Since the beginning of the year 2019, BitMEX has had a growth of 50% in terms of Bitcoin. The company says that this fund is a relatively small part of all its negotiations.
The BitMEX insurance fund has registered a massive increase in assets since the beginning of 2019. Now it has more than US $312 million in Bitcoin, which represents 0.15% of the total Bitcoin currently existing.
The cryptocurrency trading platform serves as a facilitator for derivative contracts between multiple parties. Using BitMEX, users can make leveraged transactions with a much larger amount of Bitcoin than the one that they initially deposited. However, this practice involves risks. For example, when two traders bet directly against each other, the winner may obtain an amount greater than the one that the loser initially offered as collateral.
Traditional asset leverage platforms such as the Chicago Mercantile Exchange (CME) have several levels of protection against such eventualities. The first is the capacity to force “losers” to pay under the threat of a civil lawsuit, which leads to the possibility for governments to rescue these trading houses if they are on the verge of collapse. Obviously, smaller markets like that of cryptocurrencies, where all users expect to have direct access to the platforms, do not provide this level of protection.
In this is the kind of situations is where the BitMEX insurance fund comes into play. With available data dating back to the beginning of 2016, BitMEX states that this fund grows from settlements that could be executed in the market at a better price than the bankruptcy price of that particular position. The insurance fund also says that the fund is withdrawn when customers are unable to fully meet the demands of their transactions. However, it is especially interesting to see the growth rate of this fund.
BitMEX’s Fund of 31,300 BTC
Since the beginning of 2019, the BitMEX insurance fund has grown from 20,776 BTC in reserve to 31,295 BTC as of August 26th, 2019, an increase of more than 50%. In addition to its rapid growth, the insurance fund is attracting the attention of cryptocurrency communities because their holdings represent an important part of all Bitcoin in the world.
BitMEX states that its theoretical annual trading volume is around US $1 billion, which makes Bitcoin in this insurance fund a relatively small part. Despite this, the inherent volatility of the cryptocurrency ecosystem can quickly change the situation.
Barely last year, for example, OKEx was greatly affected by US $420 million as a direct result of the fluctuation of cryptocurrency prices in general. Even the winning traders encountered a loss, and the aggregate impacted both the futures trader community and OKEx.
Despite being “only part” of its negotiation, the growth in the annual trading volume in Bitcoin that BitMEX has had is an attractive target for cryptocurrency investors. A significant part of all the existing Bitcoin worldwide is in the hands of this platform. The capacity of the cryptocurrency par excellence to recover from all-time lows will continue making it a valuable asset.
By Willmen Blanco