BitMEX Aims to Achieve ‘Near-Zero Downtime’ with ‘Aggressive’ Hiring After Major Outage

BitMEX has released the postmortem of the downtime it suffered on May 19 ensuring that “at no point during this event were any customer funds at risk,” and that no liquidations occurred while the exchange was offline.

The event resulted in 38,437 cancel-order instructions just 17 minutes before the resuming full functionality of the platform. Also, all the pending and new customer withdrawals were processed within 90 minutes of coming back online.

Working on improvements

As per its report, the exchange’s trading engine server “unexpectedly restarted” because of underlying hardware issues, which took the platform offline. After being recovered partially, it restarted a second time prompting the team to trigger a recovery procedure that utilized a new failover mechanism introduced earlier this year.

The whole ordeal took less than 2 hours while withdrawal wasn’t processed until an hour and a half after the trading resume successfully.

The crypto derivatives platform says it is taking steps to minimize the risk of any downtime which involves making architectural improvements so that the impact of hardware/software failures on the platform is reduced.

They have already replaced the technology behind its primary database that improves recovery times 4x and opens opportunities to scale it 15x over the next few months.

BitMEX is also growing its teams “aggressively” with most of its positions that involve data engineer, developer, analysts, and AML operations managers among others for primarily Hong Kong, Singapore, and San Francisco locations.

Trying to live up to the expectations

BitMEX’s market share has been declining ever since the March sell-off when the crypto derivatives platform reportedly suffered two DoS attacks and the price of bitcoin went down to $3,600 on it and could have crashed to zero, compared to $3,800 on other exchanges.

But still when BitMEX that offers 100x leverage went down, the market felt the effects as Crypto Twitter came alive.

“The burden of being on top. And no guarantee it lasts forever. This is just complacency,” said trader Ledger Status.

While Binance has been capturing its market share, BitMEX’s BTC balance also took a hit and diminished by 32% since then, although exchanges’ bitcoin balance has been on a downtrend on almost all the exchanges.

“The cryptocurrency industry has come a long way in a short amount of time. We know that the expectations on us have risen and we’re working 24/7 to further improve the resiliency of our platform,” said the company which aims to achieve “near zero down-time.”

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Author: AnTy

Derivatives Exchange BitMEX Hit with a Civil RICO Lawsuit From Bitcoin Manipulation Abatement

Crypto derivatives exchange BitMEX is facing yet another lawsuit.

Puerto Rican company BMA LLC formerly known as Bitcoin Manipulation Abatement is accusing the exchange of “deliberately designed, from the ground up” to facilitate “a myriad of illegal activities.”

This isn’t the first time that BMA is suing a crypto company, as just two weeks ago they filed a lawsuit against Ripple and its CEO Brad Garlingouse for an alleged violation of US securities law in XRP token sale.

Before that, in November, they targeted BitMEX competitor FTX alleging them of price manipulation only to dismiss the case voluntarily a month later.

Now, BMA and Pavel Pogodin who control this little-known firm filed a suit in the US District Court for the Northern District of California alleging BitMEX’s parent company HDR Global Trading reaped billions in illegal profits via wire fraud, unlicensed money transmission, money laundering, and violations of the Racketeer Influenced and Corrupt Organizations Act or RICO.

The plaintiff accused the company of illegally processing $3 billion each day, “which is the record volume for such unlawful activity in the entire history of the monetary regulation in the United States.”

This has been in violation of US federal law on the grounds that BitMEX failed to acquire a money transmitter license, alleges BMA.

Also, about 15% of the $138 billion trading volume recorded by BitMEX in 2019 belongs to the traders located in the US.

BMA also alleges the derivatives exchange manipulated the crypto markets by boosting the Bitcoin price artificially.

The lawsuit further notes the extremely high trading leverage, 100x offered by BitMEX and claims the exchange uses the server freezes and “system overload” to accept and reject trading orders during volatile markets to cause price fluctuations and trigger maximum liquidations.

Plaintiff also took shots at BitMEX co-founder and CEO Arthur Hayes, calling him “cryptocurrency’s P.T. Barnum” who is a “promoter for the ‘degenerate gamblers’ he solicits, and encourages speculative trading by (…) making bold predictions designed to elicit responses and move the market in a way that is profitable for BitMEX.”

HDR Global is aware of the complaint and will be defending itself against the “spurious claim.” An HDR spokesperson said,

“BMA has recently emerged as a serial filer of claims against companies operating in the cryptocurrency space, and is widely recognised for operating just like a patent troll.”

