The iron fists of the U.S. Department of Justice and the U.S. Commodity Futures Trading Commission (CFTC) stifled BitMEX’s “non-compliant” throat and pushed this former “king” of the crypto asset futures market to a dangerous wall.
After October 2, the adverse effects of the regulatory agencies on BitMEX’s criminal proceedings came one after another.
On the 2nd and 7th, 46,200 and 10,600 BTC flowed out of BitMEX in the two days, equivalent to at least 600 million U.S. dollars. On October 8, BitMEX officially issued an announcement stating that several executives had left.
As a veteran crypto asset futures platform that has been founded for nearly 6 years, this time the “lost of people and wealth” will undoubtedly bring heavy losses to BitMEX’s operations. Coingecko data shows that as of October 11, BitMEX’s 24-hour open position reached 737 million US dollars, ranking fifth, with industry competitors OKEx occupying the top spot. On the indicator of 24-hour trading volume, the crown is worn on Binance’s head.
If BitMEX is suspended due to supervision this time, the market share vacated by this established platform will also be eaten by competitors in the same industry. The successors are not innocent. They need to consider how to do a good job of compliance and avoid becoming the second BitMEX to be targeted by regulation.
BitMEX “flees” US$640 million in two days
The chain reaction of the US regulator’s move to BitMEX has already appeared.
On October 10, the on-chain data monitoring released by Tokenview showed that the net inflow of BTC to the exchanges on the market declined for two consecutive weeks, with a decrease of 21.92% and 9.25% respectively from the previous month. Among them, BitMEX, which is trapped in the vortex of criminal litigation by the US Department of Justice and the Commodity Futures Trading Commission (CFTC), saw its net inflow of BTC dropped by 76.87% and 100.29% respectively over two weeks.
From the more detailed Glassnode data, the massive outflow of BitMEX funds all occurred after its CTO Samuel Reed was arrested on October 1. On October 2, 4,6256.9 BTC flowed out of BitMEX; 5 days later, on October 7, another 10,669 BTC flowed out of the platform. Calculated according to the BTC price on October 11th, within less than a week, $640 million worth of funds have “fleeed” from BitMEX.
Two times a large amount of funds flowed out of BitMEX, and the return was scarce. Data shows that this platform only saw an inflow of 2,716 BTC on October 3.
Accompanying the “big outflow and small inflow” of funds came the decline in BitMEX trading volume. Non-small data shows that on October 2, BitMEX’s daily trading volume was 1.7 billion U.S. dollars, and on October 4, it dropped to a minimum of 500 million U.S. dollars. In the last two days, after the BTC price rebounded from USD 10,000 back to USD 11,000, the daily shrinking of BitMEX’s trading volume has only eased. As of October 11, this indicator was adjusted to $1 billion on BitMEX.
Obviously, the iron-handed means of supervision has caused BitMEX users to panic and even distrust.
To make matters worse, the core members of BitMEX are leaving the team one by one.
Since it broke on October 2 that the U.S. Department of Justice and the CFTC filed criminal proceedings against BitMEX and its owners and operators, Samuel Reed, the chief technology officer and co-founder of the platform, was arrested in Massachusetts; on October 9, He paid a security deposit of 5 million US dollars and was released on the condition that he appears in court to participate in the proceedings, and if convicted, he submits to the trial.
On October 8, BitMEX officially issued an announcement stating that several executives had resigned, including BitMEX founder Arthur Hayes, co-founder Ben Delo, and business development director Greg Dwyer who were also on the prosecution list, the CTO who was released on bail Has been in the official list of departed personnel.
The turnover of the former “King” has shrunk by 90% from the year’s high
BitMEX, which has been in the crypto-asset futures market for 6 years, suffered an unprecedented “lost of human and financial losses” due to US regulatory charges. Before that, its king status was threatened by the emergence of later competitors.
Since its establishment in 2014, BitMEX has been focusing on the trading of futures contracts for mainstream crypto assets, including perpetual contracts and delivery contracts. In 2016, multi-currency perpetual contracts were launched on the platform. Prior to this, there was no leading platform for perpetual contract products in the encrypted asset market, and BitMEX took the lead.
Up to now, there are a total of eight mainstream asset futures transactions on BitMEX: BTC, ADA, BCH, EOS, LINK, LTC, TRX, XRP and XTZ, supporting perpetual contracts and delivery contract services for these assets, and the former is the most popular on BitMEX. Service. According to Coingecko, as of October 11, the main contribution to BitMEX trading volume was perpetual contracts. Among them, BTC’s trading volume accounted for 57.6% and ETH’s trading volume accounted for 14.5%.
Perpetual contract, a segment of futures trading, has seen a redistribution of market share after 2019. At that time, first-tier platforms such as Binance launched perpetual contracts one after another, and OKEx also joined the perpetual track by virtue of its market position as the leader in delivery contracts. By 2020, Bybit, FTX, Bingbon and other cutting-edge platforms that specialize in futures trading like BitMEX will also emerge.
If we say that these platforms are surviving and fighting in the cracks where global regulation has not yet clearly defined crypto assets. Then, in November last year, Bakkt, a subsidiary of CME Group, was launched, which was a battle for the market with a compliance “sword”.
Although due to compliance restrictions, there are many thresholds for trading on Bakkt, and even it is not favored by Amber, but the “ace” of compliance saves large funds and traditional institutional capital from a lot of worries. On September 18 this year, Bakkt’s daily trading volume exceeded US$200 million.
