to peak, it is clear that Ethereum is a serious contender and is now the 2nd largest Cryptocurrency available, overtaking the likes of Litecoin.

Is this exponential rise going to continue? The price has been plateauing lately, almost taking a breather; however no doubt there are a lot of traders with fingers twitching over that buy button, myself invcluded. Anyone who was trading Bitcoin back in 2011 and 2012 must surely feel some sort of déjà vu.

Why has it come to this? The article highlights a few reasons, some of which the Bitcoin community are highly aware of already. Firstly, this tedious battle on the future of Bitcoin between Core and Classic has led to a number of startups and traders lacking the confidence to invest further into the currency and look for alternative virtual currencies. We can all agree that trading Bitcoin over this period has been lacklustre and boring, and until we have a clear answer on what is going to happen I don’t think we are out of this rangebound yet.

Furthermore, Ethereum provides a way to create smart contracts easily. Personally I think this is huge – already the finance community are looking into this and has gained a lot of attention from companies such as JPMorgan, Microsoft and IBM. Smart contracts can save a whole lot of time and money, especially in finance and banking where traditional contracts (such as in inventory financing) can take days if not weeks to execute. Backoffice functions benefit as well, which have a number of different databases and clutter in which a number of things can and will go wrong (being told you are short $5 bucks of an illiquid stock on settlement day and you’re going to enter a ‘buy-in’ was never a fun thing to hear from your backoffice).

Given the fact that the NYT is almost ‘pumping’ ETH, I would suggest to get on board the gravy train. We should witness further news forthcoming about it if discussions between Core and Classic do not go anywhere and Bitcoin remains in a deadzone. This all points to one way ticket for ETH. I recommend buying the dips – anywhere below 0.024 Ether / Bitcoin is attractive. BitMEX is the only exchange to offer a 25x leveraged Ether / Bitcoin futures contract, ETH7D, so get your bids in early and enjoy the ride.

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Bitcoin Technical Analysis: October 31, 2015 Sat, 31 Oct 2015 04:27:36 +0000 http://CD3147E0-06F3-4C82-9209-4EE9CBEAD3F7 Entry:

BUY LONG XBT24H  (BitMEX Daily BTC/USD futures contract) while spot is at 325 USD with a spot stop limit of 323 USD.


CLOSE XBT24H Long position at 345 USD;

Consider reducing the position by 40%-60% by taking profit at 333 USD.

Video Analysis:

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Bitcoin Technical Analysis: October 9, 2015 Fri, 09 Oct 2015 03:45:45 +0000 http://B4CCB5CC-9ECE-4E18-8463-88B5B7D0DF4E Entry:

BUY LONG XBT24H  (BitMEX weekly BTC/USD futures contract) while spot is at 244-243.5 USD with a spot stop limit of 243 USD.


CLOSE XBT24H LONG position at 247 USD;

Consider reducing the position by 40%-60% by taking profit at 246 USD.

Video Analysis:

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Crypto Trader Digest – Oct 5 Mon, 05 Oct 2015 14:54:07 +0000 http://FEF87BB0-B560-4708-B333-1CB986C88707 Spot The Hedge Fund Manager


All of us Bitcoiners are gamblers, whether you admit it or not. At some point you decided it was a good idea to send some of your hard earned money to a website that allowed you to buy magic internet money. The ultimate gamblers’ high was the fall 2013 spike to $1,200. Ever since, many in the industry have been jonesin’ for a return to the promised land of instant riches.

If regular Bitcoin holders are gamblers, those of us who own Bitcoin related businesses are even bigger risk takers. Unfortunately this streak of risk taking is sometimes applied in the wrong context. Two of the individuals above bet their working capital on a stable or rising Bitcoin price. Bitpay held a large amount of Bitcoin as a result of their payment processing service. Ethereum raised a significant amount of capital in the form of Bitcoin and held it. Unfortunately the price halved and we see the results from two of our industries most successful businesses and projects.

The problem with hedging is the upside is capped. If the price was back at $1,200, I wouldn’t be writing this article. Nobody asks how you make your money when you are making it, but they surely do when losses rack up. The question for Bitcoin business owners is are you running a hedge fund or a business. Many businesses claim they do X with Bitcoin, but when you inquire how they hedge a particular facet of their business that is exposed to the price, you get a blank expression. At that point call up Ray Dalio.

If part of your business’s working capital is in any way exposed to the price of Bitcoin or another cryptocurrency, a properly implemented hedging strategy is a must. One of BitMEX’s goals is to provide hedging tools to crypto businesses. We are always open to new ideas and new products that might be of use to the community. Get in contact with us if you want help thinking through how derivatives products can help protect your business from the irrationality of the market.

