We should begin this Deribit Review by discussing a bit about the exchange and its background
Deribit is a crypto exchange that has a heavy focus on futures and options. The site also offers 100x leverage, which allows traders to trade with more currency than they have in their wallet. This compbination of features makes Deribit a strong option for daytrading and swing trading, and the host of great features and powerful interface help to smooth the process.
The site is also fast – boasting multiple transactions per second with extremely low latency – typically below one millisecond. Deribit claims this is the fastest in the industry, though it is hard to verify such a claim.
But features and speed alone don’t make a great platform. In this Deribit review, we will take an in-depth look at this exchange: discussing the fees, the interface, the history, the customer service, and how all those elements stack up against the competition. Ultimately, we will be aiming to provide a comprehensive Deribit review to help you decide if this is the right platform for you.
About Deribit
We should begin this Deribit review by discussing a bit about the exchange and its background.
Deribit is a cryptocurrency futures and options exchange platfor, which was started by John Jansen (who is now also CEO). The site was in production for several years before releasing in 2016. This makes the site around 4-5 years old at the time of writing, which is a fairly standard age for a site like this. It also means that the exchange has been around long enough to develop a good reputation and has a large user base with high daily trade volumes.
Today, this is considered to be one of THE best crpto exchanges at least when it comes to futures trading.
What is a Cryptocurrency Futures Exchange?
So just what is a crypto futures exchange? There’s a high chance that some people reading this won’t know what a single one of those words means!
Cryptocurrency is essentially the term you use to describe currencies like bitcoin and alt coins (litecoin, BNB etc. that work similarly to bitcoin). These currencies don’t represent a physical asset like gold – as is the case for fiat currencies – but instead need to be “mined” by computers that conduct highly complex algorithms that require obscene amounts of computing power. This means that the number of cryptocurrency “coins” is smartly limited (especially as it takes longer and longer to mine for cryptocurrencies and they eventually run out). Some cryptocurrencies use other methods to reduce their numbers over time.
Cryptocurrency is then tracked using a global ledger called the blockchain. This keeps a record of every single transaction and ownership of cryptocurrency that is stored across countless machines. This then prevents anyone from being able to hack the system and ensures that there is clear consensus over who owns what. This is a technology that is said to transform the internet and business in general over the coming years – in particular by allowing people to truly “own” digital products.
Traders can then buy and sell cryptocurrencies to make a profit just as they might do with regular currencies. Day trading is a particular form of trading and investing that involves buying cryptocurrency and then selling it extremely quickly afterwards. The aim here is to take advantage of tiny fluctuations in the value of the currencies, such that it would be possible to quickly make a profit.
In other words, if you buy Bitcoin and the value of the Bitcoin goes up by a tiny margin, you can then sell that Bitcoin a few minutes later. If you bought enough Bitcoin, then even that tiny increase can add up to a lot.
The great news is that crypto is highly volatile as compared with fiat currency. This means that you can buy bitcoin and its precise value will likely change very rapidly. This creates more opportunity to buy and sell.
What’s more, is that because cryptocurrency isn’t regulated by a central bank or government, this means trades are faster AND much cheaper. This creates more opportunities for traders and makes these platforms extremely powerful.
So where does Deribit come in?
Well, this is the platform that makes all of that possible and that helps users to buy and sell the bitcoin they want. As we will see, it does this in a number of specific ways that are well suited to this type of trading and that have advantages for everyone else as well.
Features
Essentially, futures allow you to trade bitcoins without actually having to hold the cryptocurrency. This is important because it can actually be quite confusing to store bitcoin for the uninitiated! That’s because bitcoin and other cryptocurrency can normally only be stored using a specific “cryptocurrency wallet.” That in turn means that you can’t simply start trading unless you already have a wallet and understand how to use one! Direct cryptocurrency-only sites will meanwhile require you to buy cryptocurrency before you begin trading – as you won’t be able to buy with fiat currency once you’re in the site.
Fiat-to-bitcoin sites on the other hand have different issues: they allow for your transactions to be tracked just like trading fiat, and they incur much higher fees and slower speeds.
