Deribit Review 2023
Our Take On Deribit
THE BOTTOM LINE:
When it comes to exchanges that exclusively deal in derivatives, Deribit stands out as an excellent option. Specializing in options and futures trading, Deribit ensures high levels of liquidity in these markets, providing traders with a top-notch experience for their derivatives trading needs.
In this guide, we look at the Deribit trading platform, its features, and benefits, and compare Deribit to some other exchanges out there.
Deribit At A Glance
Established in 2016, Deribit was co-founded by a trio comprising siblings John and Marius Jansen along with Sebastian Smyczýnski. Although its origins are European, the exchange now operates from Panama, a crypto-supportive location. John Jansen holds the position of CEO within Deribit, while Marius Jansen undertakes the role of COO.
Deribit serves as a platform for trading options, futures, and perpetual futures contracts. While all these market segments offer profit potential, comprehending their intricacies is crucial prior to committing your capital.
Crypto options provide contractual flexibility, enabling the purchase or sale of an asset at a later date. Calls and puts categorize these options. Calls permit the acquisition of an asset (e.g., BTC or ETH) in the future, predetermined at a fixed price, regardless of its market value then. Puts allow the selling of BTC or ETH at a predetermined price in the future. Options aren't mandatory and can expire unused.
Futures resemble options but impose an obligation on both buyer and seller to fulfill a transaction upon expiration. These contracts commit to buying or selling an asset at a predetermined price in the future. Futures necessitate execution, obliging buyers to purchase the underlying asset and sellers to vend it at the agreed price on the specified date.
Perpetual futures differ as they lack an expiry date. Essentially, these instruments mirror traditional crypto trading (commonly known as “spot” trading). Unlike spot trading, though, perpetual futures trading doesn't mandate ownership of the underlying crypto asset (e.g., BTC or ETH). Instead, traders engage in price speculation, profiting from accurate price predictions.
The main drawbacks of Deribit are:
- No volume discounts on fees
- Few supported assets
- Not available in the US
What Is Deribit And How Does It Work?
While most popular cryptocurrency exchanges, such as Coinbase, support “spot” markets as their main offerings, Deribit is strictly a derivatives exchange.
This pertains to the fundamental method of engaging in cryptocurrency trading. It typically encompasses the actions you undertake when buying or selling a cryptocurrency. In a spot trade, you submit a purchase or sale order to an exchange and gain possession of the cryptocurrency upon buying, while relinquishing ownership upon selling. These trades are commonly settled upon execution, occurring instantly (“on the spot”).
This involves a more intricate trading approach that offers the chance to purchase or sell an asset like BTC, ETH, or SOL at a later point. Derivative contracts derive their value from an underlying asset, yet they constitute a distinct transaction separate from the actual asset itself being traded.
Derivatives can be “exercised” or utilized in the future, deviating from the contract's original purchase date. This introduces an expiration date to derivatives, with their value contingent on market projections. Typically, derivatives are employed to pre-fix the price of a cryptocurrency and either buy or sell it at that rate on the expiration date, irrespective of the market's actual trade value on that day.
Deribit operates as a centralized (CeFi) exchange, holding client funds within platform-controlled crypto wallets and overseeing all market activities directly. Comparable to Deribit, other well-known exchanges like Coinbase are also centralized exchanges.
In contrast, decentralized (DeFi) exchanges merely facilitate connections between trading parties (buyers and sellers) via smart contracts, devoid of asset custody or liquidity provisioning. Examples of decentralized exchanges include Uniswap and Sushiswap.
Deribit's platform is an excellent option for intermediate and advanced traders who feel at ease with speculating on future price fluctuations and maintaining the necessary margin to cover their derivative contracts. While these trades hold significant profit potential, they also carry substantial risks, capable of swiftly overwhelming inexperienced traders.
Deribit Benefits And Features
Advanced Order Trade
Deribit, like other exchanges supporting futures and options trading, offers an array of intricate trading tools:
- Market Order: This type of trade emphasizes speed, executing your trade promptly at the current market price. Swiftness takes precedence over securing the best price.
- Limit Order: You preset a limit price for your trade, ensuring execution at that price or a better one. “Buy” orders are complete if sellers are offering at or below the limit price, while “sell” orders fill if buyers are willing to purchase at or above the limit price. Limit orders might take longer to execute than market orders, possibly remaining unfilled in the order book for extended periods.
- Market Limit Order: Combining aspects of market and limit orders, this trade initially enters the market for execution at the market price. If the market price changes before the order completes, the remainder of the order fills as a limit order, either at or above the limit price for sell orders, and at or below the limit price for buy orders.
