CryptoDaily Spoke With BitMEX CEO Arthur Hayes About His Vision, Leverage, Where The Industry Is Headed, And His Feelings About CZ. Meet The Man

1. What inspired you and Ben Delo to launch BitMEX?

I left Citibank in the summer of 2013, and knew that another gig in banking just wouldn’t be as lucrative or engaging as I wanted my career to be. My family and friends always knew I wanted to be an entrepreneur, and not a career banker. After six months of full-time trading Bitcoin futures contracts on a platform called ICBIT, I realised there was an opportunity to improve the development of this space and I could build something better. Reaching out through my network, I located my two co-founders, Ben Delo and Samuel Reed. I pitched them the idea to start a Bitcoin derivatives-only trading platform, and we started building BitMEX in January of 2014.

From there, the company has grown to be one of the most liquid platforms to trade crypto risk globally. BitMEX trades up to $3 billion dollars a day in assets with volumes having grown as much as 8500% in 2017. Now, we continue to re-architect our trading engine to support growing trading volumes. BitMEX has a world-class team of developers and engineers who are focused on improving the system so our users have a great trading experience, 24/7, 365 days a year.

2. How did your career as a market-maker on the ETF desks at Deutsche and Citigroup prepare you for launching and managing BitMEX?

When I worked at Deutsche and Citigroup, I learned that derivatives trading accounts for multiples of the traditional spot market. The leveraged trading market was extremely underdeveloped in the space at the time and I saw an opportunity that crypto would be a long-lasting asset class. At the time there was only one offering for bitcoin derivatives, so by combining my experiences with my interest in cryptocurrency, BitMEX’s offering was able to appeal to traders who wanted more options for derivatives beyond the standard platforms.

3. What surprises you the most about the cryptocurrency trading exchange industry?

What surprised me was the dominance of retail traders. Usually retail investors and traders are the last to adopt a new asset class, and so when I had the idea to create BitMEX, I thought that building a platform which appeals to institutional investors would succeed. But with crypto, it is the opposite. The significantly higher volume we had once we pivoted toward retail traders and raised leverage to 100x, proves that institutional investors do not dominate the trading landscape.

4. How have you seen the cryptocurrency trading industry evolve since you launched BitMEX?

Since launching BitMEX in 2014, I’ve seen the industry evolve quite a lot. We saw an influx of new, highly sophisticated traders come on board during the bitcoin boom of 2017. Specifically, the involvement of traditional institutions and the launch of crypto futures by CME and CBOE were big drivers of the bull run as a whole. The rise of traditional financial companies becoming interested in trading and investing in cryptocurrencies continues to be a changing aspect of the industry.

5. How do you see the cryptocurrency trading industry evolving over the next couple of years?

As society becomes more comfortable dealing with digital assets, more people will enter the cryptocurrency industry. That in turn will lead to greater and greater trading volumes. The major changes will be in how the increasing liquidity of crypto will allow different types of products and services to be offered.

6. What are your thoughts on the blockchain asset class as a whole? Should traders allocate space in their trading portfolios for cryptocurrencies? Should investors allocate space in their investment portfolios for cryptocurrencies?

Investors should only allocate money to crypto that they are willing to make a loss on. Removing emotion from crypto is the only way to invest or trade well over time. Any serious investor who looks at risk vs. return should include cryptocurrencies in their portfolio. Cryptocurrencies are negatively correlated with most assets that traditional investors have in their portfolios. Therefore, the addition of crypto, can serve to increase the overall efficient frontier of any portfolio.

7. Which countries does BitMEX not accept clients from?

Due to regulation requirements, BitMEX does not accept clients who are located in the United States, the province of Québec in Canada, Cuba, Crimea, Sevastopol, Iran, Syria, North Korea, or Sudan. We reserve the right to immediately close accounts and liquidate open positions of any user who breaches these terms.

8. Digital asset custody is a hot topic in the industry. As we see more custodial solutions to market, will it increase pressure on cryptocurrency exchanges to manage their liabilities (i.e. clients’ assets) more securely and transparently?

Cryptocurrencies are bearer assets. Therefore, they are extremely hard to hold custody of. Most custody solutions lack 100% credible insurance against hacking or employee collusion. There is no real reason to pay high fees for a custodian to hold your crypto assets as anyone can deploy the same technological means to secure their own crypto assets. Furthermore, if people hold their own crypto instead of depending on a financial institution, it actually reduces the attack surface for hackers. A hacker would rather attack a large concentration of crypto held by a custodian, rather than a disparate number of individual wallets.

9. Do you have plans to add tradable instruments related to additional cryptocurrencies in the future?

We’ve traditionally seen huge success with Bitcoin derivatives and we’re always looking for ways we can offer our users more trading options that fit their portfolios and risk appetite.

10. Can you provide some growth metrics about the number of clients BitMEX has, the total number of trades being conducted, revenue, or other measures to provide some perspective about your company’s success?

Throughout 2017, BitMEX’s average daily trading volume grew by 129x and continued to grow throughout 2018 and 2019. Most recently, we witnessed a record-breaking $11 billion worth of trade on 11 May 2019.

11. Who are some of the cryptocurrency and blockchain industry participants you look up to, and why?

I have mad respect for CZ, CEO of Binance. Binance continues to launch innovative financial products suited for the new wave of investors and traders. Binance embraces the crypto ethos and has created a very engaged community of traders and investors.

Arthur Hayes

Co-founder and Chief Executive Officer, BitMEX

Arthur Hayes obtained his BA in Economics at the Wharton School of Business at the University of Pennsylvania in 2008. Subsequently he moved to Hong Kong where worked as an equity derivatives trader for Deutsche Bank and Citigroup for 5 years.

Arthur was the head ETF market maker at both firms. In January 2014, BitMEX was formed. BitMEX is a Seychelles based P2P cryptocurrency trading platform that gives retail investors access to the global financial markets using cryptocurrency products. BitMEX operates the most liquid Bitcoin / USD trading product, XBTUSD, which features 100x leverage, and volumes on average are over $3 billion per day.