Bitfinex is owned and operated by iFinex inc, which is headquartered in Hong Kong and is registered in the British Virgin Islands. Founded in 2012, Bitfinex is one of the oldest crypto exchanges and the mature and developed services and offerings provided certainly shows this off.
Originally just offering a peer to peer (P2P) exchange for bitcoin, Bitfinex is now a leader in the industry with high volumes and liquidity. The products on offer include, exchange trading, derivatives, margin trading, P2P funding for margin trading, An OTC desk, and a custom-built order toolkit to provide the ability to implement algorithmic orders and trading strategies.
These advanced trading products, are thus targeted to advanced and professional traders who would make use of the margin available, as well as the API and complex orders.
Bitfinex is not registered or regulated under any jurisdiction and does not offer insurance to customers. However, did return all funds (over $70m worth of BTC) stolen in August 2016 hack via a smart token created for the purpose. Essentially an I-Owe-U token that could be traded on their exchange, Bitfinex made good and paid off the debt in full by 4th Apr 2017.
Bitfinex has had a number of other security concerns and issues and is currently facing investigation and trial for potentially losing over $850 million of customer funds.
As a platform, Bitfinex is well developed, mature and polished. A Demo is available on the homepage without an account, showing off the trading platform for both the exchange and derivatives. However, this demo doesn’t provide demo funds unless you create an account.
Once signed up and logged in, security features and verification are optional but heavily pushed. 2FA is mandatory. Bitfinex also use IP monitoring, email encryption and withdrawal protection which need to be enabled by the user. Verification is necessary only to deposit or withdraw Fiat funds, in which case the verification for KYC/AML is thorough and according to the site can take up to 2 weeks to complete. The majority of funds held offline in cold wallets to prevent access by hackers or fraud.
Bitfinex is also closely associated with Tether, with whom they share common management and shareholders. Critics have raised questions about this relationship
Is Bitfinex safe
Bitfinex has had a rocky history with security. In 2015 the exchange’s customers were hacked, losing around $400,000. In 2016 $73 million more was stolen. Bitfinex promised to repay the missing funds and responded by creating a smart token which would act as a debt to be repaid. This debt was fulfilled within 8 months.
Following these breaches, Bitfinex has increased security considerably within its platform. Making 2 factor authentication mandatory. This requires customers to input a constantly changing code from an app on their phone to gain access. They have also implemented additional security measures on their withdrawals process.
Furthermore, depositing or withdrawing fiat currency requires full KYC verification despite not being regulated to by any jurisdiction or financial entity.
Another fallout of the security breaches was Bitfinex’s access to US dollar payments and withdrawals was curtailed and in 2018 they had serious difficulties with securing banking relationships. In April 2019, Letitia James, New York Attorney General filed a suit accusing Bitfinex of using Tethers cash reserves to cover up a loss of $850m to a Panamanian payment processor, Crypto Capital Corp, who absconded with the money. Tether ltd is an affiliate company of Bitfinex, sharing management and shareholders. Tether supposedly hold USD in their bank accounts, to back the “stablecoin” USDt (a cryptocurrency named USD Tether or Tether for short) which is supposed to be backed by USD on a one-to-one ratio. This also has the implication that Tether is no longer backed by cash on a 1 to 1 ratio. Bitfinex neither admits nor denies these claims and the case is ongoing as of July 2020.
Despite these concerns, Bitfinex remains one of the most popular exchanges providing good liquidity.
You can visit Bitfinex . While the product offerings and platform are excellent, at the moment we would not recommend using their services until the questions about the alleged losses have been answered. Quite frankly, there are similar products available from other providers who are not under investigation. We intend to keep an open mind on the topic and may alter our recommendation once the case is resolved.
Bitfinex wallet
Bitfinex do not offer a private wallet service at the moment and funds are held in Bitfinex wallets. If you need a private offline wallet, we recommend Trezor
Bitfinex account
Sign up
The Sign-up process for Bitfinex is similar to many other exchanges. You only need an email and password to get you in. You do also have to choose a username when signing up, which you can use to log in as well as an email address.
Once you have opened the account, you will receive an email with a link to click in order to verify your email address.
You can now log in to Bitfinex. However, instead of directly letting you into your account when you log in with your username/email and password, you will be sent an email with a link to get into your account. This is an extra security precaution in place until you set up 2 factor authentication.