China Bitcoin Premium Points To Moon

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During the November 2013 Bitcoin bubble, the belief was that Chinese people would rush to convert their RMB into Bitcoin to escape the financial repression they faced at home. That did not come to pass as it was still very easy and cheap to spirit capital out of China. That all changed this summer when the PBOC shocked the world by devaluing the CNY by 4% over one week.

The PBOC did not stop there. The Chinese government is aggressively trying to stem the capital flight out of China. Many real estate commentators have lamented how Chinese buyers have slowed down the pace of property purchases because of the increasing difficulty they face exporting their RMB.

In my article Hello Bitcoin: China Begins Enforcing Capital Controls, I speculated on the potential impact on the Bitcoin price if for the purposes of real estate Chinese buyers began using Bitcoin to export their wealth.

Now China is attacking another capital flight enabler, UnionPay. UnionPay is China’s bank card network operator. Previously while abroad, Chinese people could withdraw limitless amounts of cash into a foreign currency. In Macau you would walk up to a pawn shop and “buy” a very expensive item. Then you would “return” said item and get Hong Kong or US dollars in cash. The pawn shop would take a 3-5% cut of the item’s price as their fee for washing your money. This was a several billion US dollar a year business. Overseas UnionPay withdrawals are now limited to 100,000 CNY per year, which is about $15,500. For the Chinese who love overseas shopping trips to Paris, London, and Milan that amount barely buys two luxury handbags.

The first signs of a possible shift of wealth from China outwards through Bitcoin will be the premium of XBTCNY to XBTUSD. The above chart shows the 24 hour moving average of the premium between Bitstamp (XBTUSD) and OKCoin (XBTCNY) over the past 30 days. While the absolute premium at the present moment is not large, the trend is up and to the right. I plotted the premium against the price of Bitcoin. The two exhibit no correlation over this 30 day time period; however, I predict that if premium continues to rises, it will lay the groundwork for a moon shot.

In the 3% to 5% premium range, it becomes worthwhile to buy offshore, sell onshore in China, and remit money between China and Hong Kong. The difficult step is bringing CNY from China into Hong Kong. If you cross the border between the two territories the legal limit is 20,000 CNY (3,000 USD). At a 5% premium that is a 150 USD gross profit before exchange fees and bank wire fees. That isn’t compelling. This trade needs to be done in a size >$10,000 on a daily basis and electronically. Previously there were certain individuals who would take CNY onshore in China and remit you HKD or USD offshore into Hong Kong in any size.

If truly the traditional avenues of moving money out of China have been shut, then the premium will rise above 5%. That presents a clear signal that there is an imbalance of demand to sell CNY and buy Bitcoin. That is when the rocket ship will ignite.

A Desperate China Caps Card Withdrawals In Frantic Attempt To Stem Outflows

XBT Futures Term Structure

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Last Friday’s weekly price volatility (BVOL7D Index) declined to 2.79%. That is the lowest reading since we began collecting data in November of last year. The low volatility impacted March 2016 futures (XBTH16) dramatically. The annualised basis declined 7% WoW. Looking at the current term structure, the question is how much longer will this low volatility regime continue. As volatility returns to risk assets globally, will Bitcoin continue to sit out this party?

While XBTH16 still is the most expensive in terms of basis, I would be hesitant to sell it and buy spot. There is still more than 5 months left until expiry, and that is an eternity in Bitcoin. If 30 day realised volatility returns to 50%, basis will jump across the curve. The biggest winner will be XBTH16. It has the most time value remaining. If you believe that there are more volatile times ahead, go long XBTH16 vs. short XBTZ15. This upside volatility option will cost you 5% (XBTH16’s basis minus XBTZ15’s) in annualised basis terms. If the volatility increases, the spread between XBTH16 and XBTZ15 will widen and a profit will be realised.

Trade Recommendation:

Buy XBTH16 vs. sell XBTZ15 to profit from a volatility normalisation and a widening of the spread between the two contracts.

The last installment in our series on basis trading has been published. Lesson 3 deals with risk management.

XBT Spot

Screen Shot 2015-10-05 at 2.45.50 pm

Golden week has begun in China. Trading has ground to a halt. The banks and markets reopen on Thursday. Until the Chinese return expect a very boring market.

Outside of China, Bitcoin is hovering at the $240 level. Looking at a weekly chart of Bitcoin since the crash to $150 in January, a strong support between $220 and $230 has formed. The price has bounced off this level for the last 10 months. The last dip below $200 lasted minutes and within a day the price rallied above $220. The length of this consolidation phase is unknown, but when Bitcoin does reawaken the charts point to an upward bias.

