Looking for an alternative to BitMex? Delta Exchange is a good one!

BitMex is currently the leader in cryptocurrency Futures trading. The exchange claims to be 1500% more liquid for BTC-USD trading than any other platform. However, trading on BitMex also has some hidden costs. At times of high volatility, their order engine chokes and traders are unable to close their position or enter into new ones. Google search for ‘BitMex order submission error’ throws up over 50,000 results, highlighting how frequent this problem is. It has been alleged that BitMex manipulates its market, gives special privileges to its in-house market maker and makes money at the expense of its traders. This blog post explains these allegations in greater detail. In light of these issues, if you are looking for alternatives to BitMex for your margin trading, I’d highly recommend checking out Delta Exchange.

Delta is a relatively new entrant in the bitcoin Futures trading space. The exchange was launched in August 2018. I discovered it through one of their blog posts that offers details about the team behind Delta, their vision and plans for the future. I was both intrigued and impressed with both the level of transparency and the clarity of thought process of the Delta team. It was evident to me that this is a project worth tracking. In the past couple of months in which I have followed Delta Exchange, I have been positively surprised by their execution prowess as they have continued to roll out new Futures contracts and new features. Furthermore, I have pleasantly surprised by the increasing buzz about the exchange and the steady growth in its Twitter and Telegram community.

I believe Delta has the potential to become a force to reckoned with in the crypto derivatives and margin trading space. While I’d encourage you to do your own research, I enlist below the things that make me bullish on Delta.

Customer- first approach

As things stand today, market manipulation, front-running and overall mismanagement are quite common, even in exchanges doing billions in daily traded volumes. In this backdrop, Delta comes across as an idealistic whiff of fresh air. They list Fairness, Transparency and Integrity as their guided values and expressly commit to treating their traders with honesty. If they continue to walk the talk, this stance towards customers should reap rich dividends.

Healthy order books

The current trading volumes at Delta are relatively low compared to its more established competitors. However, the order book is healthy and the quality of liquidity at Delta is at par with its peers. For example, in the BTC-USD Futures contract, the spread in the order book is at tight as in BitMex and the order book has depth of about 50BTC on each side. In my view, quality of liquidity is the best indicator of the strength of an exchange and it is usually the indicator which tends to be abysmal for most new exchanges. It is commendable for Delta to have pulled off this type of liquidity so early on in its life.

Innovative financial products & features

Given the background of the founders, Delta team is quite strong in financial engineering and seems to have a deep understanding into the psyche of traders. They have listed XLM Futures which is currently the #4 coin, making Delta the only place where you can go both long and short Stellar Lumens with leverage. They recently increased the maximum leverage allowed on the BTC-USD contract to 100x, from 20x previously. This has brought Delta at par with BitMex and Deribit as far as maximum leverage is concerned.

Focus on security

If you running a centralised crypto exchange, it would be a cardinal sin to lose the crypto in your custody. It is encouraging to see that Delta is giving safe keeping of crypto the due it deserves. The exchange currently accepts only bitcoins as margin, which as kept in a multi-signature wallet. For enhanced security, withdrawals are processed only once a day after manual review. While this does increase the friction for traders a bit, I believe this inefficiency is worth it considering all the security-related benefits it provides. Staying hacking free is critical for crypto exchanges and so far, Delta seems to be doing a good job.

Strong team – problem fit

The founding team has the right mix of skills and experience for building and running a crypto Futures exchange. Two of the founders are alumni of blue-chip Wall Street firms viz. Citigroup and UBS and have cumulatively about 15 years of experience in financial markets, with emphasis on derivatives trading. The third founder is a tech whiz and has previously built and sold companies that were backed by the likes of Softbank and Sequoia.

Few but noteworthy advisors

The exchanges advisory board has only 4individual. But all the 4 advisors are highly accomplished, come from diverse areas of finance/ fintech and seem to have the potential to add material value to the company.  Advisors include Prof Bhagwan Chowdhry of UCLA Anderson, who is also an advisor to Stellar Development Foundation, and Stani Kulechov, CEO of EthLend.

Final Words

I believe Delta checks all the boxes and has the potential to become a strong competitor to incumbents like BitMex. Moreover, the contract specifications at Delta and BitMex are nearly identical and makes it easy for traders to switch from BitMex to Delta and even run arbitrage strategies between the two exchanges. Would love to hear your thoughts on Delta.