Bitfinex: Cryptocurrency Exchange User’s Guide For Buying & Selling?

About Bitfinex Cryptocurrency Exchange

Bitfinex is the world’s major Bitcoin exchange by volume. With a market volume share of 39.12% of the total cryptocurrency exchanges’ market share, larger than the share of its nearest competitors all combined. Including Coinbase with a market share of 23.28% and Bitstamp, with a market share of 15.49%. Huge trading volume is vital for traders as it certify a low spread, which is the difference between the best bid and ask prices.

Courtesy of Bitcoinity.org.

Bitfinex is a Hong-Kong based exchange established in 2012 by Raphael Nicolle. The exchange is one of the most common cryptocurrency trading platforms in operation since the inception of cryptocurrencies. Bitfinex caters more for intermediate and advanced traders as well as organizations and offers a wide variety of tradable crypto-assets and trading pairs

At present, the exchange accounts for a 24-hour trading volume worth around 42,464 BTC, with 62.26 trades per minute. These high trading volumes and rates of execution of orders are a result of high scalability of the platform designed and built by an exceptional group of experts dedicated to providing a high level of services for traders by utilizing a wide coin selection, low fees, and a comprehensive interface. The exchange also allows fiat deposits and houses a variety of cryptocurrencies with approximately 76 market pairs active on the platform.

Unfortunately, the team behind the exchange recently decided to discontinue provision of services to residents of the United states, and focus on their users in other parts of the world.

Key Features Of Bitfinex

Functionality

Bitfinex runs an up-to-date, responsive, and all-inclusive interface. The dashboard present users with state of the art tools, incorporating Trading View charts and an elegant, and responsive mobile application available on both Android and iOS platforms.

Security 

As one of the oldest exchanges platforms in operation, it’s obvious that Bitfinex has experienced some security challenges. The exchange experienced the first major hack on May 2015. On this occasion, the hacker was able to amass a whole 1500 BTC from the hot wallet controlled by the exchange. However, the lost funds were quickly refunded by the exchange. A later hack attack proved to be more challenging, as the hacker was able to evade the security on the platform, exploiting a vulnerability in the multi-signature system stole a whooping sum of 119,756 BTC, which were worth an approximate $72m at the time.

To counter these trials, the team were forced strengthen the security by choosing to closely monitor withdrawals in order to help stay off attacks. The security system was re-built to monitor withdrawals by IP addresses and other behavioral patterns that trigger manual inspection on unusual withdrawal.

As a brilliant move to stay off hot-wallet attacks, Bitfinex rations 99.5% of its client funds offline in a cold storage system that employs a multi-signature function that is purely distributed across multiple secure locations, leaving only 0.5% of crypto assets being accessible in hot wallets.

Another security measure employed is that traders can whitelist one or more addresses to warrant that withdrawals can only be sent to that particular wallet address to avoid unusual withdrawals. Bitfinex also claims that it uses a withdrawal confirmation step that is resistant to malicious software from web-browsers.

Bitfinex site also employs efficient database encryption algorithms in addition to the Distributed Denial of Service (DDoS) protection to ensure that trades cannot be ceased by an external effect. Customer accounts are also strengthened via the use of Two-factor-authentications, Pretty Good Privacy (PGP) encryption mechanisms and a host of advanced verification tools designed to monitor changes in accounts activity.

Fees

Bitfinex fees are relatively very low when compared to various exchange platforms in the crypto-space, as its standard for large, trading-intensive exchanges. According to Bitfinex.com, Maker fees are paid when liquidity is added to the order book by placing a limit order below the ticker price for a buy, and above the ticker price for sell. While Taker fees are paid when liquidity is removed from the order book by placing an order that is executed against the demand of the order book.

The table below summarizes the trading fee structure of the exchange as structured by Bitfinex:

Note: If you place a hidden order, you will always pay the taker fee. If you place a limit order that hits a hidden order, you will always pay the maker fee.

Margin trading

Bitfinex also allows users to trade with up to 3.3x leverage, borrowing funding from the P2P margin funding platform to boost their trades.

Bitfinex allows traders to borrow the desired amount of funding for a particular entered trade, at the percentage and time interval of their choice, or they can simply open a position and Bitfinex will take out funding for them at the top attainable rates.

