Bitcoin and cryptocurrency exchange BitMEX, once branded a “bitcoin casino,” has lurched from crisis to crisis over recent years.
The Seychelles-based bitcoin and crypto exchange, specialising in bitcoin derivatives, was last week hit with a lawsuit accusing it of market manipulation, among other illegal activities.
Now, as the bitcoin price makes another assault on $10,000 per bitcoin, a “major” BitMEX outage has prompted warnings the exchange is becoming increasingly unreliable.
BitMEX’s trading engine went offline on Tuesday for over an hour due an incident it described as a “major outage,” leaving users unable to access their funds.
“I’ve been warning people [about BitMEX] for almost three years now,” said closely-watched bitcoin and crypto analyst Scott Melker, adding BitMEX is a “horrid” exchange.
“I just do not understand why people still trade there,” said another bitcoin trader.
After coming back online, BitMEX said a “full post-mortem” of the outage will be made public “within the next few days.”
Bitcoin and cryptocurrency exchanges around the world have reported surging demand and new user signups in recent months, in part because of lockdowns put in place to slow the spread of the coronavirus Covid-19.
Soaring demand is testing the stability of some bitcoin exchanges, with Coinbase, the largest U.S. crypto exchange, dropping offline earlier this month.
“Unprecedented market volatility and activity during the outbreak have impacted all firms that provide trading technology, effectively being stress tested daily,” said Jim Nevotti, president at Chicago-based software provider Sterling Trading Tech.
“Market volatility translates into larger amounts of users, activity and order flow on the platforms at the same time. Recent outages experienced by some firms in [the bitcoin and crypto] industry have exposed fault lines in their underlying infrastructure.”
BitMEX, once the largest bitcoin derivatives exchange measured by open interest, has been losing market share to rival bitcoin and crypto exchanges over recent months—though still supported around $2 billion worth of bitcoin futures trading volume over the last 24 hours, according to crypto data analysts at Skew.
BitMEX market share has been eroded by other exchanges ramping up their bitcoin and crypto derivatives offerings. However, problems for BitMEX have also caused users to seek alternatives.
In March, a sudden fall in the bitcoin price to under $4,000 per bitcoin was led by BitMEX before the exchange was closed for “maintenance.”
Bitcoin and crypto market analysts have warned so-called leveraged trades, where investors can open positions much larger than their own capital and are popular on BitMEX, can lead to “extreme corrections.”
Last year, BitMEX sparked panic among bitcoin traders and investors after accidentally exposing thousands of its users’ emails–with the exchange’s Twitter account then compromised shortly after.
The latest BitMEX outage comes just days after the bitcoin exchange was hit with a lawsuit claiming it is involved in illegal activities such as market manipulation and money laundering.
The 106-page lawsuit also alleged that BitMEX operates an unlicensed U.S. money transmitting service and has earned its owners “billions of dollars in illicit profits.”
“We will deal with this complaint through a normal litigation process and are entirely confident the court will see the claim for what it is,” a BitMEX spokesperson said.