The Ultimate Guide to Trading Bitcoin Futures on Deribit

Sign up at Deribit and earn a discount on your fees for the first six months: https://www.deribit.com/reg-521.550

Lots of people have been complaining about the performance on BitMEX lately and wondering what alternatives there are. Well Deribit is the closet thing you will find, so give it a try.

Comparison to BitMEX

The first question many readers may have is: how does Deribit compare to BitMEX?

Same:

Well good news: the main products are almost exactly the same.

Both Deribit and BitMEX run Bitcoin-collateralised Bitcoin-Dollar Futures with contract units denominated in USD. This means you deposit BTC and use that as margin to trade BTC/USD price action on whatever leverage you choose.

Both Deribit and BitMEX BTC/USD futures require just 1% initial margin, offering 100x leverage on your collateral. BitMEX contract size is 1 USD, Deribit is 10 USD. Same tick size, 0.5 USD, and same fees -0.025% maker, 0.075% taker.

Both platforms have Testnet versions that you can demo your bots and play around with functionality to get comfortable. Deribit lets you isolate margin positions by creating subaccounts.

Con (Disadvantage to BitMEX):

Deribit has only 40 BTC in its insurance fund, compared to BitMEX’s monster 14,000 BTC stack. This means when the volatility really hits and your position matters, BitMEX is more likely to be able to cover the P&L.

When you close a position, the profit earned is available for withdrawal request right away from BitMEX. On Deribit when you close a position, it requires waiting the next session (8 UTC) to settle any realised PNL before you may request withdrawal.

BitMEX has more advanced order types to allow for Reduce-only and other flags.

Pro (Advantage over BitMEX):

Deribit processes withdrawals on the fly though from hotwallet (BitMEX processes withdrawals once per day at 13 UTC with no hot wallet).

BitMEX takes your entire maintenance margin on liquidation to supply the insurance fund, whereas Deribit just charges a 0.15% fee. BitMEX does a total liquidation whereas Deribit will partially liquidate you 10% at a time.

In terms of platform speed and performance, Deribit by far wins in the comparison. Deribit order creation, trade execution, matching, margining all is lightning fast even in times of high volatility. BitMEX, on the other hand, whenever there is any volatility in the market, seems to break down and reject orders and give lagged responses sometimes on the order of minutes.

Market Comparison:

Liquidity wise, BitMEX orderbooks are about 50x thicker than Deribit’s:

And then marketshare by trading volume:

The overall marketshare in terms of volume is about 30x bigger at BitMEX than Deribit.

TL;DR you have less liquidity and position-certainty on Deribit, but you will have smooth trading experience in contrast to BitMEX’s order rejections, lag and other platform issues.

Futures Panel

Assume you have deposited some BTC and navigated to the “BTC Futures” section of the platform:

In the “Account Summary” tab there is an outline of the funds available and used up in margin for positions:

The positions you have open all have a required Initial Margin and Maintenance Margin. Initial Margin is the level you need to enter a position, whereas Maintenance Margin is the level you need to keep the position alive and avoid liquidation.

The equity in your account is used to back all the positions you have open. This means that any BTC you have in there will support a position you have. So for example if you forget about a Long position you are in and you leave 5 BTC in there too, and price crashes, you will get liquidated only when the entire 5 BTC is gone. As a general rule: always check your open orders and open positions, you do not want to be on the hook for a trade you did not intend! Or you can use Subaccounts feature of Deribit to isolate BTC into separate areas from other trading activity.

The “Futures Summary” tab will show you an overview of any actively traded contracts you have had in the session (8 UTC to 8 UTC):

This gives you a helpful overview of your current exposure as well as the risk in form of the liquidation price where each position would be bankrupt.

Futures Order Books

Once you have gone to the BTC Futures section of the platform, you can select between the different contracts that are open for trading on the market:

Here you have three contract choices: Perpetual, December 28, and March 29, 2019. Click on the tabs to navigate to the contract you prefer to trade. The Perpetual contract is the most popular that attracts the liquidity and volume. This contract has a continuous funding payout based on whether it is trading at a premium or discount to the spot market — so it pays out interest constantly as soon as you enter a position as long as you hold it. If the price is in a discount, then the funding is paid from shorts to longs to bring price into equilibrium. But most of the time, longs will tend to pay shorts.

