Deribit is a Bitcoin Futures and Options exchange, enabling traders to trade Bitcoin and Ethereum with up to 100x leverage.
This Bitcoin trading platform is currently ranked as the fourth largest crypto derivatives market by open interest and regularly achieves more than $200 million in 24-hour trading volume.
While it’s true that the exchange is still relatively new, it has already proven on multiple occasions to be a very trustworthy trading platform.
For instance, on October 31, 2019, Deribit suffered a flash crash caused by issues with its BTC index calculation mechanism. As a response, the derivatives exchange decided to roll-back all trades, which protected traders from big losses due to invalid liquidations.
Competitors, like BitMEX, have had similar issues in the past but users were never refunded.
What is Deribit?
Deribit is a crypto futures and options exchange that allows practically anyone to trade a variety of Bitcoin and Ethereum derivatives with few to no barriers.
- Very liquid Bitcoin and Ethereum Options
- Attractive fee structure for perpetual futures
- 99% of user funds kept in cold storage
- U.S. citizens are restricted
- Limited deposit options (just BTC and ETH)
- Newly introduced KYC policy
As it stands, Deribit is mostly known for its large range of Bitcoin and Ethereum options, though the platform also offers a variety of different futures contracts.
Currently, customers are able to withdraw up to 1 BTC or 50 ETH per 24 hours straight after registering, whereas those looking for higher withdrawal limits will need to complete identity verification.
Unfortunately, residents and citizens of the United States are prohibited from using the website.
For other regions, the platform is available in seven different languages, including Chinese, Korean, Russian and Turkish.
Deribit provides a friendly user interface that is designed to be simple yet complete and contains a wide range of features, including volatility charts, indicators, and indexes. Maintenance margin requirements start at 0.55% and increase linearly by 0.5% for every 100 BTC in your position size.
The exchange offers an official API that can be easily integrated with a variety of automated trading bots and is one of the most popular cryptocurrency options and futures trading platforms, while most contracts have a thick order book.
Hence, liquidity should be of little concern when trading at Deribit.
Team and Background
Deribit was founded back in 2016 by brothers John and Marius Jansen, in addition to a professional programmer and computer scientist by the name of Sebastian Smyczýnski.
John Jansen has more than a decade of trading experience and previously worked as an options trader at the Amsterdam exchange, whereas Marius Jansen is an early Bitcoin adopter, and was personally responsible for a good fraction of the total worldwide Bitcoin trading volume in its early days.
The platform was originally based in the Netherlands, operating under the company name Deribit B.V. However, after a review of the current regulatory climate, the exchange founders thought it best to uproot and move to Panama—thereby avoiding the mandates of the coming Fifth Anti-Money Laundering Directive (5AMLD).
In Panama, the exchange will operate under DRB Panama Inc., a wholly-owned subsidiary of the Dutch entity. This move will allow Deribit to continue offering the same services its customers currently enjoy, with few changes.
Deribit coins and contracts
Deribit is a web-based trading platform that offers a variety of different cryptocurrency futures and options markets.
These are types of derivatives that track the price of an underlying asset, such as Bitcoin, allowing traders to speculate on the direction of the market and open hedge positions without actually buying/selling the underlying asset.
Although futures and options are similar in they are both derivatives contracts, they differ in the fact that futures have both unlimited upside and downside potential, whereas options losses are limited to the size of the premium.
Beyond this, most futures are settled on a pre-defined date, whereas options holders have the right, but not the obligation to settle up to any point before the option expiry date.
As it stands, Deribit offers futures and options for two cryptocurrencies: Bitcoin (BTC) and Ethereum (ETH). Traders can choose from both perpetual and traditional futures with, or a range of different options, with short, medium and long-term expiry dates available.
In terms of leverage, Deribit allows users to trade Bitcoin futures with up to 100x leverage and Ethereum futures with up to 50x leverage. Options, on the other hand, can be traded with a maximum of 10x leverage.
Trading features and functionality
The platform features a simple, easy to navigate user interface with robust charting and technical analysis tools available thanks to its TradingView integration.
