25 Juli 2019


Patrick Heusser

Patrick Heusser

Senior Trader bei Crypto Broker AG

Über den Autor

We’re pleased to share a review of the most persistent, relevant, and current topics related to the disruption from crypto assets and blockchain in finance in a first edition of our magazine Building Blocks – Tokenisation & the Blockchain Evolution. The magazine features collaboration from over a dozen leading figures in the crypto and blockchain community and insights on the major topics around crypto investing and digital asset market developments.

We’d be happy to give you a digital copy of this magazine: please sign up for it with the form lower on this page.

Below is the first article we released from the magazine: an article by our Crypto Broker Senior Trader Patrick Heusser about the crypto trading universe.


Bitcoin and other crypto assets have come back into the spotlight recently. Newcomers to this market may feel a bit lost in this significantly different environment, and we felt now is a good opportunity to give some insights and to highlight what makes various trading platforms distinct.

The crypto asset trading universe is highly fragmented. There are hundreds of exchanges and market places where you can buy and sell crypto assets. In this report we focused on the most liquid and best regulated ones. From a traditional investment manager’s perspective, there are a few points that need to be analysed before engaging in a new asset class. This report should help you to find your way through the jungle of crypto asset trading.


We have divided the trading venue tables into non-derivative exchanges and derivative exchanges. Some of the venues show up on both tables, as they have margining trading capabilities.
Focussing first on the non-derivative exchanges, the most important point for an investor is the fiat ramp capabilities as most traditional investment companies hold client money in fiat. There are only a few exchanges that have fully functioning fiat ramps (deposit and withdrawal of fiat). Therefore, our table primarily shows exchanges with a functioning fiat ramp. The exceptions are Binance and Okex. Both are traditional altcoin exchanges. Their unique selling point is that they offer a variety of smaller coins that you can trade against bitcoin, Ethereum, and a few stablecoins.
Regulation plays a big role as well, and therefore, we have considered jurisdiction, too. It is not easy to figure out where these companies are regulated. The problematic ones are the ones in very lightly regulated jurisdictions such as the British Virgin Islands and Belize. Usually, those exchanges have their headquarters somewhere else such as Hong Kong. Nevertheless, there are well-regulated exchanges in various parts of the world such as the EU, UK, US, and Japan.

a) SAFU: Secure Asset Fund for Users, b) Coins are insured if stored in the hot wallet (or online) with the exchange, c) A reserve pool will tapped if one of their wallets get hacked, and 1) Bitfinex does have a fiat ramp, but their banking relationships are not very reliable.


a) You can enter into leveraged trades of up to 100x on some exchanges, b) There is a reserve pool in case of a market incident (flash crash or massive rally) that triggers liquidations, and traders have negative equity on the platform, and c) Liquidations are distributed among designated liquidity providers.


Diving into the Derivative Exchange World

For traditional asset managers, margin trading is not a hot topic. However, if you consider the fragmented trading universe, and the consequence that you need to deploy capital on so many trading venues, then margin trading comes in handy. You are able to execute customer orders more quickly by trading on margin and sending the fiat or coins to the exchange after you trade. Obviously, for any hedge fund trading strategies, margin trading is a must-have.

Jurisdictions, similar to the non-derivative exchanges, are spread around the globe, and include a few well-regulated trading venues as well as some that we call “rather unregulated” platforms.
There is quite a difference in the product offerings of these trading platforms and venues. Most offer futures trading. Options can only be traded on Ledger X (and only by institutional investors) and Deribit (for retail and institutional investors). If you dig a bit deeper into their offerings, there are differences in a variety of products. For example, Bitfinex does not offer any futures. They only offer margin trading. Bitflyer and CME only offer bitcoin futures, but both have a different maturity schedule. Perpetual futures are a special product that comes close to a CFD (Contract for Difference). The ones that offer perpetual futures have a different index (and different underlying assets). This is one of the reasons why prices do not align across the various trading venues.

Kraken and Bitmex have the biggest selection of futures. They both offer several maturities in different coins. If you combine the offering of both exchanges, you cover almost 90% of all tradable futures. There is one big difference, though, in their margining and profit-and-loss concepts. On Bitmex, everything is valued in bitcoin. Whereas on Kraken, each coin future needs the respective coin as a variation margin. The advantage of Kraken’s concept is that your profit and loss calculation is straightforward. Your coin moves up or down and you profit from it in the respective coin. On Bitmex, you have most of the futures quoted against bitcoin (and not USD, as on Kraken). On the perpetual swaps, which are quoted against USD, even on Bitmex, you have a very special setup for the ETHUSD perpetual. There you have a third currency involved in the overall valuation of the contract. This is a concept that exotic options traders are familiar with and it is called quanto valuation.

The security of assets on any trading venue is always a concern for an asset manager. Hence, some of those platforms have introduced different types of security measures. You have to distinguish between security measures to store assets and those for margin trading. To store assets, regulated exchanges have a so-called “hot wallet insurance”. They have an insurance company that has agreed to cover the risk of theft or hacks and the like. Binance has no insurance, but they introduced their so-called SAFU (Secure Asset Fund for Users). It is basically a reserve pool funded out of their revenues. Just recently, Binance was hacked, which resulted in a loss of bitcoins out of their storage. They announced that they will cover the loss with their SAFU assets. For margin trading security measures, there are various concepts. The two main security measures are margining and insurance funds. Margining is the same approach as in the traditional system established exchanges like CME or ICE. The bottom line: a risk management system will monitor the pledged margin versus the market value of the traders’ positions. If it falls below a certain threshold, the position will be liquidated. Usually, this is done without collateral damage, and the liquidated trader receives the remaining margin. In rare cases, the liquidation cannot be executed without leaving negative equity. Then the insurance fund is triggered to cover the gap. If there is no insurance fund or the gap is bigger than the value of the fund, then so-called “socialised” losses occur. This results in all traders with a profit having to give some of this profit away to cover the loss. Kraken has its own unique system, called a “position assignment system”. If you are a designated liquidity provider, you can pre-define what size and on what relative levels you will take liquidation trades on to your book (into your position).