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Author: AnTy

Amended BitMEX Lawsuit Seeks $540 Million From Self-Proclaimed Early Investors

BitMEX, a cryptocurrency derivatives exchange, and its CEO Arthur Hayes has been slapped with a $540 million amended lawsuit by self-proclaimed early investors like Frank Amato and RGB Coin Ltd. They were later joined by Elfio Guido Capone.

The first lawsuit was filed back in December for $300 million, and now it has been amended to include Capone and the amount in damages has been increased as well.

The lawsuit claims that the plaintiffs in the case were the earliest investors and made a seed fund of $55,000 back in 2015 who were promised that their investment would be converted to equity at $10 million post-money valuation.

The plaintiffs seek $90 million for the current value of their equity as well as $450 million in punitive damages based on the current valuation of the derivative exchange.

The lawsuit further claimed that now CEO Arthur Hayes contacted all the three parties involved via Linkedin looking for angel investment as there were no backers for the derivative platform from as early as mid of 2014.

Amanto, at the time, was a commodity derivatives trader at JP Morgan & Co.who said that Hayes was looking for equity investors. He went on to claim that Hayes promised him his investment would buy him 0.5% of Bitmex equity at $50,000 along with equal rights as that of the other two founders of the exchange.

Amanto also claimed that Hayes assured them to notify him in case they plan for another fundraising so that he can retain his ownership percentage. The legal document read:

“Defendants representations and repeated assurances that Mr. Amato’s investment would entitle him to equity in BitMEX were either knowingly false, or were recklessly made to induce Mr Amato to invest money that Defendants never intended to allow to become equity in the business.

In reliance on Defendants’ representations, Mr. Amato executed the SAFE and then, on June 26, 2015, wired Defendants $30,000.”

Capone Accuses Hayes of Misleading and Giving False Information

The newly added plaintiff in the amended lawsuit Mr. Elfio Guido Capone accused Arthur Hayes of giving false information and procrastination after receiving the funding. Capone claimed that Hayes contacted him on a similar promise of offering 0.5% equity at $50,000 at $10 million valuations. When he inquired about other investors in the exchange, Hayes claimed that he had been promised $150,000 to $200,000 from other investors.

Capone contacted Hayes multiple times to convert his $50,000 investment into a 0.5% equity in the exchange, but Hayes backed down and offered $125,000 instead to forget about the equity promises.

Capone claimed that he declined the offer and reached to other two founders of the platform Sam Reed and Ben Delo. However, Ben Delo responded with a meme to his issue, claiming that even though they were headquartered in San Francisco, they can easily evade the accountability by incorporating in Seychelles.

The complaint also claimed that BitMEX established a shell company by the name of ABS Global in order to evade strict security laws. Which they can claim to regulators that Bitmex had no investment from US Investors and can also hide its operations out of California, which is the hub for all operations of the derivative exchange.

The lawsuit can get Bitmex in hot waters and puts them in the same league as Bitfinex which has been dealing with several class-action lawsuits for manipulating their yearly monetary records. BitMEX is one of the most popular crypto exchanges which handles billions worth of Bitcoin every day.

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Author: James W

BitMEX Users are Paying High Bitcoin Fees But Do They Really Care?

Crypto derivatives platform BitMEX “has a significant impact on the Bitcoin network and user fees,” wrote 0xB10C, a German Bitcoin freelance developer.

The developer explained that the platform broadcasts multiple megabytes of large transactions into the Bitcoin network which in turn affects the transaction fees paid during the US business hours and European afternoons.

These transactions are primarily withdrawals by BitMEX users which the exchange process by hand and do not spend Segwit outputs.

BitMEX users paying 6.8% of the total daily transaction fee

Between September 2019 and March 2020, BitMEX broadcasted around 415,000 transactions into the bitcoin network which took up 593 MB and a miner fee of 181 BTC, representing about 2.8% of the total bytes and 3.8% of the total fees broadcast in this period.

These fees, however, are not paid by BitMEX but deducted from the withdrawing users.

Miner fees are chosen by users when withdrawing and 10,000 satoshi is the smallest and most commonly (44%) used withdrawal fee while 50,000 satoshi the least by just 3%.

Meanwhile, feerate, the result of the combination of a user-picked fee and an algorithmically chosen number of inputs, estimators adjust their recommendation, and the wallets using them set a higher feerate.

They also recommend a high feerate to outbid BitMEX transactions “which take up a significant part of the available space in the next blocks.”

Although hard to calculate the fees paid by BitMX users, it is estimated they “cause an average fee rate increase by 4 sat/vbyte between 13:00 UTC and 21:00 UTC.”

