Deribit is a crypto derivatives exchange founded in 2016 and headquartered in Panama City.
The platform specializes in Bitcoin futures and Bitcoin options trading. The Deribit crypto trading exchange has a 24h trading volume of USD 652 million – the 16th-highest in the crypto market.
Deribit is mainly preferred by professional traders who want to trade Bitcoin and Ethereum futures and options. One of the striking features of Deribit is its robust, institution-grade trading platform.
However, other exciting features like low trading fees, leveraged trading of futures and options, and leading-edge security and customer support make Deribit an excellent choice for beginners in the futures market.
So, should you use Deribit for trading cryptos? Here’s a detailed Deribit review to help you make the right decision.
Deribit Supported Currencies and Trading Pairs
Deribit specializes in Bitcoin (BTC) and Ethereum (ETH) derivatives trading. As of now, it only supports two trading pairs:
Deribit Product Offerings: Futures and Options Trading
Deribit offers three trading options: traditional futures contracts, perpetual swaps, and Deribit options. Let’s see how these contracts work.
- Traditional Bitcoin Futures and Ethereum Futures
Traditional BTC and ETH futures are futures contracts with a weekly, monthly, and quarterly expiry. They are similar to stock futures and derive their price from the underlying crypto asset.
- Perpetual Swaps
Perpetual futures, also known as perpetual swaps, are futures contracts without an expiry. These types of futures are gaining significant popularity among crypto traders. Most derivatives exchanges, including Deribit, offer attractive leverage on perpetual swaps.
Deribit also has European-style options that work similarly to options in stocks and indices.
Coming to leverage, Deribit offers up to 100x leverage on futures trading. For options trading, the maximum leverage is limited to 10x. However, traders need to have a 10% margin requirement in their trading accounts, along with a 3% margin requirement on open positions.
Deribit Order Types
Deribit supports various order types that allow you to control your trades better. The following order types are available on Deribit.
- Limit Orders: These orders are executed at a pre-specified price. When placing a limit order, the user needs to select a price at which they want the order to be executed. The order will execute once the price reaches the entered price.
- Market Orders: These orders are executed at the current price. However, these orders may not essentially execute immediately. The speed of filling and execution depends on liquidity.
- Stop-Limit Orders: Stop-limit orders are limit orders with a stop loss attached to them. These orders are placed in the opposite direction of the trade and protect traders against big losses if the trade goes in the opposite direction.
- Stop-Market Orders: Stop-market orders are market orders with a stop-loss attached to them.
- Take-Profit Orders: Take-profit orders are the same as stop-loss orders; however, they are placed in the same direction of the trade.
Apart from these, Deribit also supports advanced order types, including:
- Good-Till-Cleared (GTC) Orders: These limit orders will remain open until they are executed or manually canceled.
- Immediate-Or-Kill (IOC) Orders: These are market orders that are either executed immediately or canceled. Partial filling of orders is possible in IOC orders.
- Fill-Or-Kill (FOK) Orders: These are modifications of IOC orders in which partial filling is not supported. Either your order will get filled immediately or not get filled at all.
Deribit Margin Trading Fees
Like most crypto derivatives exchanges in the market, Deribit follows a market maker-taker fee model. Here is how the model works.
Crypto trading orders are broadly categorized into two types:
- Orders that add liquidity: Orders that enter the order book add liquidity to the market. These include limit orders.
- Orders that reduce liquidity: Orders that are immediately executed and don’t enter the order book take liquidity away from the market. These include market orders.
Orders that add liquidity are known as market maker orders, whereas orders that reduce liquidity are known as market taker orders.
That said, here’s how the Deribit fee structure looks like.
For perpetual contracts:
- Market Maker Fee: – 0.025% (rebate)
- Market Taker Fee: 0.075%
For traditional futures:
- Market Maker Fee: – 0.020% (rebate)
- Market Taker Fee: 0.075%
- 0.04% of the underlying contract or 0.0004 BTC/options contract
Options trading fee on Deribit can’t increase beyond 12.5% of the option’s price.