Once logged in for the first time, you will need to agree to the terms and conditions. You can review these at any time within your account. At the bottom of the page once logged in there is a “Legal” menu which links to each of the various terms of service and policies in effect when using Bitfinex services.
Bitfinex account security options
Following the first log in you will be asked to set up 2FA. You can do this any time by clicking on the avatar in the top right and going to your account. In the security tab, you will be able to set up 2FA. Have a look at our quick 2FA guide here if you are not familiar with it.
Bitfinex has an impressive amount of security settings which can be optionally enabled/controlled by you. These include
Email encryption, for which you will need to create and provide a pgp public key. This will ensure any emails sent to you by Bitfinex are encrypted.
Session settings. You can choose whether you receive an email alerting you of every logon, whether you are logged out after 10 mins of inactivity, control on which IPs are allowed to visit your account
Withdrawal address settings. You can whitelist which addresses you can to which withdraw crypto funds
Further withdrawal settings. Email alerts and IP checks
As you can see Bitfinex’s has learnt from its security breaches and made account security a high priority
The 5 core features of trading at Bitfinex
Exchange trading
This is the simple familiar trading platform, where users can deposit, trade and withdraw digital currencies and tokens. It does offer more advanced orders and a few more quote currencies than the average exchange.
Margin trading
The margin trading feature allows qualified users to trade with up to 5x leverage. By borrowing funds from the peer to peer margin funding platform, traders can open positions much larger than the amount held in their accounts. Traders can manually enter a funding order to receive
- the amount of funds
- at the interest rate of their choice
- for the duration of their choice
Alternatively, traders can simply open a margin order, and Bitfinex will automatically link a financier at the current rate.
Margin Funding
The opposite side of the coin to borrowing to trade on leverage is to lend money to others. This peer to peer lending facility allows investors to safely earn interest by loaning funds to others to use for margin trading. This is a low risk investment as it provides a simple interest return. There is a fee of 15% charged to lenders who offer margin funding.
The OTC market
A private over-the-counter market is offered by Bitfinex. According to the support pages, Bitfinex seem to be offering both a principal desk where you can buy directly from Bitfinex’s OTC desk and an Agency desk where you are connected with another user to be the counterparty. The notional minimum is 100k USD and the service incurs a fee of 0.1%
Derivatives
Verified users can trade up to 100x leverage on the derivatives market offered by Bitfinex. Derivatives on BTC, ETH, Gold and BTCdomination are offered.
Wallets
The funds you deposit in Bitfinex can be held in one of three wallets.
- The Exchange wallet – which holds funds your trades on the spot exchange. This is the most likely place you would normally deposit funds
- The Margin wallet – which holds funds for your trades on the margin exchange
- The funding wallet – which holds funds which are used to provide financing to other margin traders.
Funds can be moved between wallets for free so even if you make a mistake choosing the correct wallet, it’s not an issue.
Bitfinex Base currencies
Like many other exchanges there are a wide variety of trading cryptocurrencies and tokens available to trade. Unlike many other exchanges, there is are more choices of base currencies available. The spot exchange at Bitfinex uses 11 different base/quote currencies. These are
USD, BTC, EUR, JPY, ETH, GBP, EOS, DAI, USDt, XCHF, and CNHt.
Advanced features of Bitfinex exchange
As we have seen, thanks to being one of the more mature exchanges, Bitfinex has had time to develop more advanced features to its line-up of services.
Derivatives
The first “advanced” product on its line-up that most users will see, must be the option to trade derivatives on high margin. This option is only available to verified users who are resident in eligible jurisdictions. Just like any other high margin product this is not available to regular US residents. Derivatives are available for BTC, ETH, Gold and BTC dominance.
API
Most exchanges have found it relatively straightforward to implement API access for traders who may wish to use their own software or trading algorithm. Bitfinex is no exception. Bitfinex provides REST and WebSocket APIS and also host several open source integrations and libraries.
Advanced orders
Bitfinex allows complex/advanced order types for advanced traders who may want more control over their orders. These orders will be familiar to traders and will be a welcome addition beyond the standard market and limit orders most crypto exchanges offer.