Trade Recommendation:

Buy 25x leveraged October 2015 futures (XBTV15) with spot $235 to $240. The upside target price is $250.

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Ether Margin Trading vs. Futures Contracts Thu, 20 Aug 2015 04:58:40 +0000 http://D6375A8D-2A4D-4265-B6B0-1F18C104297B Soon after spot Ether trading began, leveraged products on the Ether/Bitcoin (ETHXBT) appeared. BitMEX was the first exchange to offer leveraged trading via a futures contract called ETH7D. The leading spot ETHXBT exchanges Poloniex and Kraken, have just started offering margin trading. This post will explain the differences and costs of margin trading vs. futures trading of ETHXBT.

Margin Trading

Margin trading requires that traders borrow Bitcoin to go long ETHXBT, and Ether to go short ETHXBT. Traders will then place their leveraged orders into the spot order book. The ability to borrow Bitcoin and Ether is not a sure thing. On Poloniex and Kraken other users must lend out their excess Bitcoin or Ether. If there is no supply, margin trading cannot happen. The interest rates paid are very volatile and can be expensive at times.

Futures Trading

The BitMEX ETH7D futures contract expires weekly every Friday. Each contract is worth 1 ETH, and traders must post Bitcoin as margin to go long or short. BitMEX allows 5x leverage. This means that there is no need to borrow ETH in order to short the ETHXBT exchange rate when using ETH7D. There is no daily interest rate charged either. The difference between where you buy or sell ETH7D and the current spot ETHXBT rate at the time represents an implied interest rate. For traders who have Bitcoin, ETH7D represents the easiest and cheapest way to go both long or short with leverage on ETHXBT.

How To Trade Ether Wed, 12 Aug 2015 13:30:12 +0000 http://5848563F-8635-4C37-857B-B48946314B47 The hottest new altcoin on the block is Ether (ETH). Ether is the token used to power the Ethereum protocol’s smart contracts. Now that Ether is freely tradable, this post will explain the different ways to express bullish and bearish views on this new cryptocurrency.

Spot Trading

Buying and selling Ether on a spot basis is quite simple. The most liquid Ether currency pair is Ether/Bitcoin (ETHXBT). Poloniex and Kraken are the leading exchanges by volume.

Buying Ether

To buy Ether, send Bitcoin to the exchange and exchange it for Ether. This must be done on a fully funded basis (i.e. there is no leverage).

Selling Ether

If you hold physical Ether, you can exchange it back for Bitcoin. Selling Ether you don’t possess is not possible.

Leveraged or Derivatives Trading

For most of the readers of this blog, leveraged trading / speculating presents a more interesting way to trade Ether. With the exception of Bitcoin and Litecoin, leveraged or derivatives trading on altcoins was not possible. BitMEX recognised that Bitcoin traders would like to speculate on Ether with leverage and using only Bitcoin as margin.

BitMEX launched the ETH7D, weekly expiring ETHXBT futures contract, when spot trading became available last Friday. Each ETH7D contract represents 1 ETH. The contract expires each Friday at 12:00 GMT on the ETHXBT exchange rate. All margin, profit, and loss are conducted in Bitcoin. The maximum leverage allowed is 5x.

Buying Ether Futures

BitMEX Ether futures contracts allow traders to speculate on the future value of the ETHXBT exchange rate. A trader who wishes to go long 1,000 ETH, must buy 1,000 ETH7D contracts. The beauty of ETH7D is that it requires Bitcoin as margin. The maximum leverage is 5x. If the ETH7D price is 0.005, the trader must post 1 Bitcoin as margin (1,000 Contracts * 0.005 ETHXBT * 20%). If the price rises to 0.006, the profit is 1 Bitcoin = (0.006 – 0.005) * 1,000.

Selling Ether Futures

Short selling, or selling something you don’t possess is usually impossible with altcoins. Using ETH7D, traders are able to placed leveraged bearish bets on Ether as long as they own Bitcoin. For example, a trader who wishes to go short 1,000 ETH, must sell 1,000 ETH7D contracts. Again only Bitcoin is required for margin. If the ETH7D price is 0.005, the trader must post 1 Bitcoin as margin (1,000 Contracts * 0.005 ETHXBT * 20%). If the price falls to 0.004, the profit is 1 Bitcoin = (0.004 – 0.005) * -1,000.

Placing leveraged trades, and shorting Ether are only possible with BitMEX’s ETH7D futures contract. ETH7D Contract Description