【Special Feature】Maximizing Profits in Contract Trading! A Comparison of Five Entry-level Exchanges

The emergence of BitMEX in 2014 opened the first window for trading derivative products of cryptocurrencies, bringing more diverse ways to trade Bitcoin and other cryptocurrencies that were originally only traded in spot form. In 2016, BitMEX further introduced trading with leverage of up to 100 times, earning the platform the nickname of the largest casino in the cryptocurrency world.

Today, cryptocurrency derivative products have gradually become the focus of market investors. Compared to 2016, the trading volume on the BitMEX platform has grown by more than five times. According to a report by Bloomberg, the global daily trading volume of cryptocurrency derivative products is 10 to 18 times that of spot trading. More and more exchanges are realizing the demand from investors for cryptocurrency derivative products and are launching futures contracts, options, and other derivative products to tap into this market.

With so many exchanges available, how should investors choose? This article will introduce several mainstream derivative product exchanges in the market to help investors choose the investment platform that suits them best.

Advertisement - Please scroll down for more content

OKEX

OKEx launched Bitcoin perpetual swaps and futures contracts in 2018, attracting a large number of users from mainland China. In a short period, its derivative trading volume caught up with the well-established platform BitMEX, becoming a mainstream derivative platform. Compared to other derivative platforms, it ranks first in trading volume over the past seven days. Overall, the exchange boasts good liquidity in both spot and derivative trading.

OKEx Full-screen Contract Trading Interface (source: OKEx)OKEx offers a variety of derivative products, including perpetual swaps, futures contracts, and options contracts. The contracts are further divided into coin-margined contracts and USDT-margined contracts.

USDT-margined contracts are more commonly understood by users, while coin-margined contracts use cryptocurrencies (such as BTC) as margin and settle in USD equivalent at closing. These are typically used by hedging users who need to hold the coin for the long term.

Regular investors can choose contract types based on market trends. Generally, when the short-term market is bullish, they can go long on coin-margined contracts; when the market is bearish, they can short USDT-margined contracts. As for supported coins, OKEx's derivative products mainly focus on major coins with high market value, including BTC, ETH, LTC, ETC, XRP, EOS, BCH, BSV, and TRX.

In terms of user interface, OKEx's design is clean, user-friendly, and tailored for its primarily Chinese user base. The default language is Chinese, making it more accessible for users who are not fluent in English. The platform also provides various order types such as Iceberg Orders, Trailing Orders, and advanced limit orders, offering convenience and professionalism in trading operations.

Huobi

Following OKEx's introduction of contract trading, Huobi quickly launched its own contract trading platform Huobi DM at the end of 2018. While starting later than OKEx, the platform has shown rapid development in terms of product design, contract depth, spread, and trading volume, comparable to OKEx.

In terms of products, Huobi DM currently does not support perpetual swaps but offers weekly, bi-weekly, and quarterly futures contracts, all of which are coin-margined contracts and do not support USDT as margin. Therefore, compared to other platforms, Huobi's derivative products lack diversity. In terms of supported coins, Huobi supports the same major coins as OKEx, including BTC, ETH, LTC, ETC, XRP, EOS, BCH, BSV, and TRX.

The user interface of Huobi DM is similar to OKEx's, providing a smooth and visually appealing trading experience. However, some users believe that OKEx's full-screen trading interface offers a better user experience than Huobi DM.

Regarding order placement, Huobi DM allows users to place orders at prices closest to the current market price, which is convenient during periods of high market volatility. Other functions do not differ significantly from other platforms, with minor differences in terminology, but essentially offering the same functionality.

BitMEX

Founded in 2014, BitMEX is a well-established cryptocurrency derivatives exchange in the market. According to the founder of TokenAnalyst, the platform earns at least $700,000 in trading fees from derivatives trading daily, positioning itself at the center of the entire ecosystem for years. Compared to other derivative platforms, it ranks third in trading volume over the past seven days.

It is important to note that BitMEX is a purely derivative trading platform and does not facilitate spot trading. Therefore, users need to incur additional on-chain transaction costs when managing their assets. However, BitMEX offers a unique feature where Makers enjoy a 0.025% fee rebate, meaning they receive a 0.025% rebate on the trading amount if their order is executed, eliminating the need to pay fees.

BitMEX offers a limited variety of derivative products, focusing on perpetual swaps and futures contracts. Although the platform's CEO, Arthur Hayes, has mentioned plans to introduce bond and options products, no further updates have been provided at the moment.

While BitMEX supports BTC (referred to as XBT on BitMEX), ADA, ETH, XRP, EOS, LTC, TRX, and BCH, only XBT, ETH, and XRP are supported in perpetual swaps. Other coins are offered only in monthly futures contracts, and BitMEX's contracts require XBT as margin, not supporting USDT.