Limit Order
Limit (Order Book)
Market Order
Stop Order
Stop-Limit Order
Trailing Stop Order
Fill or Kill (FOK) Order
Immediate Or Cancel (IOC) order
Time in Force (TIF) Order Option
Scaled Orders
Honey Framework
'Reduce Only' Order
One Cancels Other (OCO) Order Option
Hidden Order Option
Visible on Hit
Post-Only Limit Order Option
Honey framework
The most interesting feature in Bitfinex’s offerings. The Honey framework is an algorithmic order framework from the built in trading terminal. It provides the ability to design custom order form layouts, trigger notifications, and render status information directly in the orders table. Essentially providing an easy shortcut to implement advanced algorithmic trading strategies. Definitely not for everyone, but this feature just shows how focused Bitfinex is on professional traders rather than the average user who just wants to buy some bitcoin.
Subaccounts
Bitfinex provides a master and sub account feature which allows multiple trading accounts within one master account. This could be used to
One of the benefits of managing multiple accounts is that, the fees are based on the shared volume across all the accounts. Since the fees at Bitfinex are discounted in tiers based on volume traded, this increased volume would mean increased discounts on the fees.
Paper trading/Demo account
One of the options when setting up a sub account, is to designate the sub account as a paper trading account. This essentially creates a demo account to test and develop trading strategies in a simulated environment. Test tokens are created which have no value but can be trading in a mock environment on exchange, margin and derivatives markets.
Bitfinex Verification
Sign up is quick and you can trade straight away but if you want to deposit or withdraw fiat currency you need to go through verification, which is thorough and can take up to 2 weeks.
Without verification you can still deposit /withdraw crypto, trade on exchange or margin markets, partake in the p2p lending market, have full access to trading and funding APIs
How to trade Bitcoin on Bitfinex.
Exchange Trading on Bitfinex
Purchasing bitcoin or any other currency on Bitfinex should be quite familiar to anyone who has used other exchanges before.
- Ensure the order form tab is on Exchange and not Margin
- Change the quote currency from “ANY” at the top to the currency you are currently holding. Eg. USD (or your preferred payment currency). This will filter all the pairs to show just the USD prices
- Keep the order type as Limit. This will ensure that any order you place will stick to the price you specify rather than the market price, which can change. However this will also mean the order is only filled when the market price moves to your limit price.
- Enter the price you want to pay.
- Enter the amount you want to buy. This will show you the rough total cost in the price box.
- In the above example I have selected to buy 5 BTC at 10778 USD. This has calculated it will cost me $53,890
- Click on Exchange Buy to send the order to the market
- Once the market price moves to (or below) the price specified, the order will be fulfilled.
The fees when trading on the exchange market are tiered based on the amount of orders executed in the last 30 days. For traders who have executed orders up to to $500k in the last 30 days, the maker and taker fees are 0.1% and 0.2% respectively. The tiering system goes up to $30 billion or more traded at which point the maker/taker fees are 0%/0.055%. Please refer to the fees page on Bitfinex for more details.
Margin trading on Bitfinex
Bitfinex allows users to trade up to 5x margin. This means you have to hold at least 20% of the size of the open positions as a balance in your account. You can still use any of the standard quote currencies but if you are holding a currency that is not the quote currency as collateral, the margin allowed is slightly lower.
To trade on margin, you can simply change the order form shown in the exchange trading example above to margin.
Before making the order, you can choose to borrow funds first. Borrowed funds are subject to interest. By manually borrowing funds you have control over the rate that you receive. If you don’t do this, Bitfinex can match you automatically with funding at the current prevailing interest rate to cover your order.
Once the order form is on margin, the process to order is almost identical. A summary of your orders and balances including how much margin you are using and are shown below the order box in the section pictured. This is handy to keep an eye on your orders to ensure that you remain within your maintenance margin and prevent getting force-liquidated.
The fees for trading on the margin market are the same as the standard exchange market. For the borrower, interest is charged that is calculated to the second. For the lender a 15% fee is charged on the interest earned.
Trading derivatives on margin
If trading on 5x margin isn’t risky enough, and you are not in a prohibited jurisdiction or are a prohibited person then you are allowed to trade perpetual contract derivatives with up to 100x leverage.
