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 change, courting all the best way again to when BTC was nonetheless in diapers.
From his swanky Singapore workplace, a busy skyline of skyscrapers behind him, he smiles confidently by means of the digicam, rolling his eyes solely barely as I ask about his background. “I’ve advised it so many instances already,” he groans.
I jokingly recommend 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 tooth as a company finance analyst at Dresdener Financial institution.
He then moved to the consultancy facet, scaling Deutsche Börse, Europe’s largest inventory change operator, earlier than working his method as much as associate at PwC. He shares:
“I suggested massive bulge bracket funding banks throughout Brexit, the ECB, for instance, on sure monetary stability issues. I did lots of work round financial institution restoration and backbone planning after the nice monetary disaster, and I used to be a part of one of many groups that stated 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.”
Along 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 change into enchanted by its prospects 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 pace, however he knew it was the longer term.
“I all the time adopted the crypto business, extra so on the expertise facet, and the underlying real-world use instances for that. So, when BitMEX requested in 2020, it was like, lastly, I can get my fingers “soiled” with one thing that I’m desirous about! It took me three days to simply accept the job with out even negotiating the wage, and other people stated, ‘You’re head of capital markets at one of many greatest audit and advisory corporations 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 individuals 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 all the time a insurgent, and I all the time preferred to do issues in another way. They thought they employed a really risk-averse man, and in the long run, I’m really quite the alternative.”
The OG crypto derivatives change
BitMEX is the business’s “OG” derivatives change, 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 a long time. 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’re not. We don’t function a launchpad like many Asian exchanges, as a result of meaning it’s worthwhile to have new tasks flowing in, and then you definitely promote them. It’s a advertising and marketing instrument. You might have a spot change subsequent to it. We don’t do that. We take a look at high cash, or high pairs, or high contracts. 10 property 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 children to onboard with BitMEX if it had been the very first thing they needed to do in crypto.
“I’d say, no, no, no, no, don’t do that, as a result of it’s worthwhile to have a sure degree of training and expertise.”
But, within the spirit of reside and let reside, if somebody desires to take a danger, they need to be capable to do it with out being mollycuddled or gatekept:
“I feel we reside in a free world, and it ought to be a free world.”
After all, he highlights BitMEX’s position in consumer training and the plentiful assets the change 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 frequently, the crypto merchants’ digest, and we do different programs… I imply, when you shut your eyes, we will’t do something about it, however when you’re stepping into with eyes vast open, you understand 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 all the time 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 total frontend and backend infrastructure and processes to place “extra give attention to danger administration.” He laughs:
“Regardless of all the things you examine it, BitMEX is likely one of the most conservative crypto locations on this planet. Why? As a result of we do only a few issues. Primary, we’ve all the time been very targeted on derivatives for professionals, and quantity two, we’ve full segregation of property.”
In a enterprise terrain fraught with landmines at each flip, BitMEX has by no means compromised on buyer fund safety. All property are secured through safe multi-party computation (MPC), and all transfers are protected by transaction guidelines that guarantee any assault is blocked at a coverage degree.
“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 great distance since then. He pauses:
“To this cowboy, “Wild West” factor, we may have completed extra by way of educating individuals, however we’ve even been sued for market manipulation, and all these have been confirmed mistaken in court docket, formally. All of these authorized instances have gone away by now. We have now fought all of them by means 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, individuals had been new to the idea of futures, and that led to extra liquidations. Quick-forward to as we speak, 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 Road stuff. Within the 10 years we’ve been in crypto, I’d say, by way of professionalization, we’re perhaps the place the TradFi world was across the early 2000s or so, perhaps slightly 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 earnings, akin to exchange-traded funds, index trackers, and extra.
“Why do individuals love ETFs? I imply, subsequent to, hey, it’s environment friendly since you pay much less charges than for lively administration. It’s copy buying and selling mainly.”
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 girl, proper?” Why is that good? When you’ve got merchants who’re good, and also you open this up, there are two issues. The copy followers really be taught one thing, as a result of they’ll see what’s traded when, and it’s like a passive funding. I simply comply with the lead of another person.”
BitMEX’s copy commerce function permits customers to emulate a number of merchants without delay, to not “put all of your eggs in a single basket,” and the decision may be reversed as effectively: when you discover a dealer whose technique you disagree with, you possibly can arrange your preferences to do precisely the alternative.
“So if a dealer buys, for instance, Ethereum, I promote Ethereum, and the opposite method round, after which you possibly can 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 degree. You actually can decide and select what is nice in your danger degree.”
Genius acts, institutional performs, and BitMEX’s subsequent strikes
As an Asia-based change, 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 prone to change sooner or later? What does Stephan consider the Trump administration and the newest strikes to come back out of Washington? He pauses for a second earlier than replying:
“I feel the GENIUS Act was genius. They mainly 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 depends upon 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 method, as a result of it’s worthwhile to be on the bottom, we’re not.
You might want to then begin with the appropriate 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 12 months.”
What else is on the playing cards for BitMEX for the remainder of 2025 and past? Stephan says he shall be sharing information at TOKEN2049 in October, and I can’t assist however marvel if there shall 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 information facilities from Dublin to Tokyo in a strategic transfer to cater to institutional merchants. He explains:
“The vast majority of all of the crypto exchanges exterior of the U.S. run their information 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 clients by means of this capital effectivity, so they should deploy much less capital.”
Standing on the shoulders of giants
We’ve gone method over time, and the sky behind Stephan is dusky and tinged with pink, however as we wrap up the interview, I’ve yet another query. I’m dying to know what it’s prefer to comply with 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 challenge or no matter, it was like, hey, I’m Stephan, I’m the capital markets chief at PwC in Europe, and would you may have time for me? And the reply by no means was a no. It could 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 instances 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 all the time execute as quick as he wish to or as decisively as his predecessor. Nonetheless, he smiles, he’ll take it anyway.
“The privilege is I can go to mainly any individual on this business and say, ‘Can we’ve a chat?’ And normally I get one, which is an enormous assist already in driving the enterprise. I’d say that is the privilege I used to be handed over.”
