What is Bitfinex?
You won’t find the wide range of altcoins like you do on Bittrex (although this has been changing in 2018), and you won’t find the same assurances and ability to convert crypto to dollars like you do on GDAX, instead Bitfinex is like a middle ground between these platforms with a conservative range of margin trading options (meaning the ability to take leveraged positions; in this case, up to 3.3x leverage).
When you trade on Bitfinex, you are trading in a market full of professional traders. This is a blessing and a curse. On one hand you have access to some of the best liquidity in crypto (meaning you won’t find a lot of big spreads and can generally get your orders filled without a ton of slippage), on the other hand you are competing with those whose skill levels likely are beyond yours (not that this isn’t essentially true of any exchange).
Although the pros can be said to outweigh the cons with Bitfinex (and this helps explain why it is generally the exchange with the highest Bitcoin volume), there are some hesitations worth noting with Bitfinex.
Hesitations include the following points (which mostly revolve around the same issue of Tether and dollars):
- Bitfinex is not meant for new users, and it will tell you that as soon as you try to sign up.
- You need to have at least $10k in cash or crypto to even get in the door. Or as Bitfinex puts it, “New accounts will not be able to trade or perform any platform function until they reach a minimum account equity of 10,000 USD, achieved by bank wire or by depositing cryptocurrency.”
- Bitfinex has close ties and common shareholders to Tether (USDT), so if things go south with Tether… Bitfinex is likely going to feel the brunt of that. This also matters because, see the next point.
- Bitfinex has an odd relationship with dollars. In simple terms, USD and USDT are treated as the same in Bitfinex. This shouldn’t necessarily pose any issues to you, and you should still be able to deposit and withdraw USD, but it does mean there is a little extra consideration here. If you want to avoid dealing with the Tether system, you can go to Coinbase first to convert your dollars into crypto and then send the crypto to Bitfinex and then make the trip back in crypto when you are trading.
- Bitfinex has a somewhat complex and odd history. Unlike the story of Coinbase/GDAX, a startup making efforts to work with U.S. laws, the story of Bitfinex is full of hacks, Tethers, and bouncing around from country to country. It doesn’t make them bad or good, it is just something to be aware of before and not after you jump into trading on the platform. See Bitfinex Examined: Inside the Troubled Bitcoin Exchange’s History.
In other words, Bitfinex is the top exchange by volume and perhaps the most important single exchange when it comes to the price of cryptocurrency! Further, it is an exchange with very few issues in its recent history that many crypto traders use without a problem on a daily basis. However, it is also an exchange with a not entirely spotless past that is rather Tethered to Tether (which is never great when the Tether FUD rears its head as it often does).
If you understand the handful of reasons to be cautious, then there are a lot of reasons to add Bitfinex to the list of exchanges you use after you get some experience trading under your belt.
The bottom line being, Bitfinex shouldn’t be your first stop when getting into crypto (Coinbase/GDAX, Gemini, Kraken are all better bets for that), but it is a valid and popular choice for a cryptocurrency exchange that really should be included on any complete list of exchanges.
NOTE: A very useful feature of Bitfinex is one common to some exchanges, but not all. It is the ability to apply indicators to charts (check out a demo). GDAX only offers 12 and 26 day moving averages, Bitfinex offers a range of useful indicators. If you know how to use indicators like RSI, then this feature can be very helpful (it avoids you having to have another screen open with your indicators on it).
WARNING: There are risks associated with any exchange. In general, leaving too much crypto on a given exchange is a bad idea as exchanges are considered “hot targets” for hackers. This is generally true for all exchanges. To help decrease the risk of a hack to your account, make sure to use strong passwords and two-factor authentication. Bitfinex actually encourages you to not leave your funds on the exchange and plans to charge a fee for it at a later date.