The margin trading market affords traders a means to earn interest on both the crypto and fiat currencies by providing funds to traders wanting to trade with leverage. Traders can then offer to fund at the rate and duration of their choice, or they can simply lend at the gaudy return rate. You can visit this page to know how margin trading works on Bitfinex.

The node-website BFXUSD offers useful tools for plotting rates of interest over time and calculating potential returns. It’s for the individual to decide whether the potential returns are worth the risk of another hack.

Margin Funding

For non-traders who prefer a safer investment plan, then the Bitfinex Margin Funding feature might the best option to choose. Using the funding wallet, users have the ability to provide funding to margin traders, in any of margin supported currencies on Bitfinex, while receiving interest on their holdings without being subjected to the risks of active trading.

Users can enter offers with their own chosen strategies. When the set offer is accepted by a margin trader, the money in the user’s Funding wallet will be used by the trader to buy or sell bitcoins (open a position) on margin. When the trader completes his or her trade by closing the position, the currencies are bought or sold back and the money, plus added interest, will be returned to the owner’s wallet.

Customer Support

Users are currently served by a support team that is available 24/7 via email. The team aims to answer queries within 12 hours, but responses can take much longer. In addition to this, there’s a  knowledge base section that covers the most pressing issues alongside other question and answers pages available on the website.

Supported Currencies

Bitfinex supports about 72 trading pairs linked to the four base currencies of USD, EUR, BTC, and BCH available on the site. The table below summarizes the number of currencies and tokens currently traded on Bitfinex:

Bitfinex Funding and Withdrawal Options

The only way to deposit fiat Dollars is via bank wire transfer. Bitfinex charges a 0.1% fee on all bank wire deposits, with a minimum fee of $20.

Getting Started With Bitfinex

Bitfinex Sign up and Login

Before creating an account, it’s necessary to read the pop-up box that appears and agree to the terms and conditions. The instructions contain a temporary minimum account equity of $10,000 USD as shown in the image below. New accounts are not allowed to trade or perform any platform-specific action until they reach this amount. In addition, for a new user to gain access to fiat deposits and withdrawals, he/she must agree to undergo a proof-of-identity process which may take up to an average of 6-8 weeks to complete.

• Once you have ticked all the necessary boxes in an agreement to the above conditions, you can move onto creating your account.
• Next, follow the instructions in the empty boxes provided to enter your username, email address, and password, your time zone and the unique captcha text as shown at the time of registration.

Secure Your Account

After creating your account, it is from the best practice to optimize your security before funding the account. Bitfinex provides an advanced range of security features that users can enable to increase their account security and further protect their funds:

• At least, it is recommended for all users to create a very strong, unique password for their accounts, and to combine.
• The second level of security is the use of two-factor authentication with Google Authenticator application available on both Android and iOS devices.
  Note that, if you are setting up your authenticator for the first time, it is important that you write down your 2FA key made visible during the setup process, saved (offline alone) in a secure location. This will enable you to recover your account in-case your 2-FA device gets lost. A failure to do this can result in account lockouts lasting days.

• Withdrawals locked when a new IP address is detected from the user sending queries.
• Setup a withdrawal confirmation phrase.
• If a threat message is triggered, the exchange can:
  1. lock or disable withdrawal addresses for all currencies.
  2. Disable “Keep Session Alive”.
• If there has been a corrupt practice recorded from your IP address, a limited access can be placed on your account based on IP address.

For more information on how to thoroughly secure your Bitfinex account, visit the Security section of the Bitfinex Knowledge Base.

Making A Deposit

Once your account is fully secured, you can begin to fund your account by locating the “Deposit” button in the upper right-hand corner. Clicking the deposit button takes you to the deposit page where you can choose fiat ($USD), Tether or from a list of cryptocurrencies available to make a deposit.

Fiat Currencies

Note that your account must be verified as discussed above, before you can make a deposit of fiat currencies (USD or Euro). You can verify your account here.

Cryptocurrencies

For cryptocurrencies, you need not go through any further verification before making deposits of your cryptocurrencies.

To fund your wallet:

• Click on the Deposit button on the top right corner of your Bitfinex account interface as marked with the red box below.

Note that there are three (3) wallets to choose from, which are:
1. Exchange Wallet is used for buying & selling supported cryptocurrencies on the exchange.
2. Margin Wallet is used when trading on margin.
3. Funding Wallet is used when providing financing for other margin traders.

