**Making sense of BitMEX bitcoin indices**

The futures contracts provide exposure to the price of the underlying asset without physically buying or selling it. Futures trading is impossible without the index price derived from the spot exchanges. The contracts need to be settled against the spot price, to make a useful instrument for speculating, hedging and arbitraging.

## The .BXBT index

The most important index at BitMEX is, without a doubt, the **.BXBT index**. This index represents the current price of bitcoin at the spot market and is obtained from these three exchanges: Bitstamp, Kraken and Coinbase Pro. The index calculated every minute as the average price between the three, with each contributing an equal weight of 33.3% (33.33% + 33.33% + 33.33% ≈ 100.00%).

All of the other BitMEX indices, except a few, required for the bitcoin futures to work are derivatives of the .BXBT index.

## The indices derived from .BXBT

**.XBTUSDPI** – the premium index. Represents the premium or discount at which the XBTUSD perpetual swap is traded. It is calculated by comparing the .BXBT index (representing the spot price), and the current bid/ask spread level for XBTUSD. If the spread is below the index, the contract trades at a discount and the .XBTUSDPI will be negative. If the spread is above the index, the contract trades at a premium and the .XBTUSDPI will be positive.

**.XBTUSDPI8H** – 8-hour time-weighted average of the .XBTUSDPI index. It is the average premium or discount at which the XBTUSD perpetual contract was traded during the last 8 hours. This index necessary for the final calculations of the funding rate, and it is the only component which is variable, as the BTC and USD lending rates are set constant.

**.XBTUSDPI2H** – 2-hour time-weighted average of the .XBTUSDPI index. This index, even though present in the BitMEX documentation, is not used in any calculations as of now (correct me in the comments if this is false).

**.BXBT30M** – 30-min. time-weighted average of the .BXBT. This index represents the average price of the .BXBT index over the last 30 minutes. It is used for the settlement of the quarterly bitcoin futures contracts (XBTH, XBTU, XBTM, XBTZ). The use of the average price over some length of time for the settlement is done to tackle the possible attempts of price manipulations right before the expiry.

**.BVOL** – thirty days volatility index derived from the .BXBT30M**.BVOL7D** – weekly volatility index derived directly from the .BXBT**.BVOL24H** – daily volatility index, also derived from the .BXBT

## The independent indices

**.XBTBON** – bitcoin lending rates index. It is used in the calculations of the funding rate. Currently set at a constant of 0.03%.

**.XBTBON2H**, **.XBTBON8H** – two and eight hours average of the .XBTBON. Since the last one is set to a constant of 0.03%, these are the same.

**.USDBON** – US dollar lending rates. This index is used in the calculations of the funding rate and is set to a constant of 0.06%.

**.USDBON2H**, **.USDBON8H** – two and eight hours average of the .USDBON. Both equal to the .USDBON since it is set to a constant number.

## The flow chart

The flowchart below serves as a visual representation of, the interconnection of various BitMEX bitcoin indices and variables. Note that in the centre of everything is the .BXBT index, without which the futures exchange, basically, can’t operate.

## Conclusion

The BitMEX .BXBT index is the essential index for this futures exchange. It calculated every minute as the average bitcoin price of the three spot exchanges (Bitstamp, Kraken, Coinbase Pro). Almost all other BitMEX bitcoin indices are derivatives of the .BXBT. This index is crucial for the calculation of the funding rate for the XBTUSD perpetual contract, as well as the liquidation prices and the unrealised profit and loss.

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