As such, about a total of 1.7 BTC of additional fees are paid by Bitcoin users per day due to the BitMEX broadcast, 6.8% of total daily transaction fees.

And the spike in fees remains at an elevated level before to pre-broadcast levels at around 22:00 UTC and those with low fee rate might take a few hours until they are included in a block during this period.

No one really feels the pain

Even if these fees are passed on to their users as such still an incentive to lower the fees, do users really care about fees when it is already small enough? Nic carter, co-founder of Coin Metrics said,

“It’s a bit strange to realize that fees would be close to 0 if exchanges used better practices. Their profligacy helps maintain the fee pressure.”

He further pointed out that “the exchange has no real incentive to pursue the cheapest fees for their users.” Developer 0xB10C said,

“On one hand, the additional fees paid by network users (due to the BitMEX broadcast) increase the network security. On the other hand, nobody likes to pay these fees.”

As independent crypto researcher Hasu says,

“the real problem is the fees are so low on an absolute basis that neither users nor exchanges (in second-order) really feel the pain.”

What can be done?

The developer further noted that the exchange can greatly reduce its transaction size by implementing the current industry standards. The developer recommends,

“Once activated, utilizing Schnoor and Taproot combined with output batching seems to be the most promising for improving the transaction count and size.”

He further suggested using compressed public keys instead of four uncompressed public keys in every BitMEX input. Transaction batching and spending SegWit, whose adoption has declined from its all-time high at 60% peak in January 2020 to below 50%, are other options.

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Author: AnTy

BitMEX Adds Japan to its List of Restricted Jurisdictions Starting May 1st

  • Cryptocurrency derivatives platform BitMEX will no longer serve Japanese users.

As per the official announcement on Tuesday, the Seychelles-based exchange is restricting access to its users who are Japanese residents starting 30 April 2020, 23:00:00 JST for new users, and 1 May 2020 for existing registered users.

As such, a first time Japan resident user will be unable to trade while any registered Japan resident customer will no longer be able to open a new position or increase an existing open position, open positions will be unaffected.

This is not the first time BitMEX is restricting users, back in August, the exchange added Seychelles, Hong Kong, and Bermuda to its list of restricted jurisdictions that already included USA, Quebec, Hong Kong, China, Crimea, Iran, Syria, North Korea, and Sudan, from accessing its platform.

Why the restriction?

This new restriction has been in response to the amendments to the Japan Financial Instruments and Exchange Act (FIEA) and Japan Payment Services Act (PSA) effective as of 1 May 2020.

As per the amending regulations, crypto exchanges have to register with the regulatory authorities and comply with the relevant provisions.

Crypto exchanges also have to manage users’ money separately from their own cash flows. In a move to tighten restrictions on the crypto custodians, the agency now requires the exchanges to find a third-party operator to hold their clients’ money.

Moreover, they are required to use “reliable methods” like cold wallets and in case they are using hot wallets, exchanges would have to hold “the same kind and the same quantities of crypto assets” so that users can be reimbursed in the event of theft.

“We support the efforts of regulators to help establish standards for cryptocurrency products that will underpin the advancement of this rapidly growing asset class,” said the exchange.

“We will continue to work with the Japanese regulatory authorities to support their aims for the Japan market and will keep our Japan users updated.”

As we reported, since Black Thursday, BitMEX has lost nearly 32% of its market share and much of that has been grabbed by Binance.

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Author: AnTy

BitMEX’s Insurance Fund Will Grow Slower with Exchange’s Latest Trial Changes

Crypto derivatives platform BitMEX is reducing the Base Maintenance margin requirement for both Bitcoin and Ethereum. But for now, it is only for a trial period. As stated in their blog,

“These changes are a part of our ongoing efforts to fine-tune our platform for an even better trading experience, and reflect users’ feedback.”

While the Base Initial Margin requirements will be unchanged, the Base Maintenance Margin will be reduced on April 17th, Friday.

Source: BitMEX Blog

For traders on the Base Risk Limit that is below 200 XBT notional for XBTUSD and 50 XBT for other contracts, this change means Initial Margin requirements remain the same while Maintenance Margin requirements will reduce and the difference between Initial Margin and Maintenance Margin will increase, as such the Liquidation Price will move further away from Average Entry Price.

As for traders above the Base Risk Limit, Initial Margin requirements will reduce as such Bankruptcy Price moves closer to Average Entry Price, and Maximum Leverage available will increase.

Reduction in Maintenance Margin requirements means Liquidation Price will move closer to Bankruptcy Price, and the amount of Maintenance Margin lost in the event of liquidation will reduce.