Additionally, Deribit charges a liquidation fee on all contracts. It charges a 0.35% liquidation fee on traditional futures, 0.375% liquidation fee on perpetual swaps, and 0.019% of underlying or 0.0019 BTC/ contract for options.
Deribit Liquidation Mechanism
Deribit has an automated liquidation mechanism like all other modern-day derivatives exchanges. Crypto exchanges have an auto-deleveraging system that forcefully liquidates a trader’s open position if their initial margin falls below the maintenance margin requirements.
Since derivatives exchanges, including Deribit, offer up to 100x leverage, forced liquidation is common in leverage trading. The main cause for a forced liquidation is a sudden market fluctuation due to some piece of news or malicious price manipulation.
Deribit implements a robust liquidation mechanism to protect its users from forced full liquidation. Deribit’s liquidation mechanism involves:
- Incremental Liquidation
Deribit uses incremental liquidation, also known as partial liquidation, to ensure that liquidation occurs in fractional steps. Incremental liquidation gradually closes open positions instead of reducing a trader’s open position to the zero-equity point.
- Insurance Fund
In some cases, the price at which the losing trader is liquidated differs from the price at which the winning trader has their target. Deribit has an insurance fund to fill this gap, ensuring that the winning traders get paid.
- Socialized Loss System
If the insurance fund runs out of funds, Deribit has a socialized loss system as a backup. After the depletion of the insurance fund, all the losses are socialized – distributed equally among profitable traders.
- Daily Settlement
Deribit also has a daily settlement system, and settlements take place every day at 8:00 UTC. This ensures that the socialized loss system doesn’t affect long-term traders.
Deribit Funding Rates/Fees
Since perpetual futures contracts don’t have an expiry date, they can trade away from the underlying asset’s price for a long time. This could make the market one-sided. To avoid this, Deribit implements a funding rate mechanism.
Here’s how the funding rate works.
When the price of the perpetual contract is higher than the spot price, long traders have to pay a funding fee to short traders. This discourages traders from buying, thereby dominating the sellers and bringing the price close to the spot price.
Similarly, if the price is trading below the spot price, short traders will pay a funding fee to long traders, making the buyers dominant.
Now, how is the funding rate calculated? Deribit uses a Mark Price mechanism to calculate the funding rate. This includes measuring the percentage difference between the Mark Price of the contract and the Deribit BTC Index.
Please note that the funding fees are exchanged between traders, and the exchange isn’t directly involved. Deribit refreshes the funding rates every eight hours.
Deribit Trading Platform & Tools
Deribit has a powerful web-based trading platform accessible from the Deribit website. The platform comes with leading-edge technical analysis tools that enable traders to devise trading strategies and make informed bitcoin derivatives trading decisions in the futures market.
Deribit implements the TradingView charting system, which is the industry standard used by the leading exchanges in the crypto market. Key features of Deribit trading view for trading bitcoin derivatives are:
- Multiple Time Frames: Deribit supports time frames from 1 minute to 1 day, allowing traders to analyze historical chart data across various time frames.
- Multiple Chart Types: Deribit supports numerous chart types, such as line charts, area charts, candlesticks, Heikin-Ashi, etc. to get a clear view of the market.
- Indicators: Deribit has hundreds of built-in technical analysis indicators that enable seamless analysis and helps you make informed trading decisions.
- Drawing Tools: Deribit comes with various drawing tools, such as horizontal/ vertical lines, trend lines, price/date range, long/short position, Fibonacci retracement, etc.
That said, let’s now look at the key tools available on Deribit’s trading panel. Below the chart, you have the Order Form, where you can set leverage, select order types, and place Buy or Sell orders.
Below the Order Form is the Order Book, where you can check the market depth and track Buy and Sell orders in real-time. Towards the end, Deribit gives you a section to manage your open positions, open orders, trigger orders, order history, and trade history.
