BitMEX the End of an Era

The following guest post is written by Peter Wilkinson, CEO of the crypto exchange BitMEX.

My name is Peter Wilkinson, current CEO of BitMEX. I joined BitMEX out of the traditional finance sector where I’d been an in-house lawyer at an insurance company. I received an intriguing call from a headhunter that BitMEX was in urgent need of lawyers. During my first interview, I was asked how quickly I could start and whether they could buy me out of my notice at my previous role. I could tell this was no ordinary company.

At this stage, I only had a passing knowledge of crypto. A quick search turned up a plethora of coverage in Bloomberg, the Wall Street Journal and elsewhere — much of it about Arthur Hayes. The firm was looking to drastically change the traditional finance ways of exchange operations, deploying immediate settlement, 24 hour trading and a risk structure that removed the worry of having to pay back the margin financier. What stood out in particular was Arthur Hayes’ social media presence on X (formerly Twitter) and BitMEX’s bold marketing initiatives – like parking Lamborghinis outside the Consensus 2018 venue in New York. Again, this was totally different from anything that I had come across in the stiff world of TradFi.

Despite the flashy hype and ‘disruptor’ aura that surrounded the company, what impressed me on day one was how serious and committed everyone at BitMEX was. You could tell that the people were genuinely passionate about the business and about driving it forward. It sounds cliché but it felt like this was more than just a job for them; they were genuine evangelists.

Coming from traditional finance, I was used to the element of apathy that went hand in hand with the seriousness; perhaps inevitable given everything was strictly regulated. At BitMEX, however, there was no such apathy and the seriousness came from a focus on delivering the best product possible; the commitment for everyone to pitch in was really eye-opening. I was honestly expecting a bit of a laid-back attitude given the common perception of crypto being that it was run by ‘children’, but I couldn’t have been more wrong.

Before I knew it, there I was, sitting in the Hong Kong office, marvelling at the sharks gliding gracefully around their tank, fully stocked bar on the premises, poker and mahjong rooms, and wondering how I got here. Although it was somewhat bewildering, a closer inspection showed me the underlying steel of the operation. Along with the millennial razzmatazz, there were sleek grey lines and a crypto price ticker circling the ceiling all through the space – it almost felt more like a polished hedge fund than a crypto business.

It wasn’t all sharks and revolutionary finance however; not too long after I arrived, in 2020, there was the now well known US enforcement action against the founders and the company. It was the first big law enforcement event against an exchange in the industry and it came at the worst possible time. We had just implemented full KYC, and were the first non-US exchange to do so; which was already a stress on the business. This was initiated by the founders because it was the right thing to do when looking to the future of the business having to operate under various licence regimes. It was already underway when the US charges hit.

This implementation of KYC drove a lot of our core users away to other platforms that still didn’t require KYC. When the charges were filed, many of our customers were spooked and rushed to withdraw their funds – many of them never came back. There was a fear that the US authorities would freeze the BitMEX platform and lock up customer balances. If that had happened, it would have been outrageous (and illegal) but it was during a time of real fear when people were unclear on what the US government would do to the business or the industry.

We were just starting to roll out Bitcoin-native products like monthly ISDA loan swaps to institutional customers, which died in the water after charges landed. Coupled with the fact that there was already robust competition emerging – copying BitMEX products and poaching our users. Not to mention it coincided with the founders stepping back from their active roles in the business, leaving it to a new management team from a traditional finance background that did not hold the same industry presence of the founders to help market the business.

Even after this hammer blow, I felt, and still feel, that BitMEX was genuinely special. With the people, the culture, and our users (particularly those active in the Trollbox!), we built something to be proud of. For example, we have many loyal staff who have been with us for well over five years. That’s a lifetime in crypto, and it speaks volumes about the culture of the business where everyone pitches in with a business-first mindset on how to make things perfect.

Looking back, that dedication may have slowed down our product launches as we often sought perfection over execution, but it is a testament to the fact that our people take immense pride in what they do. We never had strict SLAs on staff with the failure to meet such targets resulting in an automatic warning letter from HR that you might see at some of the competitor exchanges – and I’m glad we didn’t, as it created a much more collegiate and transparent working culture.

And, like I said, the Trollbox is just brilliant – a place for our users to chat, rant and moan (or alternatively even get banned!). This contributed to the real sense of community amongst our users, in addition to what we had with the staff.

They say that all good things must come to an end. That may or may not be true, but in the end it has proved to be the case for BitMEX. We didn’t move with our competitors. We were so deeply focused on our derivatives niche that we failed to lift our heads and see our users wanted a single place to trade spot, earn yield, custody, and trade derivatives, particularly with stablecoins like $USDT. We joined the $USDT party late in 2021, but by then we were already bleeding market share.

I’ve also come across many commentators who note that whilst BitMEX invented the perpetual swap, we never iterated or went head-first with our competition. Whilst I’m no fan of self-confessed experts on social media (and as Homer says, after an event even a fool is wise), there is some truth in that statement. In the end there wasn’t one single thing which caused BitMEX to get to today’s winding down of the platform. I’ve touched upon some of what was relevant above, but business is Darwinian, and not everyone gets to carry on forever.

I’m immensely proud of what BitMEX and our team have achieved. First and foremost, we protected all customer funds religiously. We are the only exchange to have zero funds lost to hacks during our entire operating history of over 11 years. That is a testament to the fantastic work done by everyone – past and present – and I hope people will look back on that as something worthy.

Finally, there’s the seminal role we played in supporting the founders’ vision of the perpetual swap, which is now the most traded financial instrument in the crypto industry. Imitation is the greatest form of flattery; the perpetual swap is now available across every single player in the crypto exchange space, and is the engine room for crypto leverage. BitMEX may not be part of the crypto landscape going forward, but if you look around, it wouldn’t look like it does now without it having been there, and I’m honoured I got a ringside seat to see it all happen.