Bitcoin Mercantile Exchange ( BitMEX ), a bitcoin derivatives exchange that launched in 2014, already has 5,800 users who have traded $760 million on the exchange, according to Bloomberg .
Started by Arthur Hayes, a former Citigroup trader living in Hong Kong, the goal was to create an exchange where people use cryptocurrency to bet on securities not easily accessible to them in their home markets.
Because China restricts exchanging its yuan for other currencies, citizens find it expensive and difficult to invest in overseas securities. Foreign investors are also restricted in trading China stocks. Buying Derivatives In Bitcoin
Hayes came up with the idea of allowing Chinese investors to use bitcoin to purchase synthetic versions of foreign stocks that are otherwise off limits, such as Facebook and Apple. Conversely, foreign investors can short a basket of the country’s shares that are not exposed to such strategies.
The goal, said Hayes, is to let anyone bet on anything, at any time.
BitMEX lets traders go to sites like Kraken or Coinbase and exchange funds for bitcoin. They can then open a BitMEX account, deposit the bitcoin, and use it to trade. Investors do not buy stocks. They buy derivatives, which are contracts that simulate indexes or stocks. Profits and losses are calculated in a customer’s BitMEX account. Customers can withdraw the proceeds and convert it back to cash.
BitMEX does not have a license to market to Chinese investors. The company relies on the Chinese government’s permissive approach. BitMEX Off To A Good Start
Aiding BitMEX is the size of China’s market and Hayes’ experience designing financial contracts. Thus far, 5,800 users have traded $760 million. BitMEX is already profitable, which is rare for startups in the amount of time it has existed.Hayes said he will allow customers to use cryptocurrencies besides bitcoin […]