The only drawback of Deribit’s trading platform is that it was designed with more experienced traders in mind. It’s great for beginners as well; however, there is a small learning curve that beginners will need to go through when they begin trading Bitcoin options and futures on Deribit.
Deribit Mobile App
Deribit also offers a mobile app that allows traders to manage their trading operations from their mobile devices fully. The Deribit app is available on both Android and iOS platforms. You can perform numerous activities from the mobile app, such as opening a new account, taking positions, depositing and withdrawing funds, etc.
Another standout feature of Deribit is the Testnet, which allows you to trade in a simulated environment with demo currency. New traders may not be comfortable trading with real money. Such traders can leverage the Testnet to understand how the platform works, place orders, use indicators, etc.
Once you gain enough confidence, you can deposit funds into your main trading account and begin trading with real money.
Deribit Deposit Methods and Deposit/Withdrawal Fee
Deribit only accepts deposits in Bitcoin. You can deposit funds in your trading account from a Bitcoin wallet.
If you don’t own Bitcoin, you can head to an exchange like Binance or Coinbase to convert your fiat currency into Bitcoin. As of now, Deribit doesn’t allow fiat currency deposits using third-party gateways.
The same goes for withdrawals. Deribit only supports Bitcoin withdrawals in a Bitcoin wallet, and there is no fiat support.
Coming to the fees, Deribit doesn’t charge any deposit or withdrawal fee. However, a blockchain network fee may apply when withdrawing funds.
Deribit Trading Accounts and Limits
Deribit is one of the many exchanges that have mandatory KYC requirements. There are four levels of KYC status:
- Retail Level 0: ID document and proof of residence needed
- Retail Level 1: Proof of residence needed
- Corporate Level 0: Incorporation documents, ownership structure, register of directors and stakeholders, and ID documents of directors and stakeholders needed
- Corporate Level 1: Same requirements as Corporate Level 1
The distinctions between Level 0 and Level 1 accounts, such as daily withdrawal limitations, ability to perform block traders, etc., no longer exist.
Corporate level account users can create multiple sub-accounts under the main trading account to accommodate multiple traders and test different strategies. These accounts have rate limits based on the seven-day trading volume.
Accounts with a seven-day volume of less than USD 1 million have a rate limit of 5 matching engine requests per second. The limit increases to 10 p/s for a trading volume of less than USD 5 million, 20 p/s for a trading volume of less than USD 25 million, and 30 p/s for more than USD 25 million.
For non-matching engine requests, each sub-account has a 20 p/s rate limit with a burst of 100.
How to Start Trading on Deribit?
Now that we have discussed the product offerings, trading fee, platform features, and deposit/withdrawal methods on Deribit, let’s delve into how you can start trading on the platform.
Follow these steps to get started.
1. Create a Trading Account on Deribit
You can visit this page to create an account on Deribit. Upon registration, you’ll be asked to complete identity verification.
Once you submit your documents, the Deribit team will approve your KYC within a few hours. After your KYC is approved, you can start trading on Deribit.
2. Deposit Funds
The next step is to deposit funds. As discussed, you can only deposit Bitcoin. So, if you don’t own Bitcoin, you’ll need to buy it first. Once you have Bitcoin, you can deposit it in your Deribit account from your BTC wallet.
3. Place Your First Trade
Once you have funds in your account, you are ready to trade. Head to the trading panel and fill the Order Form. You’ll need to enter the following details:
- Order type
- Quantity (in BTC or USD)
- Price (for limit orders only)
- Maximum leverage
After filling the Order Form, click on Buy or Sell to take a trade. When your order gets executed, you’ll enter a position. Your open position will be visible in the “Positions” section of the trading panel.
4. Exit Your First Trade
The final step is to exit your trade, and you can do it in two ways. You can exit your trade manually by placing a market order against your open position.
Else, you can place stop-loss or take-profit orders. If your trade goes against your prediction, your stop-loss will trigger, and you’ll incur a loss. If your trade goes in your direction, your take-profit will trigger, and you will earn a profit.