Today’s crypto asset futures market is already a piece of the red sea. It is no longer as clean as BitMEX started from scratch. The market that could be monopolized in the past is gradually being eaten up.
Since June 2019, BitMEX’s daily trading volume has shown signs of shrinking. According to the non-trumpet account, on June 29 last year, the daily transaction volume of the platform reached a maximum of 14 billion U.S. dollars, and in the following six months it has been less than 10 billion U.S. dollars.
The house leaks were even rainy, and the “3·12” black swan incident in the currency market also suffered a heavy blow to BitMEX. Due to the bias in its mark price adjustment, it caused a huge amount of liquidation funds. On the same day, BitMEX liquidated a long contract worth 1 billion U.S. dollars, which caused a downtime on the platform, and soon 31707 BTC flowed out of the platform.
Perhaps, users’ distrust of BitMEX has been accumulated for a long time, and this time, U.S. regulation has pushed again.
As of October 10 this year, BitMEX’s daily trading volume has fallen to US$1 billion, which has shrunk by nearly half compared to the same period last year, and compared with this year’s high of US$10 billion, a decrease of about 90%.
During the period when BitMEX trading volume continued to decline. Binance, which entered the futures market in June last year, came in behind, and a month later, its daily trading volume reached US$12.8 billion. As of October 10 this year, Binance’s daily trading volume was US$5 billion, which is five times the volume of BitMEX.
Coingecko data shows that as of October 10, the amount of 24-hour open positions on BitMEX was US$743 million, ranking fifth in the industry, and OKEx ranked first with US$1.36 billion. At the same time, BitMEX’s 24-hour trading volume was US$1.47 billion, ranking fourth, with Binance on the top spot, with a daily trading volume of US$5.99 billion.
Those who take over BitMEX should avoid the sword of supervision
In the fierce competition in the crypto-asset futures market, although BitMEX is getting worse this year, it still takes the lead in the market with 8 currencies. In addition to its first-mover advantage, it may also be “owed” to its acceptance of users. Low barriers to time-only one mailbox is required to register and use the service. And this also laid a hidden danger for it.
This time, the US Department of Justice and the CFTC filed a criminal lawsuit against BitMEX on the grounds that the platform did not perform KYC and anti-money laundering obligations when serving US customers.
The 40-page lawsuit also mentioned that BitMEX was suspected of providing transaction services for users in Iran, a country under US sanctions. Another FBI statement showed that one of the defendants involved in BitMEX had also bribed overseas regulatory agencies. This violated the US Foreign Corrupt Practices Act, which specifically prohibits Americans from bribing overseas officials.
It is not the first time that BitMEX has been targeted by US regulators due to compliance issues. Last year, Bloomberg reported several times that BitMEX was under investigation by the US Commodity Futures Trading Commission. The core issue of the investigation is still whether BitMEX illegally provides trading services to US users and whether there is large-scale money laundering. At the time, the CEO of this platform, Arthur Hayes, had been out of touch for several weeks.
However, BitMEX has always been tough on investigations by US regulators.
Earlier, when Arthur Hayes talked about banks criticizing “Bitcoin is the first choice for money launderers”, he unceremoniously retorted, “Don’t money launderers prefer the US dollar?” He even cited, for example, that in 2012, HSBC admitted that it was anti-money laundering. The loopholes in the plan led to the successful laundering of US$881 million by the Mexican drug cartel. “I don’t think banks have a foothold.”
Arthur Hayes explained the reason for moving the main body of BitMEX to Seychelles, saying that it was to avoid U.S. supervision. He stated boldly, “The money spent bribing Seychelles regulators is only the price of coconuts, which is less than bribing US officials. many.”
Now, after BitMEX is directly subject to criminal proceedings, it seems that there is no intention to “surrender. On October 1, the official issued a tough announcement stating, “It resolutely disagrees with the U.S. government’s awkward decision on these allegations and intends to vigorously resist these allegations. BitMEX has been striving to comply with applicable U.S. laws since its inception.”
The tension between the two parties has spread to the normal operations of BitMEX, the flight of funds, the departure of executives, and the extreme panic among users. Once BitMEX is suspended due to supervision, the complete escape of users and funds will become inevitable. If this happens, for competitors in the same industry, a mountain that lies in front of you will collapse, and the share and pattern of the crypto asset futures market will also change.
From the product point of view, catching BitMEX users may not be difficult for other competitors.
Currently BitMEX provides perpetual and delivery contract services, and the number of asset targets is small. There are not many trading platforms for similar products in the market, and HBO’s underlying assets are more abundant. Platforms such as Bybit and Bingbon, which are only involved in mainstream currency futures trading, have already kept up. In terms of trading depth, which is the most important for futures trading, HBO is becoming more and more perfect. The daily trading volume of OKEx and Binance is even higher than that of BitMEX.
The real difficulty is still the dilemma BitMEX is facing now-how to operate in compliance. At present, only Bakkt under CME Group can legally provide services to American users in the market. Among mainstream futures trading platforms that focus on the currency market, OKEx, Binance, and Huobi have all publicly reminded that they will not provide services to US users. If a platform ventures to provide futures services for US users, it will not rule out the bad luck that BitMEX will experience.
Faced with the market share that BitMEX may vacate, the real test of competitors is how to seek compliance and avoid becoming the second BitMEX
