eToro joins the growing number of FX broker dealers offering Bitcoin derivatives. The London-based FCA regulated firm has reported that it has gone live with a CFD Bitcoin contract. The moves comes after one month of beta testing as reported in December 2013.
eToro states in its press briefing that it offers Bitcoins from an investment perspective with certain requirements put in place, for example, the product will be offered to users as an executable instrument four times a day, the company stated that this is due to the price volatility in Bitcoins.
Apart from self-traders, eToro’s offering attracts investors who prefer to copy or follow traders, Bitcoins will be available on eToro’s social trading platform, Open Book.
Bitcoins have had their fair share of scrutiny from investors and regulators in the last twelve months. The crypto-currency saw rapid price movements which consequently saw Bitcoins cross the formidable $1,000 mark in November trading at $1,250.
FX brokers first initiated their interest in April last year with IG and Spreadex front running with the launch of a tradable instrument. However, due to liquidity and risk principles the instrument hasn’t taken off.
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eToro, a predominantly retail orientated broker, was expected to be one of the early providers of the product. Yoni Assia, Founder and CEO of eToro spoke about the firm’s new product launch in a statement: “Both eToro and Bitcoin were born out of the social revolution. It’s therefore very apt for us to take the lead in making Bitcoin – essentially the world’s first crowdsourced currency – available to the masses. Through our social network, individuals can easily and conveniently invest in Bitcoin and take advantage of a new type of investment either with their own strategies or by harnessing the wisdom of our members.”
Elsewhere, UFXMarkets has also announced that it is beginning to offer bitcoin trading to its users. At UFX Markets, the CFD is being provided with what is considered pretty flexible trading conditions as 10:1 leverage is being provided. In its initial marketing, the broker is focusing on the potential trading benefits of bitcoins due to its volatility, Chris Judd, Chief Analyst at UFXMarkets stated in the company’s public release that “Forex traders don’t need to care how economies are doing or whether something new will catch on. Volatility creates great opportunities for Traders. That means that no matter what you think about the future of bitcoin, it’s an ideal trading asset.”
Bitcoins and crypto-currencies have been given the cold shoulder by regulators in major world economies, from Europe to Asia, central banks have issued brave warnings on the dangers and risks of Bitcoin trading. China’s intervention was the most significant with direct implications on the price of the instrument resulting in a drop of over 50%.
Brokers face numerous challenges managing Bitcoin exposure from a dealing point of view. Without a benchmark product or centralized listing mechanism, offsetting exposure can pose detrimental risks for principal brokers (market makers).
However, if Bitcoins continue to attract two-way flow, e.g. long and short trades then positions will be netted off. The same issues are common among investors when assessing the safety and security element of investing in the virtual asset class, with Bitcoins’ existence limited to a computer hard drive investors are concerned about the dangers of losing their investment.
However, a new ‘safe like’ vault service offered by a UK-based provider could be the missing key to safe and reliable Bitcoin investing. Elliptic is a new insurance service which protects Bitcoins from loss, theft and malfunction.
Bitcoins have started 2014 on the right footing with news of social gaming giant Zynga announcing that they will accept the currency and thus ramping up the price, according to MTGox, the world’s largest Bitcoin exchange, the instrument is trading at $960.