Futures solve these issues because you aren’t actually buying the cryptocurrency. Instead, you are predicting the future value of the currency by making an agreement to buy or sell for a fixed price. This way, you will earn money if you sell for a lower price than the value ultimately turns out to be and vice versa.
Here though, it is the contract that has value, and not the act of ownership itself. Deribit not only allows you to trade in this way, but also lets you use fixed expiration futures. Traditional futures contracts expire and go to settlement (which can catch out inexperienced traders) whereas the option to use perpetual swaps means the contract need never expire. This is all powerful stuff once you wrap your head around it.
Another of the powerful features offered by Deribit, is the ability to leverage trades. This means that you can trade using more money than you have in your wallet. In other words, you are essentially loaning money from Deribit in order to place the trade, thus meaning you can earn even more profit without having to own a lot to begin with. Of course, this also comes with inherent risks.
Interface
The interface on offer here is extremely well-thought out and intuitive to use. The platform loads quickly, is simple to navigate, and conveys all of the information you need in a very clear and simple manner. This is extremely important when making snap decisions that are based entirely on data and this kind of information, so it’s very welcome to see that Deribit did its due diligence here.
Currencies and Fees
While there are a lot of very positive things to say about Deribit, one big limiting factor is the tiny range of available bitcoin. Specifically, you will only be able to trade Bitcoin and Ethereum at the time of writing. These are the two largest currencies, but this also means you are somewhat limited as compared with sites that provide a much wider variety.
The leverage on Bitcoin is 100x, whereas it’s only 50x on Ethereum.
This is a lot less than BitMex, which is a similar type of platform, and it is even less than more traditionally crypto exchanges like Binance.
In terms of fees, Deribit uses a structure very similar to others in the market. Market makers pay lower fees than takers (sell) unless it is on an options contract. There is also a larger fee on positions that are liquidated which is what happens when the trader has not enough margin left in order to maintain an open position.
These fees go toward an insurance fund, which works in a similar banner to BitMex.
This being a purely crypto platform though, the fees are extremely low. You will be looking at fees that range from 0.02% up to 0.15%. This is far lower than any fiat currency exchange, which is one of the huge advantages of using a site like this.
Customer Service
One of the most important things to keep in mind when choosing a trading platform, is the customer service. This matters because you are dealing with large amounts of money and highly complex systems. If anything goes wrong, then it is highly important that you be able to get help – even if it’s just retrieving a password!
We tested the customer service and found that it was extremely responsive and helpful. All our questions were answered quickly and we found that the service team were very professional, polite, and helpful. This can provide assurance and peace of mind when making trades.
The good news is that you should have little reason to need customer service however, seeing as the platform works extremely well and with no noticeable hiccups that we witnessed.
That said, there is no live chat option, which is an omission we’d like to see rectified. Questions are channelled instead through the email, which is thankfully checked extremely regularly by a large number of support staff.
Security is also very good here. 99% of all BTC funds are placed in cold storage. What this means is that only 1% of Deribits’ BTC holdings are kept online, drastically reducing the possibility of your funds being stolen. This is a very significant feature and one to keep in mind when comparing platforms. The platform has yet to experience a single hack!
It’s also possible to protect your account on this exchange using 2FA and IP pinning. This locks accounts to a single IP address, meaning that no one can access your funds unless they are located in your building or find some miraculous way to spoof your address!
Conclusions
Overall, Deribit is one of the most powerful exchanges of its type and comes highly recommended. The features that are on offer here ensure that you have a wide range of options to make a profit quickly. The low fees are very welcome, and the focus on futures makes this an ideal option for those that want exposure to cryptocurrency but are reluctant to go all in by buying a whole bunch of it!
But with all that said, it’s also worth noting that this is a very specific tool that offers specific advantages for specific purposes. In other words: this platform is best suited to those looking to make money quickly using futures and similar strategies and is not as feature packed as a much larger platform like Binance.
It’s also important to keep in mind the limited number of currencies available (two!). If you can get past these limitations though, the focussed nature of this platform makes it an excellent place to start making money.
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