Amateur investors get another way to make risky crypto bets! Peter Cruddas of the London-based brokerage CMC Markets Plc., has allowed the company to venture into the amateur investor market segment for bitcoin and ethereum. Bets on the two of the biggest digital coins can allow these new investors to win major wagers, if lucky enough. The best that a retailer can do to make this process more easier is to help make these investors more well informed. The effort to do so puts CMC Markets Plc. with rival names like Plus500 Ltd. and IG Group Holdings Plc.
Traders will resort to a form of derivatives largely banned in the U.S. called, contracts-for-difference (CFDs.) CFDs allows users to bet on the prices of digital currencies and make money by wining the bets, without having to purchase any currency. Losing the bet means losing the transaction investment the user made along with the sum that the users bet on it. Punters lose money on CFDs more than 80% of the time, reports show, yet people seem eager to purchase.
Investors can use borrowed money, or leverage, to magnify the size of their CFD bets by hundreds and sometimes thousands of times. A $500 wager can turn into a notional gamble of, say, $250,000.
According to the CMC website, crypto assets and cryptocurrency spread bets or CFDs are “extremely high-risk speculative products.” David Fineberg, group commercial director at London-based CMC, told Bloomberg:
Our offering isn’t directly linked to competitor profitability or investor demand,
Referring to factors such as regulatory clarity and lower crypto volatility, he said:
We have launched it at time when we are comfortable,
The reinforcement has taken into account the need to extend the cryptocurrency gains to untapped clients and investors around the globe. The unattended but interested segment of investors can help raising heaps of money and great returns on sales for all involved service provides such as CMC Markets Plc. and the rest. The awareness has spread to the ordinary people through digital currency continuously breaking the internet and making constant headlines. These brokerages are taking the first steps to make people interested in making it big, the access to the digital currency market that they require but was missing initially.
The charm has reeled people in despite the fraudulent firms in business, the scams and hacking or security threats. Despite regulators and even advertisement portals like Facebook and Google Adwords, try to keep the scams at bay, people seem to jump all in nonetheless.
Individuals may enter the market now without even having to buy any digital currency or a single coin at all. The scandalous contracts-for-difference are ‘derivatives that allow investors to wager on the price of stocks, currencies, and commodities without owning them.’
While it’s understood that crypto volatility combined with leverage and inflated speculation could lead to significant losses, making quick money is rarely guaranteed and likewise the website or the brokerage does not make any claims that the laymen could leave making high bills. What it does, however, is that it allows them to participate in an opportunity to make money out of an association with the currency via betting.
And yet the firm said:
We’re not looking for the masses to ramp up their crypto positions. What we’re looking is for long-term, sustainable income for our investors.
The number of CFD firms has doubled since 2010 and they now hold about 3.5 billion Pounds ($4.7 billion) of client funds, according to the Financial Conduct Authority, the markets watchdog.
According to the new European regulatory standards, CFD firms are required to be much more cautious and responsible in keeping safe limits on bets and the number of people betting to prevent crash and default. Leverage has been capped in Poland. The Irish are debating to ban CFDs altogether whereas the Belgians already have.
CFDs are known to be too complex and too risky for retail investors. Paul McGinnis, an analyst in London with Shore Capital, who has a buy rating on CMC, shared:
They just want to offer something that their competitors now offer, There’s no real reason not to; it’s just catching up with the others.
While it can not entirely be because of the market demand and neither entirely competition or the wealth promise of digital currencies; It’s a small push from all of these reasons together that the market is now so quickly expanding despite all odds.