- Stop Market Order: Using a predetermined price, this order triggers submission to the order book once the market hits the specified price. Stop orders are solely available for buy orders. For instance, you could set a stop price of $20,000 for a Bitcoin perpetual contract buy order, with the order activating only when the market price reaches $20,000. Different from limit orders, stop orders aren't publicly visible while waiting to be filled. Stop market orders evade the risk of going unfilled, unlike limit orders. It's crucial to note that stop-market orders initiate at a defined “stop” price, yet they fill at the market price immediately following order entry, which might differ due to swift market movements.
- Stop Limit Order: Comparable to a stop market order, this variant incorporates both a stop price and a limit price. The stop price triggers order entry into the order book, while the limit price determines the actual filling price upon triggering.
- Take Market Order: Contrary to stop orders, take orders exclusively apply to selling assets. These orders enter the order book once the asset price meets the specified take price. Upon entry, the order executes as a market order, instantaneously filling at the current market price.
- Take Limit Order: These orders submit a sell order to the exchange as soon as the asset's market price reaches a specified level. The order remains on the order book until it can be executed at the limit price or a higher one.
- Advanced Order Attributes: These attributes allow for fee optimization or concealing trades from the order book.
- Time in Force Attributes: These attributes dictate the fate of transactions not instantly filled: enduring indefinitely on the order book, immediate cancellation, or cancellation after 24 hours.
Given Deribit's specialization in options and futures trading, it's imperative for every account to uphold a predefined amount of assets. This safeguard is essential to ensure the account can fulfill its commitments associated with future contracts. The minimum requirement is determined through a proprietary risk assessment system employed by the platform.
Should the risk engine identify insufficient coverage within your positions to align with prevailing market conditions, Deribit has an automated mechanism in place. This mechanism triggers the liquidation of account assets, thereby mitigating potential risks stemming from inadequate contract coverage.
Market Maker Protection
A crucial tactic for traders aiming to optimize their cost-efficiency involves strategically entering the market under circumstances where their trades qualify as maker trades. To facilitate this approach, market maker protection offers an automated solution. This feature empowers traders to establish parameters encompassing price, time intervals, delta values, and various attributes. These criteria aid in orchestrating well-timed market entries to extract the utmost advantage.
Because of the inherent computational complexity of blockchains, transaction settlement typically spans from a few minutes to even an hour. This time lag poses challenges for traders, especially in volatile markets where substantial funds are involved.
A remedy to this challenge is an off-exchange settlement, where involved parties opt for an exchange like Deribit, but the actual transfer of assets takes place outside the exchange's platform. This approach permits swift settlement, often within seconds. Mediating entities play a role in curtailing counter-party risk and enhancing asset security during the transition of funds between wallets.
Block Trade Functionality
Block trades encompass confidential dealings involving two parties, circumventing the public exchange and leveraging their personal liquidity. This functionality serves as a mechanism to execute substantial transactions, exceeding the threshold of $100,000 or more, similar to over-the-counter (OTC) trades. These transactions occur directly between traders and are prearranged. The block trade feature is accessible for both options and futures contracts.
As Deribit deals with options and futures contracts that involve transactions in the future, the platform mandates traders to uphold a margin level sufficient to honor these commitments. The conventional approach entails assessing each asset individually (e.g., BTC, ETH, SOL) and maintaining distinct margin values for each.
In contrast, portfolio margin consolidates all owned assets into a unified risk assessment. This approach grants traders greater flexibility in structuring their portfolios and negates the necessity to adhere to margin prerequisites for each individual asset.
The Deribit position builder serves as a tool to premeditate and visualize your trades. Its interface enables the input of various option or futures trades, offering a range of strike prices and expiration dates to choose from. Subsequently, the builder produces a profit/loss graph, delivering a graphical representation of the position's behavior under profitable circumstances and how it evolves over time.
Deribit extends access to its application programming interface (API) for traders. This empowers skilled technical traders to craft programs and scripts capable of autonomously executing actions on the Deribit platform, eliminating the need for direct user intervention. The API serves as a tool for carrying out trades, overseeing account balances, and showcasing data.
Earning Opportunities And Rewards
As a derivatives trading platform, Deribit will provide the best opportunities to traders looking to make bets on futures and options markets.
Profiting From Options
Options involve making predictions about the future price of cryptocurrencies. These forecasts can anticipate either an increase or decrease in the cryptocurrency's value.
To capitalize on an options trade when the future price is projected to rise above the current price, consider acquiring a call option. This grants you the opportunity to procure crypto at a later date for a reduced cost and promptly sell it at a higher price.
Alternatively, if the forecast entails a future price drop compared to the present, a put option comes into play. In this scenario, the strategy involves buying crypto from the market when its value drops in the future. Your put contract then enables you to vend it at a superior price.
