Welcome to Slate Sundays, CryptoSlate’s new weekly function showcasing in-depth interviews, knowledgeable evaluation, and thought-provoking op-eds that transcend the headlines to discover the concepts and voices shaping the way forward for crypto.
Stephan Lutz is the CEO of BitMEX, the business’s longest-standing crypto futures alternate, relationship all the way in which again to when BTC was nonetheless in diapers.
From his swanky Singapore workplace, a busy skyline of skyscrapers behind him, he smiles confidently by way of the digicam, rolling his eyes solely barely as I ask about his background. “I’ve instructed it so many occasions already,” he groans.
I jokingly counsel we change to the AI model of him for a second, or that we cowl the subject very briefly, however Stephan isn’t a person who does issues briefly. Our chat went on for greater than an hour. It’s not typically that you just meet somebody who can articulate their ideas on the GFC, Brexit, crypto derivatives, and memecoins in the identical breath.
From the bulge bracket to BitMEX
You may name Stephan one thing of an overachiever. With a background in enterprise administration, economics, banking, and finance, he minimize his enamel as a company finance analyst at Dresdener Financial institution.
He then moved to the consultancy aspect, scaling Deutsche Börse, Europe’s largest inventory alternate operator, earlier than working his means as much as associate at PwC. He shares:
“I suggested giant bulge bracket funding banks throughout Brexit, the ECB, for instance, on sure monetary stability issues. I did a number of work round financial institution restoration and determination planning after the good monetary disaster, and I used to be a part of one of many groups that mentioned what wanted to be liquidated in the long run.”
From mopping up the spills of 2008 to offering insights right into a Brexit-driven monetary local weather, Stephan was approached by BitMEX in 2020, which he says:
“Led to a state of affairs that nobody had seen coming aside from me.”
Together with his blue-chip background in consultancy and finance, not even a crypto-native agency like BitMEX knew how fascinated Stephan was by blockchain expertise, having develop into enchanted by its potentialities very early on at Deutsche Börse.
In 2010, he couldn’t see it changing the Börse’s high-speed securities reserving infrastructure with its 5 transactions per second velocity, however he knew it was the longer term.
“I at all times adopted the crypto business, extra so on the expertise aspect, and the underlying real-world use circumstances for that. So, when BitMEX requested in 2020, it was like, lastly, I can get my fingers “soiled” with one thing that I’m concerned about! It took me three days to simply accept the job with out even negotiating the wage, and folks mentioned, ‘You’re head of capital markets at one of many largest audit and advisory companies on the planet. What are you doing?!’”
He smiles, with a depraved glint in his eye. Stephan doesn’t strike me as an individual who cares an excessive amount of about what different folks assume; regardless of the incredulity of his friends, he ran towards BitMEX with open arms:
“They requested me particularly due to my background, a regulation/compliance/audit man, serving to with including credibility. After all, I’ve all of this, however I used to be at all times a insurgent, and I at all times favored to do issues otherwise. They thought they employed a really risk-averse man, and in the long run, I’m truly somewhat the alternative.”
The OG crypto derivatives alternate
BitMEX is the business’s “OG” derivatives alternate, based in 2014, and whereas its buying and selling quantity is 80% institutional, it stays the playground of particular person merchants: round 80% of its half one million or so customers are retail accounts. Stephan says:
“We’re robust in crypto derivatives, and particularly Bitcoin-denominated crypto derivatives. We’re the OG model, the unique.”
10 years of operations in most industries is only a trifle, however in crypto, it equates to many years. BitMEX was constructed on the ashes of Mt. Gox and has survived, arguably, thrived all through many a bump within the highway. I ask Stephan how BitMEX continues to compete in a now crowded market. He displays for a second earlier than replying:
“Let me provide you with an instance of what we aren’t. We don’t function a launchpad like many Asian exchanges, as a result of which means it’s worthwhile to have new initiatives flowing in, and you then promote them. It’s a advertising software. You’ve a spot alternate subsequent to it. We don’t do that. We have a look at prime cash, or prime pairs, or prime contracts. 10 belongings make up 99% of our volumes. Why? As a result of we offer derivatives, futures, and perpetual swaps. That’s it. ”
Whereas he’s happy with the truth that BitMEX is open to everybody, he’s fast to emphasise that he would by no means suggest his mother or youngsters to onboard with BitMEX if it had been the very first thing they wished to do in crypto.