Futures Order Entry

In Futures all trading is done by “Contracts”. You can not trade a fraction of a contract, you can only trade integer values. The Deribit contracts are worth 10 USD. So you just enter Quantity and Price, and then buy to go long or sell to go short. Buying 10 contracts will make you $100 long, at a price of 6610 this is equal to 0.015 BTC. Both ways — USD and BTC value — are equally valid ways of looking at it. The important part is: if price goes up you earn more BTC, if price goes down you are losing BTC.

“Limit” is just an order where you specify the price. “Market” is an order where you specify only quantity and want to get filled at whatever the market will give you. “Stop-Market” is a stop order that triggers and then executes a market order. “Stop-Limit” is a stop order that triggers and then executes a limit order.

The “Min sell” and “Max buy” labels refer to the anti-manipulation price limits that are in place to prevent crazy price action outside of reasonable range of the underlying spot price and current orderbook for futures. This protects users from any manipulation or market abuse that could lead to liquidation or other market disorder.

The “Buy Margin” and “Sell Margin” labels refer to the amount of initial margin (1%) in BTC terms (so multiply the Size (BTC) by this) needed to fill the trade. This gives you an easy way to see how much you want to risk from your available balance and how leveraged you want to get.

“GTC” is “good til cancelled” which means your order will be valid in the book until you choose to cancel. “FOK” is “fill or kill” which is a type of order that will either fill the entire quantity or cancel the entire order. “IOC” is “immediate or cancel” which is a type of order that will fill whatever it can immediately and then cancel the rest.

“Post-only” will make sure that the limit order is “maker only” and you will not accidentally cross the spread and fill a limit order at a taker fee rate. “Hidden” will ensure that your order is not visible in the orderbook to other traders.

Futures Chart

Deribit has integrated Trading View chart, which is the standard. Just like BitMEX and Bitfinex.

If you like to have the chart in front of you while trading, select the “Futures Charts” tab and use that as the visiaul instead of a summary. You can manage your positions in the table below anyway.

Manage Futures Positions

Below the order entry and orderbook you can see a table overview of your positions and can manage closing of them:

It shows the profit in BTC terms and % terms that you have on open positions. You can get an overview of the size and price and margin as well.

You can either be net long or net short in a contract, so it shows the name on one row with the Size (negative if Short). If you create Subaccounts then you can go Long in one subaccount and Short in the other subaccount to maintain simultaneous opposite positions (some strategies are useful for this).

For closing, it would be nice to have the ability to enter a quantity of contracts for the buttons on the right (“Limit/Close”), but it seems to both be entire position close.

Once you are in a position and want to manage it with Take Profit and Stop Loss you can manage the orders quite easily.

If you are long and need to set Take Profit you just make a Limit order to sell:

It would be nice if Deribit had the ability to flag the order so it is “close only” or “reduce only”, for added protection.

You can set a stop loss for your position by selecting “Stop Limit”:

You can trigger based off Mark Price or Index price (would be nice to base off Mid or Last price too). Just enter what price to trigger under “Stop Price”, in this case we put 6503 (with market currently at 6600), which means as price goes down and reaches 6503, this stop will execute. And in “Price” field right above the buttons you enter the limit price to execute at, and this has 6473.50 so it will sell 10 contracts at 6473.50 when the Mark price hits 6503. This will cut your losses on a 10 contract long position.

Right below the positions table you can see the Open Orders and Stop Orders below. Here you will have the stop-loss you just set as well as any limit orders you have open in the book.

Finally, you close out your position and it appears in the Order History showing the PNL:

The PNL from your trading will be available for withdrawal by next 8 UTC. You can still trade with it, but until session is over then it may be technically social lossed if the insurance fund can not cover unfilled liquidations in their market for that day.

Easy As That

That is how easy it is to trade BTC/USD futures on Deribit. You have multiple contracts available you can trade and you can easily use your bitcoin to go long or short and profit whether the price goes up or down.

Just be careful as always about how high leverage you are using. Watch your liquidation price and make sure you are managing your position size and risk appropriately.

If you are new, always start first with Testnet, then with very small trading amounts, until you are comfortable and know you will be able to conduct the important risk management tasks needed to trade responsibly.

Never Trade Alone

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We are a community of daytraders focused mainly on bitcoin and other cryptocurrencies. Our Teamspeak and Telegram are open to everyone. See website for details.

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