It was reported as the end of an era in crypto. The centralized exchange Arthur Hayes helped found in 2014, BitMEX, officially announced that it will be shutting down after 11 years of operation.
The exchange pioneered the 100x-leverage perpetual swap, and perpetual markets eventually became the dominant crypto derivatives product.
BitMart, another centralized exchange that had been in the top 10 exchanges but fell lower down the pecking order, also announced the closure of its trading platform.
The last time a major CEX closed was during the FTX implosion in November 2022. Instead of leading to a deeper crypto winter, Bitcoin began trending higher just two months later, flipping the $21.5k swing level to support in January 2023.
There’s discourse among crypto netizens that the BitMEX closure could trigger another such turnaround.
The differences between the FTX implosion and the BitMEX wind-down
The impact on the crypto markets from FTX’s collapse is vastly different from BitMEX’s circumstances. The former relied on the illiquid FTT exchange token and had been misappropriating customer funds for months.
Binance’s announcement that they would sell their FTT pushed investors into panic. The public tried to withdraw their assets worth billions from FTX. The exchange could not fulfill these orders because it was missing funds, leading to a bank run, bankruptcy, and years of recovery efforts.
By comparison, BitMEX’s shutdown was more tame. The exchange was unable to find a buyer, likely due to the complications around its $270 million insurance fund.
It has been criticized for its aggressive liquidation engine. A lawsuit, filed on July 23, alleged that “BitMEX strategically froze its servers during periods of high volatility so
that its Insider Trading Desk could maximize the number of customers to be liquidated”.
The company has assured its holders that its assets exceed liabilities, a situation markedly different from FTX’s bank run.
New phase of exchange consolidation
XWIN Japan observed in a post on CryptoQuant Insights that BitMEX and BitMart ceasing operations marked a major shift in the crypto landscape. In their view, these closures were just part of a broader industry consolidation.
A rising Binance BTC reserve showed that liquidity was migrating to the largest exchanges left standing. It was not necessarily a sign that more Bitcoin was sent to Binance to be sold immediately.
Meanwhile, stricter regulations, rising compliance costs, and increasing institutional participation were making it difficult for smaller platforms to survive and attract users.
Current trends suggest the next market cycle could be increasingly dominated by exchanges that combine institutional-grade compliance with greater transparency.
Final Summary
- The BitMEX and BitMart closures are vastly different in both nature and impact from the FTX implosion that marked the 2022 market bottom.
- In the coming years, fewer, larger exchanges that meet institutional standards will be the ones left standing and competing for market share.
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