“I might say, no, no, no, no, don’t do that, as a result of it’s worthwhile to have a sure stage of schooling and expertise.”
But, within the spirit of reside and let reside, if somebody desires to take a danger, they need to be capable of do it with out being mollycuddled or gatekept:
“I feel we reside in a free world, and it needs to be a free world.”
After all, he highlights BitMEX’s position in person schooling and the plentiful sources the alternate places out to make sure that merchants are taking an knowledgeable danger.
“We’re completely clear. Even our technical documentation is publicly out there. We give BitMEX Alpha out recurrently, the crypto merchants’ digest, and we do different programs… I imply, in the event you shut your eyes, we will’t do something about it, however in the event you’re entering into with eyes vast open, you recognize what you’re going to do.”
Constructed on the rubble of Mt. Gox
Launching on the particles of Mt. Gox, which noticed 142,000 BTC drained from its customers, BitMEX has at all times been security-conscious. It’s one of many few exchanges in crypto that has by no means been hacked in consequence.
For the reason that crypto winter of 2022, when “the shit hit the fan,” and FTX blew up, dragging half the business with it, Stephan says BitMEX overhauled its whole frontend and backend infrastructure and processes to place “extra give attention to danger administration.” He laughs:
“Regardless of every thing you examine it, BitMEX is among the most conservative crypto locations on this planet. Why? As a result of we do just some issues. Primary, we now have at all times been very centered on derivatives for professionals, and quantity two, we now have full segregation of belongings.”
In a enterprise terrain fraught with landmines at each flip, BitMEX has by no means compromised on buyer fund safety. All belongings are secured by way of safe multi-party computation (MPC), and all transfers are protected by transaction guidelines that guarantee any assault is blocked at a coverage stage.
“Our funds and buyer funds have by no means been commingled. Our engine checks on a second-by-second foundation. If all positions don’t add as much as zero, the engine stops, and we examine.”
I confess to Stephan that my recollections of BitMEX return to the cowboy days of retail merchants getting rekt, and Crypto Twitter baying for BitMEX’s blood. The corporate has come a good distance since then. He pauses:
“To this cowboy, “Wild West” factor, we might have finished extra by way of educating folks, however we now have even been sued for market manipulation, and all these have been confirmed unsuitable in court docket, formally. All of these authorized circumstances have gone away by now. We’ve got fought all of them by way of. The proof was clear. The engine labored as meant. If I put in an order that’s utilizing up 100% of my collateral, and the market strikes towards me, then I’m liquidated. That’s simply the way it works.”
He says that within the early days, folks had been new to the idea of futures, and that led to extra liquidations. Quick-forward to at present, and there was a sweeping sophistication and institutionalization of the house, similar to in conventional finance.
“It was the identical in TradFi. All this fairness buying and selling grew to become retail within the 80s, proper? I imply, all this Wolf of Wall Avenue stuff. Within the 10 years we now have been in crypto, I might say, by way of professionalization, we’re possibly the place the TradFi world was across the early 2000s or so, possibly somewhat bit earlier.”
Bridging TradFi and crypto with copy buying and selling
BitMEX launched its new copy buying and selling function earlier this month, which Stephan describes as bridging the worlds of TradFi and crypto. In TradFi, he explains, customers have many choices to earn a passive revenue, resembling exchange-traded funds, index trackers, and extra.
“Why do folks love ETFs? I imply, subsequent to, hey, it’s environment friendly since you pay much less charges than for energetic administration. It’s copy buying and selling principally.”
Copy buying and selling permits customers to learn from the expertise and success {of professional} merchants and simply replicate their methods.
