More and more foreign exchange (FX) brokers have been integrating cryptocurrency instruments into their platforms. Indeed, the present popularity and growth of Bitcoin and Ethereum onto industry trading offerings constitute a standard, more so than a bonus for advanced traders.
In light of this peaking demand, B2Broker initiated its own institutional crypto exchange project, B2BX last month. The project has already received strong interest from around the industry, following a successful token pre-sale that ended earlier this October. Since launching back on September 29th, B2BX’s token pre-sale has managed to raise over €6.0.
B2BX is part of an ongoing initiative to create a comprehensive marketplace for regulated and certified brokers that combines Bitcoin trading with existing retail forex trading solutions. Evgeniya Mykulyak, COO of B2Broker and leader of the project B2BX, touched on the project’s recent success and future trajectory.
Ms. Mykulyak outlined the state of the cryptocurrency market at the present and what the current playing field looks like from an inside perspective: “Today, any broker that is working in the market (there are 10-12,000 of such) and has added some crypto asset to their terminal can be regarded as a broker working with crypto instruments. However a new type of broker companies are emerging which operate exclusively as crypto brokers, that is, they do not have any assets other than cryptocurrencies and ICO project tokens.”
A new type of broker companies are emerging which operate exclusively as crypto brokers
“In our estimation, there are no less than 100 brokers that provide crypto asset trading. Many market participants have at least acquired contracts for the two most liquid instruments, Bitcoin and Ethereum,” she explained.
Growing industry traction
For their part, B2Broker has been active in the growing industry, working with numerous brokers and players to help initiate B2BX. According to Ms. Mykulyak, “We have connected 15 broker companies to the aggregator. Those include both new arrivals in the market, such as Strato and NextGen, which put emphasis on the access to crypto instruments as a separate competitive advantage, and the industry’s global leaders, such as FxPro.”
“Special attention should be paid to our clients from other regions. In Asia in particular, in spite of some restrictions, the industry is developing at a very fast pace. Thus, we have connected to the aggregator the Chinese broker Pruton. Among our clients, there is also an UAE broker with an Indian background, MoneyPlant,” she noted.
The rapid ascendancy of the Bitcoin and Ethereum present optimistic growth targets and future prospects. However, many experts feel the market still has not even reached its potential as the retail space quickly is adapting to cryptocurrencies.
In particular, “The market dynamics are going to step up, and we forecast that, by the end of this year, almost all the brokers will provide liquidity on at least two major crypto assets. The crypto broker category will grow and, if not supplant Forex altogether, will certainly seize a part of the niche, primarily due to the high volatility of the instruments,” she added.
By the end of this year, almost all the brokers will provide liquidity on at least two major crypto assets
One interesting element to consider is the relationship between existing FX brokers and cryptocurrencies. While most have seen the future and adopted new offerings en masse, such as Bitcoin trading or contracts-for-difference (CFD) products, there is a small enclave that worry about potential risks eroding their product lines.
Asked whether these products carry any risk, Ms. Mykulyak quickly clarified her stance on the subject: “No, they don’t. Crypto assets are closer to Forex than any other asset class, as cryptocurrencies are none other than new trading pairs. The pair Bitcoin-Ethereum is in fact the new Euro-Dollar.”
In the modern world, any broker has to adapt to the actual trends, and cryptocurrency has become the most demanded product from clients. “Of course, Forex will live on for some time, but the future is with crypto, and crypto asset trading is the new Forex. That is why the introduction of crypto instruments leads to strengthening, rather than erosion, of the product line. If a broker does not provide their clients with opportunities for trading in whatever they want to, the clients will simply leave for another broker,” she explained.
Worth the trouble?
Despite recently supporting new cryptocurrency offerings, many retail brokers and providers have already seen positive effects on their respective business. Consequently, “Many companies experience a practically instantaneous effect in terms of profit growth. For instance, as they summed it up, are clients from MoneyPlant reported that they had increased their trade turnover and commission income, while enhancing the recognition of their brand as a whole. So, the introduction of cryptoassets produces rather a big effect while towing along other lines of business,” she explained.
Still, there are certain levels associated with cryptos and the instrument is not merely a panacea for any struggling brokerage. Rather, “Considering that today, brokers do not offer exchange with physical delivery but provide derivative trading, the risks are not so great. And if a broker draws liquidity from a reliable contractor, there is virtually no risk at all.”
“Risks may arise in one case only: if the broker has not connected to some provider of cryptocurrency liquidity or some exchange, but is simply pulling feed, that is, is receiving quotations and processing the clients’ orders in B-book. Cryptocurrencies are too volatile, capable of moving daily 40% in either direction. For that reason, if the broker has not covered those risks, they can be badly in the black. To avoid such risks, one can connect to B2BX as a liquidity provider for cryptocurrencies,” recommended Ms. Mykulyak.
Problems for new entrants?
There is a litany of issues facing any new entrant into a market, with cryptocurrencies being no exception. According to Ms. Mykulyak, “The main problem is the lack of contractors providing crypto liquidity and the lack of knowledge how to hedge one’s cryptocurrency-related risks. The infrastructure is not developed yet, and the market is still quite young, its main activities having started as recently as March-April this year.”
“Currently, there are two other complications, of a technical and transient nature. It takes time to establish integration with a crypto exchange, and more time to open accounts, sign a contract, etc. All that is costly and involves expenditures. We resolve these issues, thus making life easier for broker companies by employing FIX API connection, which means no more making contracts and keeping accounts with each exchange. Also, we offer superior execution and more attractive prices from all the exchanges,” she added.
One of the most challenging aspects of a cryptocurrency offering is simply getting started. For this process there seems to already be a consensus procedure to follow. “The first thing to do is to find a contractor. The broker must decide whether they are just going to quote feed or provide real liquidity. To professional brokers, there is no question here, everything’s obvious.”
The demand for cryptocurrency trading is growing, and we certainly mean to build up our cooperation with B2Broker and B2BX
Ultimately, “When a contractor has been selected, it is necessary to request a list of provided instruments, carry out analysis and pick those that are relevant to the particular client base. See what generates larger trade volumes and make a listing of trade instruments on one’s own trade platform,” she explained.
“The third step is to make specifications, set a commission, swaps, leverage size, and basic asset. Currently, brokers can nominate trade accounts in Bitcoin and in Ethereum, especially in МetaTrader 5 as it allows quoting to 8 decimal places. Lastly, you need to test the system for fault-tolerance, then announce it and put it in operation. The further process involves engaging a risk manager to hedge risks,” Ms. Mykulyak concluded.
Since kicking off its token sale late last month, B2BX has succeeded in raising millions of euros for its new exchange. Maxim Karavayev, an industry expert and member of Strato Trade commented: “We have added crypto liquidity from B2Broker to our pool of liquidity providers and thus enhanced the supply of instruments for our clients. That resulted in a considerable expansion of our client base, growth of trade turnover, and consequently, growth of the commission income. The demand for cryptocurrency trading is growing, and we certainly mean to build up our cooperation with B2Broker and B2BX.”
CryptoCompare looked through our project. Check what they found!https://t.co/IlDdMZcBSt
— B2Broker (@b2broker_net) October 13, 2017
“We have used crypto liquidity from B2Broker to enable our clients to invest in crypto assets and profit on that. Thus we have attracted a lot of traders and investors, including those that are not interested in standard instruments. We have not just increased the trade turnover and our income, we have also built up the recognition of the company in the financial market. Crypto instrument trading being the current hype, we have joined the trend and can profit on this trend thanks to B2Broker and B2BX,” outlined a representative from MoneyPlant.