Startup opens Bitcoin-only margin trading platform

Startup opens Bitcoin-only margin trading platform

Summary: When you mix an experienced banker, entrepreneur, and Bitcoin together, what do you get? A new-age, self-funded trading platform that reaches profitability in only 1.5 months.

SHARE:
TOPICS: Start-Ups, Australia
6

When someone who works in the financial management industry quits a highly secure job to create a startup, it usually signals that they are either crazy or on to something good. In Joseph Lee's case, it's more likely the latter, with the soon-to-be ex-banker using his experience to bet on the future of Bitcoin.

Lee is no stranger to Bitcoin. An early adopter of the crypto-currency, he expanded his portfolio to include Bitcoin as a small experiment, but it wasn't long before it paid off and represented almost 90 percent of his investments.

And now he thinks that anyone else should be able to speculate on the value of the Bitcoin themselves, but without the risks that he and others have faced during their experimental days. Currently, if an investor wishes to trade on a Bitcoin exchange like Mt Gox, they need to manage one or more traditional currencies along with their Bitcoin currency, increasing the complexity and potential risk to them.

To overcome this, Lee has developed a margin trading platform, Btc.sx, that is completely void of all currencies other than Bitcoin. Trades are placed in Bitcoin, payouts are in Bitcoin, and the deposit required to open a position on the platform is in Bitcoin.

The second core feature of Lee's platform is that it is focused on margin trading, allowing investors to use additional investment to leverage their existing Bitcoin and increase their payouts. As with all margin trading platforms, this multiplies the reward for investment decisions that pay off, and also multiplies the risk involved if the market turns sour.

However, Btc.sx's requirement of a deposit to open a position determines how much of a bet size an investor can make, and also allows them to limit their total exposure.

"If the market moves against them in a very strong way, then I act as the counter-party to manage that risk. If I lose more than what my client puts down as a deposit, then it will come out of my pocket. I will never charge the client more than their deposit for that position," Lee said.

It effectively allows investors to place bets on how the value of Bitcoin will move, either by taking a long or short position, and for the first 24 hours of trading, leverage is provided free of charge. Btc.sx charges 0.1 percent each day thereafter for gearing.

Lee began work on the platform just nine months ago as a single founder, and after investing AU$150,000 of his own money into it, launched it three months ago. One and a half months ago, it reached profitability, giving him the push to leave his job at Macquarie Bank.

Venture capitalists have also seen promise in Lee's platform, with Lee already receiving multiple offers, but he told ZDNet that it isn't necessarily just money that he's looking for.

"I'd consider funding to be a small part of what I'm after when it comes to backing. I understand that the money is relatively easy to get if not from Australia [then] from Silicon Valley, as they love this space at the moment. What I'm really after is the knowledge to help drive growth of the business," he said.

Lee is aiming for between AU$500,000 and AU$1 million for his first round of funding, aiming to spend it on not only building out his business, but also hopefully providing a secondary benefit of improving the reputation of Bitcoin in general.

He said that when Bitcoin first emerged as a currency, there was too much focus on the parallel market use, but today, its more legitimate uses have been recognised through wider adoption and the discussions currently occurring around regulation.

"There are a lot of people who are afraid of regulation ... but what the world should be doing is getting excited about the word regulation when it is mentioned in the same sentence as Bitcoin," Lee said.

"The more regulation that comes to the Bitcoin world, the more legitimacy it will bring to Bitcoin as a currency."

Lee is also using his own business as an example of how it is possible to use Bitcoin for more legitimate purposes. He already pays his own salary partially in Bitcoin, and said that if his future employees wish to be remunerated in Bitcoin, he would do so — but only with the proviso that all transactions could be declared, audited, and traced.

"Just like the Australian dollar has respective laws about tracking and compliance, I'd like my customers to know that we don't have interest in operating in pure grey areas.

"There are lot of people that want to keep things off the radar, but I encourage anyone that wants to cash out their Bitcoin to declare their earnings in Bitcoin as capital gains," he said.

On the security side of things, Lee's platform doesn't maintain the use of a hot wallet for trades. As soon as Bitcoins are deposited, they are sent to offline vaults, meaning that should the platform come under attack, users' funds are not left vulnerable to theft.

Topics: Start-Ups, Australia

Michael Lee

About Michael Lee

A Sydney, Australia-based journalist, Michael Lee covers a gamut of news in the technology space including information security, state Government initiatives, and local startups.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

6 comments
Log in or register to join the discussion
  • the new currency

    It's crazy how big bitcoins are getting, and it makes me wonder if governments are going to start trying to get a piece of it.
    Brian_C
    • trying

      Yep, the keyword here is trying. As they tried to shutdown torrent, spam or any open protocol and failed miserably.

      Remember Bitcoin is not a company, not a website, not only a currency but a protocol. Unlike any before, a protocol can't be killed but only abandon by the users.
      Jean-Claude Morin
  • I think Bitcoins are a great idea!

    Just thinking of the (real) money that Libertarians will lose pursuing this bubble/scam warms my heart.
    Sir Name
  • Bitcoins are for real

    We might as well get used to bitcoins (and the other digital currencies). How we pay, is changing. Governments are paying attention. The Germans have now created a partial legitimization by allowing bitcoins for personal transactions. How far behind will the other be? The currency can be changed into other major currencies, it can be used to buy goods and services, and apparently it has great traction in the underworld. Do you remember what the first $ 1 Billion commercial application on the internet was? Porn!

    We all need to get familiar with what is going on in this niche. Lots of good materials on the net. I found this quite handy: http://chopra-m.blogspot.com/2013/08/change-in-your-wallet-bitcoins-and.html

    This is the tip of the iceberg.
    mikesangha
  • How I got started in BitCoin...

    This is at the heart of bitcoin supporters, Free Market Money v. State Money.

    I jumped on the bitcoin freight train about 4 months ago. Bought some bitcoin mining hardware from www.minersource.net and grew a small bitcoin mining farm to what I have now. I mine apx 1 to 2 bitcoins per day. Not too shabby. It's very obvious that Bitcoins are the future.
    Joshua McKenzie
  • BTC.SX are thieves.

    BTC.SX are THIEVES!
    It appeared to be shady entity, but now it came clear - that is fraudlent bunch of thieves, ignoring their users!

    check this
    https://bitcointalk.org/index.php?topic=524429
    Hodor_btc.sx=thieves