In terms of trading interface, BitMEX adopts a modular design that allows users to customize the interface according to their preferences. However, compared to other platforms, BitMEX's interface may appear more data-intensive and crowded, potentially overwhelming for some users.

Binance

As a leading spot exchange, Binance was not an early entrant into futures trading. However, its large user base, marketing resources, and rapidly expanding product offerings have been advantageous in capturing market share.

After acquiring the contract trading platform JEX and rebranding it as Binance JEX, Binance further launched its own contract trading platform, Binance Futures, on September 11, 2019. Both brands offer futures contracts, with Binance's platform offering a wider variety of contracts compared to Binance JEX, which includes rare options contracts. Binance's contract platform ranks fourth in trading volume over the past seven days, with BTC futures trading volume in February being more than 50% higher than BitMEX and OKEx.

Binance's contract platform exclusively offers perpetual swaps with USDT as margin. Additionally, Bitcoin contracts on the platform have the highest leverage of up to 125x in the market. The platform supports a wide range of coins for trading, including BTC, ETH, BCH, XRP, EOS, LTC, TRX, ETC, LINK, XLM, ADA, XMR, DASH, ZEC, XTZ, BNB, ATOM, ONT, IOTA, BAT, VET, QTUM, IOST, among others.

Binance is adopting a multi-coin strategy, aiming to dominate the contract trading market similar to its success in the spot market. However, investors should be aware that with smaller market cap coins, funding rates may spike during strong bull or bear trends.

One unique feature of Binance is the "Mixed Margin Trading Contract." Binance introduced its stablecoin BUSD in August 2019, allowing users to use BUSD in their spot accounts as collateral and directly borrow USDT margin in their contract accounts based on a floating ratio. This enhances the utility of BUSD and eliminates the need for users to transfer USDT from spot wallets to contract wallets. The actual convenience and benefits of this feature vary among users. It's worth noting that Binance is planning to introduce BTC as an eligible collateral option, potentially providing more arbitrage opportunities for traders.

Overall, Binance's user interface closely resembles OKEx's, with various order types and functions explained through floating windows, offering a better user experience.

FTX

FTX stands out as the most diverse and innovative platform in the futures contract market. Since its launch in April 2019, it has received investment from Binance and Alameda Research and attracted well-known investment institutions from both sides of the strait, such as Proof of Capital, Consensus Lab, FBG, and Galois Capital. FTX has gained recognition in the crypto community in both regions. Currently, FTX ranks seventh in contract trading volume, with a significant gap from the top three platforms.

FTX's CEO, Sam Bankman-Fried, is also the co-founder of the high-performing market maker Alameda Research. He has stated, "The exchange structures represented by the Asian market are designed for local cryptocurrency traders and retail traders, enabling rapid trading and operations. In contrast, the structures represented by the U.S. market are designed for Wall Street institutions, ensuring security while interacting with institutions." FTX's innovative and diverse contract products have undoubtedly attracted the attention of many retail traders.

FTX offers leverage of up to 101x on its contracts, including futures contracts, perpetual contracts, as well as index contracts such as altcoin contracts, privacy coin contracts, platform coin contracts, and volatility contracts. It has even introduced topical contracts like the U.S. presidential election contract.

One of its unique features is supporting automatic collateral conversion. Apart from USDT, users can also use BTC, ETH, BNB, and the platform's native token FTT as collateral. In cases where there is insufficient USDT for margin payment, the platform automatically deducts margin from the prioritized coins in the aforementioned order.

FTX has engaged in extensive community marketing in Taiwan. Based on interviews with FTX users, many are first-time contract traders who previously only engaged in spot trading. Despite the diverse contract types offered by FTX, community information exchange has facilitated newcomers in understanding and exploring different products.

Summary of Five Derivative Platforms

Conclusion

The flourishing development of derivative products signifies the growing maturity of the cryptocurrency market. Cryptocurrency derivatives are becoming inevitable investment targets for investors. Among the five exchanges mentioned, there is no single "best" or "worst" platform. Users should primarily consider their investment habits and needs when choosing a platform.

For example, if you trade both spot and futures, platforms like Binance and OKEx would be suitable. If you focus solely on futures contracts, BitMEX and Huobi are viable options. For those who prefer a diverse range of products, FTX is the top choice. Regarding platform credibility, it's essential for investors to observe and judge independently to avoid being influenced by potentially biased articles circulating online.

Further Reading

• CFTC Chairman: Regulated Cryptocurrency Derivatives Will Drive "Cryptocurrency Legalization"
• By the End of 2020, Cryptocurrency Derivatives Could Reach 20 Times the Spot Market

Join our Telegram for the most accurate blockchain news and cryptocurrency updates!