“It simply means, if Stephan does one thing, I wish to have the identical. It’s like in Harry and Sally, with the restaurant scene, I wish to have the identical, and people two, oh, this woman, proper?” Why is that good? In case you have merchants who’re good, and also you open this up, there are two issues. The copy followers truly study one thing, as a result of they may see what’s traded when, and it’s like a passive funding. I simply observe the lead of another person.”
BitMEX’s copy commerce function permits customers to emulate a number of merchants directly, to not “put all of your eggs in a single basket,” and the decision may be reversed as properly: in the event you discover a dealer whose technique you disagree with, you may arrange your preferences to do precisely the alternative.
“So if a dealer buys, for instance, Ethereum, I promote Ethereum, and the opposite means round, after which you may calibrate by saying, I copy it by 100%, I copy it by, let’s say, one thing between 0 and 100%. So, calibrating your danger stage. You actually can decide and select what is sweet on your danger stage.”
Genius acts, institutional performs, and BitMEX’s subsequent strikes
As an Asia-based alternate, BitMEX has by no means catered to U.S. merchants, however with a altering of the guard on the White Home and a rest of guidelines surrounding crypto, is that more likely to change sooner or later? What does Stephan consider the Trump administration and the newest strikes to return out of Washington? He pauses for a second earlier than replying:
“I feel the GENIUS Act was genius. They principally turned a aggressive catastrophe, relative catastrophe, right into a aggressive benefit inside a few days.”
So, is BitMEX actively exploring the U.S. market, then? He laughs:
“It will depend on what you imply by ‘actively’. We’re actively exploring what we would want to do to re-enter the U.S., which is, it might value us the higher a part of 18 and 24 months to try this in a sound means, as a result of it’s worthwhile to be on the bottom, we aren’t.
You should then begin with the fitting license, and go state by state, it takes time… So we’re this, however don’t count on us to open up a BitMEX workplace within the subsequent half yr.”
What else is on the playing cards for BitMEX for the remainder of 2025 and past? Stephan says he will probably be sharing information at TOKEN2049 in October, and I can’t assist however marvel if there will probably be any information of a stateside growth regardless of his coy denial.
In different plans, he says, BitMEX will roll out its institutional-grade custody resolution, having not too long ago moved its knowledge facilities from Dublin to Tokyo in a strategic transfer to cater to institutional merchants. He explains:
“Nearly all of all of the crypto exchanges exterior of the U.S. run their knowledge facilities in Tokyo. I imply, nobody is aware of that. Why it’s an institutional factor for the market makers particularly, it makes hedging between venues simpler. It’s not creating new points to commerce, however we improve effectivity for our institutional prospects by way of this capital effectivity, so they should deploy much less capital.”
Standing on the shoulders of giants
We’ve gone means over time, and the sky behind Stephan is dusky and tinged with pink, however as we wrap up the interview, I’ve yet one more query. I’m dying to know what it’s wish to observe within the footsteps of such an outspoken CEO, like Arthur Hayes.
He pauses for the longest time since we’ve been recording, and I fleetingly marvel if I’ve misplaced audio, earlier than he fastidiously says:
“It’s good, it’s an honor, and it’s tough.”
He says the “legacy is nice,” and the identify opens doorways for him; even when he was a associate at PwC, he didn’t obtain a lot enthusiasm for getting in a room with him.
“After I was at PwC, and I referred to as somebody to pitch for my thought for a consulting venture or no matter, it was like, hey, I’m Stephan, I’m the capital markets chief at PwC in Europe, and would you’ve got time for me? And the reply by no means was a no. It may be, I solely have time in eight weeks from now, which is a semi-no.”
He doesn’t have that drawback now, however admits that it’s difficult at occasions as a result of being the co-owner and CEO of a agency will not be the identical as being a CEO solely. He can’t at all times execute as quick as he want to or as decisively as his predecessor. Nonetheless, he smiles, he’ll take it anyway.
“The privilege is I can go to principally any individual on this business and say, ‘Can we now have a chat?’ And often I get one, which is an enormous assist already in driving the enterprise. I might say that is the privilege I used to be handed over.”
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