Deribit also features several UI considerations that make the platform suitable for both inexperienced and advanced crypto traders, including a ‘complex order form’ toggle that enables more advanced trading options that are hidden by default, allowing traders to make USB and implied volatility orders.
The trading platform can also be accessed through a dedicated Deribit app, available for both iOS and Android devices, though these apps lack some of the more advanced functionality found when accessing the site through a browser.
Deribit trading fees
When it comes to trading fees, Deribit keeps things clear-cut, helping to avoid the confusion that is all-too-common with cryptocurrency exchange nowadays.
The exchange charges 5 types of fees:
- Taker fees
- Maker fees
- Liquidation fees
- Delivery fees
- Funding fees
Let’s now explore when exactly each fee is charged, and how it varies from contract to contract.
Deribit charges a maker and taker fee for all futures trades, the percentage charged as commission varies based on the instrument traded.
For BTC Perpetual Contracts, the exchange charges a 0.075% taker fee, and pays a -0.025% maker fee (provided as a rebate), whereas Traditional BTC Futures have a 0.05% taker fee and -0.02% maker fee (provided as a rebate).
The fees for ETH perpetual and traditional futures contracts are slightly simpler, with a taker fee of 0.05% and no maker fee levied on all trades.
Beyond this, those trading BTC options will be subject to a fee of 0.04% of underlying or 0.0004 BTC/option contract, whereas ETH options are charged at 0.04% of underlying or 0.0004 ETH/option contract.
For both BTC and ETH options, the maximum fee is capped at 12.5% the price of the option.
When traders fail to maintain the minimum margin on their positions, the platform’s risk engine may forcefully liquidate part of a trader’s position (12.5% at a time) to keep their maintenance margin above the minimum threshold.
When positions are liquidated in this way, traders are charged a higher than normal fee, currently set at 0.5% of the position value for BTC futures and perpetual contracts liquidations, and 0.19% for BTC options liquidations.
These fees are even higher for ETH liquidations, coming in at 0.9% for ETH futures and perpetual contracts liquidations, and 0.19% for ETH options liquidations.
The platform also transfers a funding fee between shorts and longs, but does not a cut of this fee. The exact funding rate changes frequently, but can be seen in the trading interface for any chosen contract, along with a history of previous rates.
When positions are settled, traders are also charged a delivery fee—0.025% for futures and 0.02% of the underlying for options.
In terms of withdrawal fees, users are charged a fee that reflects the current network load, which means withdrawal fees can vary over time. As of writing Bitcoin withdrawal fees ranged between 0.0005 BTC for the lowest priority, to 0.001 for the highest priority, whereas ETH withdrawal fees were set a fixed 0.0001 ETH.
As it stands, the trading platform does not offer any volume-based discounts on trading fees.
Although Deribit has long been known as one of the few cryptocurrency derivatives trading platforms to forgo any KYC requirements, a recent announcement indicates the firm will begin enforcing KYC for some users on February 10, 2020.
Anybody looking to withdraw more than 1 BTC or 50 ETH per 24 hour period, or qualify for Portfolio Margining will need to complete KYC checks.
Is Deribit safe to use?
When it comes to keeping customer funds safe, many cryptocurrency trading platforms have a poor record, since the crypto trading industry has been plagued by hacks and thefts from less secure platforms.
Fortunately, Deribit appears to be doing what it can to minimize the chance of theft by keeping 99% of user funds in cold storage—which makes it difficult, if not impossible for the platform to ever suffer a large-scale theft.
The rest of the funds are kept in the platform hot wallet, which is used to serve customer withdrawals. If necessary, a transfer between the cold and hot wallets is conducted every 24 hours to ensure there are sufficient funds to cover all withdrawals.
Beyond using cold storage, the futures exchange appears to be tight-lipped about the full extent of its security setup or exactly how it protects itself from internal thefts. Instead, Deribit claims this is proprietary information and asks that users contact them directly by email if they have any security concerns—not ideal.
Deribit also protects traders with its insurance fund, which is used to pay out to profitable traders even when liquidated traders are bankrupt.
The insurance fund is funded by liquidation fees and (as of writing) has never been depleted.
