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BitMEX Insurance Fund – What is this? Pros and Cons

BitMEX insurance fund is a feature not so common among trading platforms, and these kinds of functions make a difference between market leader and those not so successful. Despite the fact that cryptocurrencies still have a relatively juvenile market, since the large breakout of 2017, some leaders have been established among crypto trading platforms. These […]

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The official website simply states that “BitMEX is a trading platform that offers investors access to the global financial markets using only Bitcoin,” and this is a thing that differentiates BitMEX from other trading platforms. However, it is not the only one.

BitMex offers its users a variety of other options which others do not.

From perpetual, leveraged swap contracts, across a variety of leverage options and many different kinds of trading contracts, to UP and DOWN trading options and Futures, BitMEX has taken crypto trading to another level.

Furthermore, their users have an insurance fund, which is the main topic of this article, so let’s dive into explaining what it actually is and how it functions.

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What is an insurance fund?

In terms of trading, an insurance fund can be defined as a protective tool that shields from a trading contract loss. For example, let’s say that liquidation of the contract happens, and when the execution price is lower than the bankruptcy price, the insurance fund will be used to cover for the losses.

What is BitMEX insurance fund?

BitMEX insurance fund is marketed by the company as a tool to “help ensure winners receive their expected profits, while still limiting the downside liability for losing traders.”

What that means is that when a trader opens a  leveraged position and their maintenance margin is too low, their position gets liquidated and there is an insurance fund, currently stated to be worth around 21,000 Bitcoin (BTC) ensuring that a trader doesn’t end up in debt.

However, BitMEX insurance fund doesn’t work exactly like its counterparts in traditional markets. Once the trader gets liquidated after opening a position with leverage on BitMEX, his equity related to the position always goes down to zero.

Here is how it actually works:

Say that the trader has:

  • 100x long position
  • 1 BTC
  • price at the opening $9000

If the price of Bitcoin falls by 0.5% (to $8,550) the contract gets liquidated. Now, the 100 BTC position needs to be sold on the market. A trader that got liquidated has no consequence what the price of that transaction will be since he lost one Bitcoin in any case.

Therefore, we can say that BitMEX insurance serves more to ensure that winning traders get what they traded for than to ensure the losing party financial security. What BitMEX will do for the losing trader is that they have other mechanisms that ensure that the trader’s balance can’t go below zero.

Still, BitMEX warns that considering that the insurance fund is capped, an occurrence where there aren’t enough funds to cover all the winners’ gains is possible.

Do all trading platforms have an insurance fund?

Insurance funds are still not common among cryptocurrency trading platforms because simply put, these institutions are still not as powerful as the traditional exchanges. This also happens because of the very nature of the underlying assets.

However, some BItMEX competitors, like Deribit or OKEx do offer the same solution.

Should I trade on BitMEX? Pros and Cons

Pros

  • High leverage
  • Insurance fund
  • Liquidity
  • Lots of different products
  • No deposit/withdrawal fees
  • BitMEX Testnet

Cons

  • A high degree of knowledge needed to use the platform
  • Trading in BTC exclusively

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If you found what you were looking for in our What is BitMEX insurance fund article, you may also be interested in reading What is BitMEX Testnet and How to Short Bitcoin.

Source: https://www.cryptocointrade.com/crypto-trading-blog/what-is-bitmex-insurance-fund/?utm_source=rss&utm_medium=rss&utm_campaign=what-is-bitmex-insurance-fund

Blockchain

‘Bitcoin maxis’ like Solana, but is there sound logic to that

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Recent changes in cryptocurrency market dynamics have fueled the popularity of altcoins like Solana [SOL]. It recently became one of the most trending blockchain platforms around on the back of its surging price.

The cryptocurrency, in fact, had a 1-year ROI of over 4,200%, despite dropping by 34% since its peak in early September. Despite the latest hiccup in value, however, market observers believe the project has managed “winning over a significant number of Bitcoin Maxis or near-maxis.”

Ikigai Funds’ Travis Kling offered this observation on Twitter when he said,

“After talking to a bunch of folks over the last couple months, it’s pretty clear that SOL is successfully winning over a significant number of BTC Maxis or near-maxis, which have previously owned zero ETH or very little ETH.”

While the crypto-space is competitive, the tech-twist to the age-old saying – “competition of your competition is your ally” also holds true. Solana is not competing with Bitcoin. Instead, it is competing with Ethereum’s position in decentralized finance, NFTs, and smart contract offerings. Given the fact that transacting on Ethereum is still a pain for some users, Solana’s cheap and fast transactions provide a better alternative to many.

Solana’s DeFi projects recently crossed $3 billion, despite Ethereum hosting the maximum number of DeFi and NFT projects. While Bitcoin “maxis” are also opting-in for smart contracts, they prefer SOL over ETH, according to Kling.

Why? According to the exec,

“I think maxis look at ETH vs SOL and think –

Well as long as its not going to be all that decentralized, might as well have a smart contract platform that can actually handle enough throughput with cheap enough fees where it can really scale, instead getting choked up like ETH.”

However, not everyone agrees with Kling’s opinions. Many believe the decentralization narrative to be wrongly used by Kling, with another Twitter user @mikemcg0 noting that Ethereum is “more decentralized than BTC.” Anyone can run an Ethereum validator,” he said, “but only a select few oligopolies can mine BTC.”

