Bybit has had a makeover, adding new perpetual contracts, rejigging its trading engine, and reducing its margin requirements. The upgrades mark the biggest upgrade to the Singapore-headquartered exchange since its launch two years ago. Futures exchanges, which were once considered exotic among retail traders, have become normalized within the crypto industry, soaking up significant volume that once went to spot exchanges. Bybit has been one of the beneficiaries of this trend, seeing its volume swell to over $1 billion a day.
The biggest talking point from Bybit’s new flurry of features is its addition of USDT perpetual contracts. Adopting Tether as the benchmark for denominating its futures simplifies matters for users of the exchange, while introducing the ability to hold long and short positions simultaneously. Traders opening positions priced in USDT can gain exposure to underlying spot market prices for assets like BTC, but with the option to apply high leverage if desired. As the name denotes, perpetual contracts have no expiry date.
More Contracts, Less Maintenance
In the past, Bybit denominated profits and losses using the underlying currency, which mandated having to top up margin calls using the asset in question. USDT contracts make it easier to top up margin and rebalance accounts using a single asset, and to deploy floating profits to execute trades in other contracts. Bybit has also made a few tweaks to its trading engine, making it easier for traders to enter and exit positions during periods of high volatility.
BitMEX’s well-documented woes during bitcoin’s crash on March 12-13 has proven the last straw for some traders, who have tired of the frequent degradation of service. BitMEX, for its part, has blamed DDoS attacks for its exchange going offline shortly after $700M of longs were liquidated. Whatever the case, the blip has been capitalized on by rival derivatives exchanges. Bybit CEO Ben Zhou has been swift to praise the uptime of his own futures exchange, in what was interpreted as a subtle dig at BitMEX’s performance issues.
Bybit Moves to Minimize Risk
A small but significant enhancement to accompany Bybit’s launch of USDT perpetuals is a shared insurance fund for traders launching multiple futures contracts. This helps to further offset the risk of liquidation and provides greater guarantees for traders. The shrinking size of the insurance fund operated by some derivatives exchanges has prompted debate on crypto Twitter. As The Block’s Larry Cermak pointed out, Deribit’s insurance fund dropped from $3.1M to $227K over the course of two days, as frothy markets sent the liquidation engine into overdrive.
BitMEX also saw its insurance fund shrink by 1,627 BTC over the same period, but this represented less than 5% of its total. On March 22, the BitMEX insurance fund stands at over 35,000 BTC. Derivatives exchanges such as BitMEX and Bybit publish daily attestations of the BTC they have on hand to cover unexpected events, with a growing insurance fund typically correlating with an increase in monthly trading volume.