Bitcoin: Sink or swim?

Updated: 2014-12-04 07:05 By Deng Yanzi in Hong Kong(HK Edition)

Editor's note: We continue with our innovation series this week on exciting pioneering firms in the Pearl River Delta region, with the launch of BitMEX, a derivatives trading platform dedicated to users of the virtual currency, bitcoin.

Bitcoin has been on a rollercoaster ride since 2013. While the extreme volatility of the digital currency may make many flinch, some bitcoin holders seek ways to hedge the risk,while speculators seek an opportunity to profit from the seesawing value.

A newly launched derivatives exchange platform, Bitcoin Mercantile Exchange (BitMEX), aims to meet both those needs.

Arthur Hayes, co-founder and chief executive officer of BitMEX, says he modeled the platform on existing derivatives exchanges for fiat currency.

Traders can deposit bitcoin from their wallet into their BitMEX account, and use them as margin to buy and sell futures contracts, with 0.005 percent trading fee on a completed transaction.

BitMEX won the Hong Kong leg of the Slush startup pitching competition in October, advancing to the main Slush event in Helsinki, Finland, last month. However, it failed to win a place in the Nov 18-19 worldwide contest.

According to Hayes, the present fee pool for bitcoin derivatives is $120 million a year. He expects the market to grow to half a billion US dollars in the next five to seven years, and even bigger when bitcoin becomes globally recognized and gains higher worth.

The value of bitcoin has been extremely volatile, starting at less than 0.1 US cent and skyrocketing in 2013, peaking at approximately $1,240 that November before falling precipitously. The current value of bitcoin hovers around $360, a plunge of more than 60 percent since the start of the year.

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Bitcoin: Sink or swim?