Within the cryptocurrency community, there is often confusion over whether or not one can short sell bitcoin via public online exchanges, and not just bet against the price increase of cryptocurrencies through institutional-grade crypto futures. The answer is indeed a “yes,” but there are still some traditional some roadblocks.
Regulation and usability between jurisdictions are typically the main issues among users when it comes to betting on a decrease in an asset’s potential value. BitMEX, otherwise known as the “Bitcoin Mercantile Exchange,” is an online cryptocurrency exchange that enables comprehensive contracts for user trading to be done only through Bitcoin.
BitMEX differs from most other exchanges or liquidity providers in the sense that it enables theoretical trading via contracts almost like a novel derivative within the cryptocurrency ecosystem. Each contract can support various levels of margin, (an actively sought out attribute in cryptocurrency) with the main bitcoin to USD contract pair offering up to 100x margin.
A Contract-Based Exchange: What Does That Mean?
It’s important to understand that BitMEX differs from many of the mainstream cryptocurrency exchanges. Many of these exchanges offer markets where ownership of a said cryptocurrency is retained. In these instances, assets like bitcoin can then be thoroughly exchanged for something like ether. BitMEX works differently, focusing on a contract set up, which has both its pros and cons.
The main advantages of instantiating a contract-based system for trading an asset is that users don’t actually have to ever physically “own” an asset; they can instead trade a contract that is representative of its ownership. In some cases this enables a deeper level of volume since reserve and fractioning can be used by the exchange.
Contracts can also offer higher levels of margin.