The difference between Initial Margin and Maintenance Margin will increase, so Liquidation Price will move further away from Average Entry Price.

This means, “insurance fund grows slower,” said popular trader with the pseudonym Lowstrife.

Another popular trader Hsaka said, “Mex decided they were sufficiently satisfied with the rate of growth of the insurance fund. Congratulations on the additional cushioning on your 100x.”

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Author: AnTy

It’s Bitcoin’s Biggest Test, As Fed’s Money Printer Goes Brrrr: BitMEX CEO Arthur Hayes

Cryptocurrency derivatives exchange BitMEX co-founder and CEO Arthur Hayes in his latest newsletter talked about the current economic environment with high inflationary expectations. According to him, while gold is set to shine in this changed economic regime, it is Bitcoin’s “biggest opportunity.”

In March, Bitcoin crashed by almost 53%, peak to trough as investors raced to the US dollar. According to Hayes, this 2020 Coronavirus crash was “inevitable.” As we have been seeing this past month, the economy and financial markets are set loose and this could be Bitcoin’s opportunity, in its short lifetime. Hayes said,

“Where the Bitcoin price may shine is in the volatile inflationary aftermath of the response to the crash.”

Fed printer Goes Brrrrrr, Got Gold & Bitcoin

In March, Bitcoin wasn’t the only to crash, it actually fell alongside every other asset, equities, stock market, oil, and gold. The 2020 coronavirus stock market crash is establishing itself as “one of the great stock market crashes,” right alongside the Global Financial Crisis of 2008, Dotcom bubble of 2000, 1997s Asian crisis, 1992’s Black Wednesday, Japan asset bubble in 1991, Black Monday of 1987, Oil crisis in 1973, and Wall Street Crash from 1929.

Central banks responded fast, purchasing more government debt and cutting the interest rate down to 0%. However, below zero and into the negative territory means “the public will simply hoard physical cash.”

In his post written in the week following the market crash, Hayes said that we have reached the “reversal interest rate” and the limits of central bank expansionary monetary policy and any further extreme measures will have a net negative impact on the real economy.

Central banks’ monetary policy has an “uncertain outcome” with inflation as the clear winner. And the inflation will come and it will be a shock which we haven’t seen for over 30 years, as such it will be a sudden economic and cultural shock, argued Hayes.

This will take us back to the 1970s when inflation was volatile and reached a high of 15%. And financial markets won’t be unaffected by this which is used to the current regime where they are protected by a “central bank put.”

“Volatile times are ahead,” Hayes said.

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Author: AnTy

QE and Quantitative Hardening to Push Bitcoin Prices by “Hundreds of Percent”

  • The halving “will cause significant stress” – BitMEX Research
  • “My personal view is that we’ll see bitcoin hit $100,000 before December 2021” – Pomp

Just over a month is left in bitcoin reward halving which according to Anthony Pompliano, host of The Pomp Podcast will be like “rocket fuel” for the world’s leading cryptocurrency.

The bitcoin reward halving occurs every 210,000 blocks or 4 years that will see miner flow to be cut down in half from 1800 BTC per day to 900 BTC per day. This halving will also see the scarcity-based stock-to-flow to double from 27 years to 54 years.

The Morgan Creek Capital Management co-founder likened this to gold miners cutting their supply by half.

According to Pompliano, while quantitative easing would push gold’s price to the $2,000 to $2,500 range, it won’t be a material increase compared to bitcoin’s.

“Over the next two years, I think that it will have hundreds of percent of appreciation, given the quantitative easing and the volatility it brings,” said Pompliano.

“My personal view is that we’ll see bitcoin hit $100,000 before December 2021.”

Quantitative Hardening

Blockstream founder and CEO Adam Back came up with another term for this event, “quantitative hardening.”

He explained how central banks have restarted QE programs to tackle the impact of coronavirus on the economy. QE is a tool used by central banks to inject money into the economy and allows them to create money which they then use to buy government debt.

The aim of QE is to boost spending and investment in an economy by firing up the money printer.

Unlike this, bitcoin with a limited supply of 21 million BTC ever, will have a supply shock.

“Bitcoin halving is “quantitative-hardening,” fiat undergoing lots of politically driven quantitative easing. Bitcoin supply algorithm starts quantitative hardening next month,” said Back.

Impact of Halving

According to BitMEX’s latest research on Mining Incentives, when the halving occurs, the network hash rate may decline by 30% to 35%.

However, BitMEX’s estimate is based on the assumption that the BTC price won’t change, all miners are rational, and a significant proportion of miners aren’t operating at a loss. But with the ongoing heightened volatility, it’s to be seen how miners and the market will react.