Profiting From Futures
Generating profits from futures closely mirrors the process for options. The key distinction between futures and options lies in the fact that while options offer the flexibility of non-exercise, futures necessitate execution. This implies that purchasing a futures contract mandates following through with the asset purchase in the future, and the same holds true for selling a futures contract.
Effectively, deriving profits from futures contracts shares similarities with profiting from options contracts. If you anticipate an impending rise in the value of a cryptocurrency, you can invest in a futures contract for it. Subsequently, as the underlying asset's price climbs, the resulting price differential becomes your profit. Conversely, if you foresee a crypto's price decline, you can capitalize by selling a futures contract, reaping gains from the price variance.
Profiting From Perpetual Futures
In contrast to traditional futures that have a predefined expiry date, perpetual futures entail indefinite contracts without a set termination date, hence the term “perpetual.”
The approach to gain from perpetual futures closely mirrors the strategy employed in regular cryptocurrency trading — procuring the contract at a lower price and vending it at a higher price. Generally, the price of a perpetual futures contract closely aligns with, or is nearly identical to, the value of the underlying crypto asset.
Opting for trading the perpetual futures contract instead of the actual asset confers the advantage of executing the trade without grappling with the intricacies of cryptocurrency custody.
No Volume Discounts On Fees
While numerous cryptocurrency exchanges offer fee reductions based on trading volume, this perk might not hold significant appeal for smaller traders. Conversely, for high-frequency traders or those leveraging institutional funds for substantial positions, the absence of fee discounts for sizeable trading activities on Deribit could be a point of discontent. Unlike some other platforms, Deribit's fee structure for makers and takers does not involve adjusting fees based on historical trading volume. Instead, these fees fluctuate solely based on the specific derivatives market, disregarding past trading volume data.
Few Supported Assets
The landscape of the cryptocurrency realm is undergoing rapid expansion, with numerous tokens now holding the status of “blue chip” within the market. A significant number of these tokens have garnered support from major exchanges, ensuring that the breadth of available assets is not a decisive criterion when selecting an optimal exchange.
However, this landscape does not directly translate to the offerings on Deribit. Presently, the platform's support is confined to a mere 13 assets, with the majority of these solely accessible through perpetual futures contracts. The options and regular futures markets on Deribit are limited to just 3 assets:
- Bitcoin (BTC)
- Ethereum (ETH)
- Solana (SOL)
Not Available In The US
Deribit exchange remains inaccessible for individuals residing in the United States. This restriction doesn't stem from any deficiency within the Deribit platform; rather, it arises from regulatory constraints within the US. The United States boasts some of the most stringent financial trading prerequisites globally, resulting in the unavailability of options and futures trading on Deribit for the general populace. These trading activities are solely accessible to accredited investors within the US.
Deribit Security Features
Similar to prominent exchanges, Deribit relies on cutting-edge security measures to safeguard client deposits and uphold platform integrity. The exchange employs a sophisticated strategy: a substantial 99% of client funds are held in cold storage wallets, inaccessible via the Internet.
Deribit's server infrastructure operates within a 24/7 monitored data center, further bolstered by on-site security personnel. Additionally, the platform furnishes users with a comprehensive array of security provisions. These encompass 2-factor authentication, support for Yubikey, and the capability to establish IP white-listing for enhanced security.
Deribit upholds a dedicated insurance fund integral for mitigating risks tied to over-leveraged traders and minimizing counter-party vulnerabilities. Within this framework, each of the four primary supported assets, namely BTC, ETH, SOL, and USDC, maintains its distinct reservoir of insurance funds. It's noteworthy that these funds are seldom utilized, thanks to Deribit's stringent liquidation protocols that preempt trader defaults by liquidating collateral in advance.
Instances of bankruptcy are assessed on a case-by-case basis, and the parties on the opposite end of these transactions are made whole using the insurance fund. To sustain the fund's viability, Deribit refills it through the accumulation of liquidation fees collected by the platform.
Deribit's risk management mechanism continually assesses your accessible funds to ascertain their adequacy for meeting trading commitments. Certain users might find it advantageous to segment their funds, creating distinct compartments to accommodate various trades and strategies. This objective is achievable through the utilization of Deribit's sub-accounts feature. Each primary user account has the potential to accommodate up to 20 sub-accounts, each with its independent margin treatment that is detached from other accounts. Facilitating instant and unrestricted transfers, funds can seamlessly move between sub-accounts whenever necessary.
Deribit supports four main assets that all options and futures markets on the platform are in terms of:
|Options And Futures|
The platform also supports a wider variety of assets that are only supported for perpetual futures markets:
|Perpetual Futures Only|
Deribit Platform Availability
Due to strict regulations around the trade of financial derivatives, the Deribit platform is not available to residents of the US.
