IG Group, who have offered cryptocurrency trading since 2013 have restricted new positions on Bitcoin temporarily as new clients increase the firms exposure.
Please note that since this article was written the FCA has banned retail traders from trading cryptocurrency derivatives. If you would like to speculate on Bitcoin and cryptocurrencies you need to use a cryptocurrency exchange or professional trading account.
As speculators look for cryptocurrency brokers that offer Ethereum and Bitcoin trading, UK brokers have found that their underlying exposure to the cryptocurrencies has increase to somewhat “uncomfortable levels”.
IG Group’ss Peter Hetherington told the FT.com
We have strict internal hedging limits on certain exotic products — principally cryptocurrencies — to determine how much of the underlying asset we are exposed to [and] avoid risks we’re not comfortable with,”
“Where we get close to reaching those limits, we stop taking new positions.
IG also stated they were concerned about the counterparty risk of dealing with unregulated Bitcoin exchanges and holding an excessive amount of Bitcoin making them a potential target for hackers.
The FT.com also highlighted criticism of other CFD brokers such as Plus 500 increasing the overnight funding charges for holding a positions in Bitcoin. Although the cost of hedging a Bitcoin position will be significantly higher than a traditional FX pair or equity indices.
Plus 500 does however add an expiry to the CFD contracts when they are opened meaning that it’s exposure is limited to when the CFDs expire, should they choose not renew open positions in addition to setting the cryptocurrency at close only.
Plus 500’s Bitcoin dealing ticket, currently shows that client sentiment is 93% long and only 7% short.
However, according to Daily FX (the FX education portal owned by IG, IG Clients are currently around 62% net long Bitcoin, the lowest it has been since October 2016.
Bitcoin: The percentage of traders net-long is now its lowest since Oct 16 when Bitcoin traded near 5700.89. https://t.co/8uGQ7iiKO5 pic.twitter.com/MU8CETUCym
— DailyFX Team Live (@DailyFXTeam) 28 November 2017