“Prohibited Person” means any U.S. Person; citizen or resident of Canada; citizen or resident of Seychelles; citizen or resident of Switzerland; citizen or resident of the British Virgin Islands; citizen or resident of, Government or Government Official of, or Person in or subject to the jurisdiction of, any Prohibited Jurisdiction; and any Sanctioned Person
“Prohibited Jurisdiction” means any of: Cuba, Democratic People’s Republic of Korea (North Korea), the Government of Venezuela, Iran, Syria or Crimea (a region of Ukraine annexed by the Russian Federation);
Derivatives on Bitfinex are traded against the USDt0 token as the quote currency. This is a token created by Bitfinex for the purpose of trading derivatives on their site and can be converted from USDt.
Derivatives contracts are available for BTC, ETH, Gold and BTC domination.
While the others are self-explanatory, BTC domination may be new to some. BTCDOM tracks the relative price movement of Bitcoin vs seven altcoins. ETH, EOS, LTC, XRP, BCH, BSV, XTZ and XLM. Essentially if you are bullish on Bitcoin vs altcoins then you long the index and if you are bullish on altcoins you short the index.
The actual method of trading derivatives is similar to exchange and margin trading, where however there is a slider bar which can be adjusted to select the amount of leverage required.
The fees for derivatives also follow the maker/taker model and start at 0.02%/0.0750% until 1mUSD traded in the last 30days. They are tiered at 10m, 30m, 100m and 300m at which point they are 0.03%/0.0625%
Third party services at Bitfinex
Bitfinex has listed some links to partners at the top of the trading pages. These include:
Blockberry – An algo trading firm
Bitrefill – which sell gift cards funded in fiat paid from your bitcoin balance. Essentially allowing you to spend bitcoin wherever an available gift card exists.
Mercuryo – a payment processor which allows you to purchase cryptocurrencies through their payment cards
How to cash out on Bitfinex
If you need to deposit or withdraw Fiat at Bitfinex, you will need to complete the ID verification. Without verification you can still withdraw cryptocurrencies.
To deposit or withdraw, click on the “Wallet” link at the top of the page.
Click on either deposit or withdraw in the drop down list.
This will show a drop-down list of supported currencies. Follow the instructions for whichever currency you want to withdraw or deposit.
Deposits are free for cryptocurrencies, however fiat deposits incur a 0.1% fee with a minimum fee of $60
Supported countries
The only countries not supported a those listed as prohibited jurisdictions in the terms of service.
“Prohibited Jurisdiction” means any of: Cuba, Democratic People’s Republic of Korea (North Korea), the Government of Venezuela, Iran, Pakistan, Syria or Crimea (a region of Ukraine annexed by the Russian Federation);
Bitfinex App
Bitfinex has a mobile app for both iPhone and Android. The app allows you to keep track of your orders and keep an eye on the markets. It can allow you to trade on the go, however it can be customised as to which permissions the app is given. This is another example of Bitfinex being hyper aware of security concerns. For example, you can set up the app to be able to view your orders and statuses but not able to create or cancel orders. You can turn off the ability to transfer funds between wallets or create withdrawals. In fact, these options are off by default, leaving you with an app that is read-only, unless you specifically change it when setting up.
In order to set up the app, you need to create an API key in your account settings. This is where you will choose the permissions to allow the app to create orders or not, to transfer funds or not, etc. Once you choose the permissions, the key is generated and a QR code is shown in your device. Just like setting up 2FA authentication, you would use the Bitfinex app to scan the code, which will allow the app to log in to your account. Ensure you copy and save the API code somewhere secret and safe as it won’t be shown again.
Once this is set up you can create a pin to log in to the app. The app also supports fingerprint or face recognition if your phone supports it.
Summary
The Bitfinex platform is well rounded and mature. Offering exchange, margin and derivatives trading as its main services, it is well suited to professional traders. There are a number of unique features that make it an especially interesting proposition such as advanced order types, the honey framework, which helps traders create custom automated trading strategies looking for deep liquidity, P2P funding and institutional grade connectivity.
However, at this moment in time, Bitfinex is accused to have lost and covered up over 850m USD of customer money. The case is ongoing and until it is resolved, we would recommend choosing an alternate crypto exchange. We will review the situation regularly and assuming the situation is resolved positively reflect that in our recommendation.
In the meantime, if you do still wish to open an account at Bitfinex. FXST will receive a small commission at no cost to you if you use this link.