Even so, Bitcoin mining has spread out even more after the recent China crackdown. Although the process is extensive in terms of effort, time, and money, according to another user, “anyone can” mine BTC “if they have the entrepreneurial mindset.”

Now, the latest outage faced by Solana did raise questions about the level of centralization. However, that has not really discouraged those who want to indulge in DeFi, NFTs, and smart contracts. As Solana forges new contracts with Hacken Foundation and Gate.io, others institutions like Osprey Funds and Grayscale are in a race to include Solana in their respective bouquet of products.

In fact, Osprey Funds has already registered Osprey Solana Trust with the SEC.

‘Ethereum killer’ or not, Solana is en route to gaining more interest from the booming crypto-market. Even turning so-called BTC maxis in the process.

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Source: https://ambcrypto.com/bitcoin-maxis-like-solana-but-is-there-sound-logic-to-that

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Blockchain

Europe Now World’s Biggest Crypto Economy: Boasts Over $1T Worth of Transactions

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Central, Northern, and Western Europe (CNWE) has grown into the world’s largest cryptocurrency economy since July 2020. The region experienced a massive increase in trading activity since then– particularly in the DeFi space.

The European DeFi Boom

Data from Chainalysis shows that CNWE received over $1 trillion in cryptocurrency over the last year alone. This represents 25% of global trading activity. Furthermore, it is responsible for at least 25% of all crypto value received by other regions, including 34% of the value received in North America.

This makes the EU the most concentrated in the world in terms of cryptocurrency trading volume. This is partially due to increases in all forms of trading activity over the past year, coming mostly from institutional investors.

Large institutional transaction value grew from $1.4B in July 2020 to $46.3B in June 2021, coming to take up half of all CNWE trading activity. The most pronounced increases were seen on DeFi protocols, where over 80% of these large institutional transactions were sent in June.

The impact of DeFi is further established when ranking coins in terms of transaction activity in the region. Despite being the largest cryptocurrency by market cap, Bitcoin heavily trails Ethereum in transaction volume among large institutional investors. Additionally, DeFi protocols took up a majority share of funds received by cryptocurrency services in CNWE in June 2021.


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The Decline in Eastern Asia

CNWE has seen significant absolute increases in its crypto trading volume. However, its new place as the world’s largest trading hub is partly due to a sharp decline in market share held by Eastern Asia– the previous world leader.

In early 2019 the region held over 30% of global transaction volume. This figure has since fallen sharply to about 15% – less than CNWE, North America, and even Central and Southern Asia.

This may be related to China’s continued push to prevent and discourage crypto trading within its borders. China re-announced their ban on crypto trading in the country days ago, and have been moving to prevent all access to exchanges within the country.

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Source: https://cryptopotato.com/europe-now-worlds-biggest-crypto-economy-boasts-over-1t-worth-of-transactions/

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Blockchain

Here’s why a multi-CBDC bridge is being tested on Ethereum

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The race to launch the first CBDC is one the world is following intently. While most have their eyes fixed on China’s digital yuan pilot, a group of countries has come together to take CBDCs a step further.

Phase 3 of Project Inthanon-LionRock saw BIS Innovation Hub Hong Kong Centre, the Digital Currency Institute of the People’s Bank of China, and the Central Bank of the United Arab Emirates experiment with a multi-CBDC bridge or an mBridge.

What does this mean?

The mBridge initiative would ideally allow central banks in different countries to issue and redeem their own CBDCs across borders on a common platform – without having to depend on correspondent banks.

Meanwhile, commercial banks would be able to “submit peer-to-peer CBDC push payments.”

The BIS September 2021 report stated,

“If successful, an efficient, low cost, compliant and scalable multi-currency, multi-jurisdiction arrangement can provide a network of direct central bank collaboration, greatly increasing the potential for international trade flows and cross-border business at large.”

The report further clarified,

“The prototype demonstrates a substantial improvement in cross-border transfer speed from multiple days to seconds, as well as the potential to reduce several of the core cost components of correspondent banking.”

Here, it is also interesting to note that the project’s Phase 2 prototype was built on Ethereum. This was because the core layer of the prototype contained the blockchain ledger and smart contracts.

Notes on features

As a multiple CBDC project, regulation and compliance were functional requirements. Central banks would be able to monitor transactions in real-time, set balance limits, control the balance held by their commercial banks, and use data for surveillance.

Scalability was also part of the design to later onboard more participants and jurisdictions.

However, one complication was the wide difference in remittance charges across countries. While the global average was calculated to be 6.38% of the remitted sum, the report observed that even a percentage as low as 1% would be costly for payments in the millions of dollars.

An update from China

Alongside the mBridge project, China has also been steamrolling ahead with its CBDC program.

Changchun Mu, Director-General of the DCI of the People’s Bank of China. confirmed that e-CNY pilots have been taking place in 10 areas.

Mu added,

“Payment methods such as QR code and tap-and- go have been well-supported and innovative services such as dual-offline payment and wearable device payment have been tested for safety and efficiency.”

Meanwhile, Howard Lee, Deputy Chief Executive of the Hong Kong Monetary Authority, suggested that an e-HKD could also be in the works.

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Source: https://ambcrypto.com/heres-why-a-multi-cbdc-bridge-is-being-tested-on-ethereum

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