5. Keep Practicing
The most important step to becoming a successful trader is to keep practicing. It’s normal to incur losses, especially in the initial days of trading. New traders must focus on the process of trading futures and get a gist of how all the financial instruments work.
Slowly, you should adopt trading strategies and take a systematic approach to trade cryptocurrency futures. Getting a good grasp of technical analysis can go a long way in boosting your trading performance and profitability.
Deribit Security Features: Cold Storage, Insurance Fund, and More
Security is one of the most important factors to consider before registering for a cryptocurrency futures exchange offering leveraged trading. Since its launch in 2016, Deribit has offered a safe and secure trading experience to its users. Let’s review the security features available on the Deribit platform.
- Cold Storage
Deribit stores more than 90% of its users’ funds in multi-signature cold storage. Then a user sends a withdrawal page request; the Deribit team manually authorizes the deposit address. This eliminates the risk of cybersecurity attacks associated with storing funds in a hot wallet.
- Two Factor Authentication
Deribit encourages all its users to activate two-factor authorization (2FA). It requires users to demonstrate the Deribit account ownership twice to get login access. This prevents unauthorized access to user accounts.
- Deribit Insurance Fund
As discussed, Deribit has an insurance fund that protects traders from forced liquidations while ensuring that profitable traders get paid.
- Secure Protocols
Deribit implements cutting-edge security protocols to protect its web-based platform and mobile app from brute force attacks and DDOS attacks. It also uses IP whitelisting, SSL encryption, and other security best practices.
Deribit also allows users to turn on desktop and in-app notifications. This way, users can get notified in case of an unauthorized login or other actions.
Overall, Deribit is one of the top cryptocurrency exchanges in terms of security. It deploys industry-leading security features and provides a secure platform and trading experience to all its users.
Deribit Customer Support
Customer support is also an essential aspect of choosing a cryptocurrency exchange. If you’re new to cryptocurrency trading, you will likely run into issues using the Deribit platform.
Thankfully, Deribit has a skilled support team that offers 24/7 customer support through email. On average, the team can take one to two hours to respond to your query.
Deribit also has a presence on social media channels like Telegram, Twitter, and Reddit. Additionally, Deribit has a vast knowledge base that comprises FAQs and blog posts to answer commonly asked questions regarding future contracts and trading.
The only drawback of Deribit’s customer service is that there is no live chat feature offered by various exchanges.
Is Deribit Regulated?
No, Deribit is not regulated. However, it requires all users to go through a KYC process, ensuring that their entire user base is verified.
Where Is Deribit Located?
Deribit has its headquarters in Panama City, Panama.
Can You Use Deribit in the US?
US residents are not allowed to use Deribit. However, it is possible to access Deribit in the US using a VPN.
How Does Deribit Make Money?
Deribit makes money from the trading fee it charges on each futures contract. Deribit doesn’t have a secondary revenue model like Phemex (premium version) or FTX and Binance (native token).
Deribit Review Summary
This Deribit review covered all aspects of Deribit futures trading, including Deribit leverage, trading fees, platform performance, and more.
Let’s quickly recap this review by discussing the pros and cons of trading on Deribit.
Coming to the pros first, Deribit has a standout trading platform that delivers institution-grade performance. If you’re looking for a platform that supports fast execution and scalping, Deribit is an ideal pick for you.
Another key feature of Deribit is the Deribit demo account. If you’re a beginner, the demo account functionality can be a dealbreaker for you.
Lastly, Deribit offers all the standard benefits, such as low trading fees, 100x leverage, and zero deposit and withdrawal fees.
Now, let’s talk about the cons. One major drawback of Deribit is that it has limited trading options. You can only trade a Bitcoin and Ethereum futures contract or option. Also, the Deribit trading platform isn’t very beginner-friendly, and new users will have to go through a learning curve.
Overall, Deribit is an excellent exchange for professional and beginner traders looking for a powerful platform to trade BTC and ETH futures and options.
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