Why There is No Downside for Brokers to Offer Cryptocurrencies
Over the last few years there haven’t been many major product innovations or other disruptors to shake up the industry like social trading or algorithms did in the past. Granted, all industries have their plateaus and peak moments but compared to other areas of finance, such as stocks or futures, forex is still a relatively newer product with plenty of room for potential growth.
The driving force in the FX industry is volatility. In a low interest rate environment, this is especially the case as the carry trade doesn’t carry the same appeal it once did. With this in mind, it’s logical to introduce new products that are volatile and therefore of interest to traders. Since cryptocurrencies are not directly correlated to price moves in FX, this can also serve as a hedge for times when FX or other market volatility is low.
Although increased volatility does involve risk, let’s not forget that it’s the volatility and leverage that makes forex attractive to trade. In some cases, simply making cyrpto currencies available is enough to interest a trader. Many times the potential client may never speculate on the product, but be sold on the idea of trading forex after seeing the potential. We’ve noticed this to be the case with CFDs: brokers offer many exotic CFD products only to see a handful actually traded.
It’s not just cyrpto currencies that are gaining interest this year. Another innovative product that we’ve written about in the spring is diamond index trading. Similar to our stance on crypto-currencies, brokers who are willing to take a risk by taking a bet on innovation will reap the rewards by standing out from the pack, something that is always a challenge in such a competitive industry.
To learn more about how to integrate diamond index trading or crypto-currencies into your broker’s platform, how risk management works with these products, or any other inquiries, feel free to contact us.
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