• Select one of the 3 available wallet addresses mentioned above

Note:
1. The most common type of wallet is the exchange wallet, which is used when buying and selling any of the supported digital currencies by Bitfinex. It is simple and free to move funds between the three wallets. It is the most basic wallet of all three.
2. Also, for each deposit, you can use a single deposit address and continue to use the same one permanently. You may also use the ‘Change Address’ button to generate a new deposit address, and the old addresses will still remain valid for accepting deposits.

• Copy the deposit address for the wallet of your choice. Choose Copy to Clipboard when copying the address to ensure the address is copied correctly.
• Open the external wallet from which you wish to access your funds and send the funds (e.g. using Coinomi) and paste your Bitfinex deposit address into the application as the transfer destination. It should be noted that sending funds (in cryptocurrencies) from an external exchange is not encourage, as it may be difficult to track in case there is an error in transfer. It is rather encouraged to send from a stand-alone wallet.

Making A Trade

Once your account has been funded, it’s possible to click on the ‘Trading’ button (shown with the red box in the image below) and select the pairing that you prefer. From here you can determine the quantity, price, and type of order that you would like to execute.

To execute a trade:

1. Make sure your funds are in your exchange wallet. To transfer funds to your Exchange wallet, follow the steps outlined here.
2. Click on Trading from the main page and select the pair you wish to trade (e.g. USD/BCH – buying USD using BCH)

3. In the Order Form, select the Exchange tab.
4. Specify the Order Type, Order Size, and Price.
5. To make things simpler you can choose Market Order, resulting in your order being executed immediately at the current market price.
6. When you have specified the type of order, size and price, simply click Exchange Buy or Exchange Sell to execute.

The above depiction shows an Order being filled for the USD/BCH pair. Note that one can choose between Exchange (“normal” buying and selling) or Margin (trading on leverage.) just by toggling between the two at the top right marked by the red rectangle.

Making a Withdrawal from Your Account

When you are finished trading and wish to withdraw your funds to a personal wallet or bank account, you can do so through the Withdraw function on your Bitfinex home page.

Basically, you can either withdraw cryptocurrencies or fiat currencies from your account. However, the two withdrawal options come with different conditions.

Fiat currencies

To withdraw fiat currencies (USD or Euro), your account first needs to be verified. After verifying your account, simply make your way to the withdrawal page, pick a currency (USD, Euro) and fill in your wire information (name, address and banking details).

The fee structure for withdrawing fiat currencies is 0.1% of the amount withdrawn, with a minimum $50,000. This is as a result of the announcement made by Bitfinex team on 12^th May 2017.

Cryptocurrencies

To withdraw cryptocurrencies:

1. Navigate to the withdrawal page from here.
2. Select the Currencyyou would like to withdraw. For a list of available tokens.
3. Enter the amount you wish to send in the “Send Amount” field
4. Choose which of your 3 wallets you will be withdrawing from.

Note: As mentioned above, there are three wallets from which you can make deposit or withdrawal on Bitfinex

5. Enter the receiving address into the “Address” field,
6. Click on the “Request Withdrawal” button.

Note:

• The first checkbox associates to locking a withdrawal address as described to be one of the security measures employed by Bitfinex above. It allows traders to lock a specific address so that no withdrawals could be sent to that address without permission.
• The second checkbox allows your withdrawals to be automatically processed. This requires setting up your security measures to a more robust profile than you may currently have implemented.
• Once the amounts are calculated, you can then click on the fiat amount populated to the right of the “Receive Amount” and adjust the received amount based on the currency value as shown below:

• The Send Amount entered at the top of the form will then be debited from your wallet balance, and the Receive Amount at the bottom of the form is the amount that will be received by the recipient address.
• The above process is identical for all other cryptocurrencies except Monero (XMR) and Ripple (XRP).
• With a Monero withdrawal, a Payment ID is usually required to associate your transaction with your account.  Sometimes, if a Payment Tag or Payment ID is required by the receiving address, Ripple requires a TAG to be associated with the transaction. However, if no Payment ID or Tag is required by the receiving address, then you can select the checkbox, “No Recipient Payment ID” or “No Recipient Tag“.