Deribit Futures & Options Exchange Review – Is It Legit?

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Deribit opened for business in 2016 and since then they have slowly but surely carved out a place for themselves in the crypto-verse. Their Bitcoin futures offerings are what initially set them apart, but as that market has been slow to take off Deribit has branched out into other derivatives. For instance, they launched a perpetual swap instrument in mid-2018 that tracks the Bitcoin spot market and offers 100x leveraged trading. The company is based in Amsterdam and its name is derived from the words “derivatives” and “Bitcoin.”

Best Leveraged Trading Exchanges

Exchange Features More Info
Bitmex
  • Largest derivatives exchange
  • Up to 100x leverage
  • XBT, ETH, TRX, ADA, BCH, EOS, LTC, XRP available
Deribit
  • Up to 100x leverage
  • BTC & ETH Futures & Options avaiable
  • Low Fees
Bybit
  • Over 300,000 users
  • Up to 100x leverage
  • BTC, ETH, EOS, XRP Contracts available

Available Products

As of this writing, Deribit features Bitcoin (BTC) and Ethereum (ETH) markets. As mentioned, Bitcoin contracts can be leveraged up to 100x. Which puts Deribit on par with industry giant BitMEX. Ethereum contracts, being a new product for Deribit, have a margin cap of 50x. It should be noted however that Deribit Ethereum options are European style, cash-settled options. This represents a first in the cryptocurrency industry.

Both Bitcoin and Ethereum are available for perpetual swaps, futures and options trading. The company has insured investors they will be adding other contracts to the menu on a regular basis going forward. At the moment, however, they still fall well short of BitMEX and their 8 supported cryptocurrencies.

Deribit BTC Contracts
Deribit ETH Contracts

Deposits and Withdrawals

Despite expanding into Ethereum derivatives, Deribit still only accepts BTC deposits. No fiat currencies are accepted and there are no plans for that to change any time soon.

There are no fees from the Deribit end for making deposits. Although it is likely depositors will incur a modest mining fee from the network. And while the company states there is no minimum deposit they also go out of their way to suggest you deposit a minimum of 0.001 BTC. This, they say, will help prevent system errors.

Withdrawals are also a Bitcoin-only process. After choosing “withdrawal” from the account page, you will be prompted to supply a wallet to withdraw the money to. All withdrawals are hand checked and the fee assessed will depend on the priority level of the withdrawal you selected. Higher priority, faster withdrawal, higher fees.

Margin Requirements

Each account has an initial 10% margin requirement. Traders are required to maintain a 3% margin on any positions. Should your account margin balance fall beneath your ability to maintain minimum margins on all your outstanding positions the platform risk engine kicks in and begins liquidating positions automatically until your account is once again in balance.

Insurance Fund

Some exchanges socialize losses by taking a bite out of the most profitable accounts to maintain liquidity. Deribit attempts to avoid this situation – called “auto deleveraging” – by maintaining an insurance account of 25 Bitcoin. Deribit claims that since they opened their virtual doors, they have not deleveraged a single account. If true, that is quite a notable accomplishment and something to consider when choosing a crypto trading platform.

Deribit Matching Engine

Where other exchanges such as Binance and Bybit may have an advantage over Deribit is in the speed of their matching engine. The speed of the Deribit engine is 0.6 ms. That might sound fast – and if we’re talking 2015 it certainly was fast – but today’s top matching engines can typically process transactions in as little as 0.1 ms. Hopefully there’s an upgrade coming soon. The Deribit matching engine does not, however, permit self-trading. Any such order would be rejected.

Deribit Security

In the first half of 2018 (the last period for which there is reliable data) more than $1 billion in cryptocurrency was lost to hackers. That’s an appalling number and one that has prompted most of the major exchanges to invest heavily in state of the art security protocols. Deribit is one of the few major crypto exchanges that has not suffered a hack. And that’s another fact you may want to consider when choosing a crypto exchange. In addition:

  • 99% of all assets are held in cold storage wallets.
  • They practice auto-liquidation of underfunded or inactive accounts.
  • They provide two-factor authentication (although not by default).
  • They have an ongoing bounty program for white hat developers to probe for weaknesses.

It’s not clear why the platform does not make two-factor authentication the default setting. But if you are serious about securing your assets, you should enable it as soon as you open a Deribit account.

It should also be noted that while most exchanges have robust Know Your Customer (KYC) protocols in place that require users to provide various types of identification that is not the case with Deribit. Deribit users need only register using the simple form on the website and as soon as their account is verified, they can begin trading.

Deribit Trading Platform Review

Should Beginners be Using Deribit?

Because Deribit deals with the very risky world of margin trading, it is not recommended as a place for novice crypto investors to get their feet wet. One bad decision could wipe them out and leave a very bad taste in their mouth about crypto going forward.

Demo Trading

For those intrepid souls who simply can’t abide the thought of not jumping directly into the crypto trading deep end, Deribit offers a demo trading environment. This gives the newcomer the ability to get familiar with the interface and hopefully imparts some useful trading knowledge as well. Feel free to execute as many dummy trades as you think you have to before actually wading into the shark-infested waters, crypto in hand.

While Deribit is to be applauded for including this potentially useful feature, one has to question why they’ve made it so hard to find. Essentially the only inkling it exists is when it is mentioned almost as an afterthought in the FAQ section of the website.

Conclusion: Is Deribit Legit?

On the whole, Deribit has some very real things going for it. The Euro-style Ethereum options, the demo trading environment, the lack of odious KYC requirements, and their disdain for socialize losses are just a few. If they upgrade their matching engine they’ll be in prime position to capitalize should the crypto options market take off.

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