Although Deribit has never been hacked in its more than 3 years of operation, the exchange did suffer a “flash crash” in October 2019, which saw the price of BTC on the exchange slip by almost 20% following an index calculation issue. Fortunately, Deribit owned up to the issue and made it right by covering the losses of anybody adversely affected by the glitch.
Deribit will reimburse over $1.3 million in losses from the BTC index calculation data issue around 21:00:00 UTC on October 31, 2019.— Deribit (@DeribitExchange) October 31, 2019
The Deribit Insurance fund will not be used to cover these losses, but compensation will be covered by Deribit.
Looking at customer-side security options, Deribit offers a handful of different options that can be used to stay secure. This includes an IP Pinning option, which will automatically log users out if their IP changes during the middle of a session, as well as an option to automatically force a session timeout after 1 hour (as opposed to 1 week), after which the user will need to manually log in again.
Lastly, Deribit also offers two-factor authentication as an additional security layer. If enabled, customers will need to use a two-factor authentication app such as Google Authenticator to generate a one-time passcode that will need to be entered during sign-in.
How to get started with Deribit
Among cryptocurrency exchanges, Deribit has one of the simplest registration procedures out there, and new users should be ready to start trading within just minutes.
Head over to the Deribit website and click the ‘Register’ button, here you’ll be asked to enter your email address, choose a nickname and password, and select your country of residence.
Once submitted, you will receive a confirmation email containing a link that you need to open to confirm your account.
As previously mentioned, you will need to complete KYC if you need to withdraw large sums.
This can be completed by navigating through the options visible in the ‘Verification’ tab in the ‘My Account’ part of the site.
2) Make a deposit
Once logged in, you’ll need to make a deposit before you’ll be able to trade.
To load your deposit address, select either Bitcoin or Ethereum in the website header, and your personal BTC or ETH deposit address, and its associated QR code will load beneath.
BTC deposits will be available to trade with after 1 network confirmation, whereas ETH deposits require 30 confirmations before the balance is made available.
3) Start trading futures or options
Once your deposit has confirmed, you will need to select which cryptocurrency you wish to trade by clicking either Bitcoin or Ethereum in the header again. The left panel will then contain a list of the available futures & options.
For futures, select the contract you want to trade in the left panel to open the trading interface. Here, you’ll be able to select the number of contracts you wish to buy and choose your entry price in the menu found next to the order book.
Similarly, options contracts with different expiry dates can also be selected in the left panel.
Once selected, a range of different options with increasingly high strike prices will be available to choose from.
Select the one you want to open the order menu, where you’ll be able to select how many options to buy and choose your entry price.
Clicking the ‘buy’ or ‘sell’ button will execute your trade, so double-check everything is correct before you submit.
In review, it is clear that Deribit does a lot of things right, but only a few things wrong. This makes the exchange an excellent option for both new and seasoned traders alike, and it is difficult to beat if you are primarily an options trader.
Compared to its major competitors, Deribit keeps its fees roughly in line with the industry standard, and offers has one of the largest contracts selections around. However, Deribit is now joining an increasing number of derivatives trading platforms to enforce KYC requirements, which does put it at a stark disadvantage against more accessible platforms like BitMEX and PrimeXBT which do not.
Likewise, although its contract selection is relatively large, it only offers contracts for Ethereum and Bitcoin. While this is ideal for some traders, anybody looking for a more diverse selection of assets may need to turn their attention to BTSE or FTX—both of which offer a far wider selection of futures contracts.
To conclude our Deribit review, we believe that the exchange is an excellent choice for options traders, whereas futures traders or those with a portfolio dominated by altcoins may want to look elsewhere. Nonetheless, the platform’s strong security record, excellent reputation and overall transparency are almost second to none in the industry, making this futures and options platform a worthy choice for many traders.
Pascal Thellmann is an investor and marketer focused on the intersection of cryptocurrency and the legacy financial system. He co-founded Bounty0x, which at the time was the largest crypto freelance platform. Now Pascal dedicates his time to CoinDiligent and trading. You can get in touch with Pascal Thellmann on LinkedIn.