In March, after reaching its all-time high this month the hash rate already dropped 45%, after the price of bitcoin crashed. However, BitMEX feels, the halving

“will cause significant stress. On the other hand, given the actions governments have taken all around the world in order to mitigate the impact of COVID-19, many other industries will also be going through a challenging period at the same time.”

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Author: AnTy

BitMEX CTO: A Botnet Attack Caused the Service Downtime During Crypto Market Crash

BitMEX exchange, has revealed what caused a downtime in their network last week amid the crypto market bear run. The company’s CTO, Samuel Reed, updated stakeholders via his twitter handle noting that a botnet had compromised the system;

The tweet was a response to an earlier post by BitMEX founder, Arthur Hayes, who had acknowledged concerns by users. Hayes highlighted that they are working to address the questions in a transparent manner over the coming days.

The BitMEX Botnet Attack

According to Reed, this botnet had made similar attempts on BitMEX’s ecosystem back in February. However, it was not successful given the exchange deployed its DDoS mitigation approach that have been effective for L3 & L4 attacks.

The attackers appear to have resurfaced on March 13th and their impact was felt this time coinciding with the market slump. Reed pointed out that the botnet compromised BitMEX through an end point that was consistently, reliably slow. This slow query was however identified after the second attack and has since been fixed as per the twitter thread;

“We’re making systemic changes on our backend to ensure this can’t happen again, and re-reviewing older systems to simplify, de-couple, isolate, and improve performance.”

On the brighter side, some crypto analysts have said that BitMEX’s operational halt prevented BTC from dipping further down to historic lows. BitMEX had earlier on attributed its network malfunction to hardware issues by one of its cloud providers but this position has gradually changed. Reed, the firm’s CTO, mentioned that they will continue to document any technical advances made within this area.

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Author: Edwin Munyui

What’s the Point of an Insurance Fund if It Wasn’t Used on the Worst Day In BTC’s History

  • No one to blame for the debacle but ourselves because BitMEX has “no interest in actually providing a functioning platform”
  • “Is this really what we set out to build? A speculative playground where traders and exchanges are the ones controlling our world” – Melody He, crypto hedge fund founder

One of the worst days of Bitcoin resulted in crypto derivatives exchange BitMEX recording one of its highest liquidations ever.

Once the Bitcoin price broke below $4,800, it was dominated by “cascading liquidations,” becoming its “own monster,” said Ari Paul. This widened the spread between the Bitcoin price on BitMEX, where it found the low at nearly $3,600 and spot exchange where it was around $3,700-$3,850.

As we reported, Sam Bankman-Fried, founder and CEO of competitor exchange FTX accused BitMEX of being responsible for Bitcoin’s violent sell-off. He said the price of bitcoin would have gone to zero if BitMEX hadn’t halted its platform under the pretense of “hardware issue.”

This “hardware issue” was the ”kill switch” like the circuit breaker in the traditional stock markets. “I think it was because their market was out of control. I think they made the right decision,” said pseudonymous trader Lowsrtife.

After they halted trading, the bitcoin price bounced 35% in under 25 minutes.

BitMEX then took over the manual control of the engine to make more “profit” from it and “became very reluctant to sell until the market bounced over 1000 points.”

It’s Our Own Doing

Lowstrife believes BitMEX didn’t cause the dump as such a fall would have happened anyway. But what’s clear is that “the market ceased to operate rationally below $5000.” Because of the panic that began from the broader economic turmoil in a run to cash and liquidity, BitMEX got overloaded but their liquidation engine wasn’t prepared to handle 90% of the long-side getting REKT.

For all of this, the trader said there was no one to blame but yourself because BitMEX has “no interest in actually providing a functioning platform.”

“BitMEX was undoubtedly the biggest bull (not by choice) due to the sheer amount of Long Swaps they inherited from traders who had been liquidated,” said trader with pseudonym Flood (BitMEX).

This move on BitMEX saw the liquidity in options market evaporating and 5% spread on spot markets.

Lowstrife also points out how the insurance fund of BitMEX had 35,508 XBT on March 11, 2020, and 35,210 XBT on March 14 questioning,

“What is the point of the insurance fund if, after the worst & most violent day ever in crypto, none of it was used?”

Now, the industry believes, this is not only the time for the crypto exchanges to look for circuit breakers but also as Melody He, co-founder of the crypto hedge fund, The Spartan Group said,

“After this, we should rethink the crypto financial system – is this really what we set out to build? A speculative playground where traders and exchanges are the ones controlling our world.”

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Author: AnTy