Exclusive: Brokers Start Shutting Down Crypto CFDs Due to One-Sided Market
Some firms have also stopped accepting crypto clients from affiliates.

Sources with knowledge of the matter have shared with Finance Magnates that a number of brokers are materially reducing their exposure to cryptocurrencies. After the initial excitement about Bitcoin futures passed, brokers realize that hedging their exposure via the CBOE and the CME Group is not a feasible option for now.
Collateral requirements of the Chicago-based exchanges total to 44% for the smaller CBOE contract and 35% for the CME Group’s contract. Brokers willing to hedge an exposure that is worth 5 BTC would need to post between $33,750 and $41,800 with the exchanges. They would hence need to require the same amount from their clients and this makes the product even less attractive and quite niche.
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Another major issue is that risk management is virtually unavailable during weekends, cause let’s face it, the BTC market is quite illiquid and any black swan on Saturday and Sunday on the physical BTC market can result in a 50% crash in a matter of hours.
Brokers did not expect that the cryptocurrency market would continue to be one-sided for so long. Apparently, traders have been making a buck with market makers, and clearing long trades on cryptocurrencies has become extremely difficult.
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More Limitations to Crypto CFDs
As a result, some brokers have outright suspended their offerings while others have started limiting exposure by preventing new positions from being opened. Some firms have drastically reduced payouts to affiliates on traffic that is bringing them new crypto traders.
The one-sided nature of the crypto market so far has surprised risk management teams that are used to handling flow that is usually advantageous to the broker.
Brokers have been losing money not only on the market but also from paying hefty fees to their affiliates. While for the most of the year there was a reasonable two-way action in the market, since the beginning of November cryptocurrencies have been moving in only one direction: up. Not just that, but the majority of clients are firmly committed to buying.
Buy and Hold Works
The most commonly used tactic by retail traders is to buy and hold the cryptocurrency until they realize some gains and close out their positions. After they have booked profits, clients are withdrawing their funds, causing a double whammy for brokers that are used to having traders continue trading with the collateral they gather on their accounts.
At the end of November, we reported that some firms have started limiting their exposure and resorted to creative ways to manage their risks. While some companies have been charging exorbitant fees on holding positions overnight, others simply limited trading to close-only. That didn’t prevent a number of firms from losing millions during the Bitcoin Cash flash action around the SegWit2x fork disaster.
I was hoping the article would explain why hedging in the futures market is not a viable option, but it doesn’t.
Apologies for not elaborating enough on that point, you are correct. Margin requirements on Bitcoin futures on the CME and the CBOE are 35% and 44%. If a broker decides to open an account with one of the exchanges with the idea of managing risk there, at current BTC prices this translates to a collateral requirement of $33,750 for 5 long Bitcoin positions (5 BTC is the minimum size on the CME, the figure gets even higher on the CBOE due to the higher collateral requirement). On top of that, there is over $500 premium on the futures contract when… Read more »
That is the reality. The markets may be open, but no long positions available due to market makers exit. If no one is on the other side of the contract, no contract. That is a problem that plagues traders in other markets as well. Not necessarily a “blackout”, but no positions offered for certain expiration times due to no market makers offering the contract.
That’s what happened to me. After 60% profit from Lite Coin and Ethereum in 3 weeks. IC markets made crypto close only. So I withdrew the capital.