The exchange is also unavailable for residents of the following jurisdictions:
|Deribit Available Jurisdictions|
Democratic People’s Republic of Korea
Syrian Arab Republic
Virgin Islands (U.S.)
Deribit Customer Support Options
To get help, traders can open a support ticket to talk with Deribit’s support team, or, for faster turnaround, you can join the exchange’s official Telegram group and request help there.
For questions regarding Deribit’s API or any other technical features, you may email firstname.lastname@example.org.
Deribit Mobile App
Deribit provides an iPhone and Android mobile app that allows you to access your account, execute trades, and manage your trading positions from anywhere.
Deribit Fees And Costs
Deribit Fee Structure Deribit, being a derivatives exchange, encompasses various fee categories, encompassing trading fees, delivery fees, and liquidation fees.
Trading Fees Employing a customary approach, Deribit employs the maker/taker model for its trading fees. This framework incentivizes traders to contribute to market liquidity (makers) rather than solely consuming it (takers). The trading fees for each specific contract offered by Deribit are presented below.
|Contract||Maker Fee||Taker Fee|
|BTC Weekly Futures||-0.01%||0.05%|
|ETH Weekly Futures||-0.01%||0.05%|
|SOL Weekly Futures||-0.02%||0.05%|
|BTC Futures & Perpetual||0.00%||0.05%|
|ETH Futures & Perpetual||0.00%||0.05%|
|SOL Futures & Perpetual||-0.02%||0.05%|
|BTC Options||0.03% of the underlying or 0.0003 BTC per options contract||0.03% of the underlying or 0.0003 BTC per options contract|
|ETH Options||0.03% of the underlying or 0.0003 ETH per options contract||0.03% of the underlying or 0.0003 ETH per options contract|
|SOL Options||Zero maker fees||0.03% of the underlying or 0.0003 SOL per options contract|
Additionally, Deribit imposes delivery fees on subsequent transactions. These fees are levied when the settlement of derivatives contracts is executed, leading to the actual transfer of the underlying asset to the trader. In the case of futures contracts, the delivery date aligns with the expiration date, thus implying that the individual receiving an asset upon contract expiration incurs the delivery fees.
|BTC/ETH/SOL Weekly Futures||0.0%|
|BTC/ETH/SOL Daily Options||0.0%|
|BTC/ETH/SOL Options||0.015% – this fee can never be higher than 12.5% of the option’s value|
Various instruments on the platform entail distinct fees upon liquidation. A portion of these fees is directed towards augmenting the Deribit insurance fund.
|BTC/USDC Futures & Perpetual||0.75%, (0.75% for maker orders and 0.70% for taker orders will be added to the insurance fund).|
|BTC/USDC Options||0.19% of the underlying asset or 0.0019 BTC per options contract (0.16% of the underlying asset, or 0.0016 BTC per contract is added to the insurance fund).|
|ETH/SOL Futures & Perpetual||0.9%, (0.90% for maker orders and 0.85% for taker orders will be added to the insurance fund).|
|ETH/SOL Options||0.19% of the underlying asset or, 0.0019 ETH or SOL per options contract (0.16% of the underlying asset, or 0.0016 ETH or SOL per contract, are added to the insurance fund).|
Who Should Use Deribit?
Deribit serves as a favorable option for experienced traders seeking a derivatives platform characterized by minimal fees and an intuitive trading interface. While the platform's asset selection might not be extensive, the featured assets exhibit substantial liquidity. Furthermore, the platform boasts a dedicated team committed to ensuring swift and secure trade executions.
How To Sign Up For Deribit
Step 1: Head to https://www.deribit.com/ and click Don’t have an account? to open the registration menu.
Step 2: Provide your email address, and country of residence, and select a unique username and password.
Step 3: Look for the activation link Deribit sends to the email you provided and click on it. You’ll be redirected to Deribit with your account now confirmed.
Step 4: With your account confirmed, you can start trading on Deribit.
Final Thoughts On Deribit
Deribit presents a favorable option for traders who intend to engage in buying and selling derivatives contracts. The platform extends its support to a limited set of cryptocurrency assets, primarily centered around BTC, ETH, and SOL. Although Deribit's cryptocurrency variety might not be the most extensive, it compensates with remarkably low fees and a substantial daily trading volume, guaranteeing ample liquidity for all trading activities.
Frequently Asked Questions
Since Deribit is not licensed to operate in the US, they do not report to the IRS. However, crypto profits are traditionally subject to capital gains tax in most countries.
No, Deribit is not licensed to operate in the US.
Deribit is headquartered in Panama.
Yes, Deribit is a great choice for derivatives traders. Please note that Deribit is exclusively for derivatives and does not offer spot markets.