The Risk of Using Bitcoin CFD Brokers – the Infamous Black Swan

By September 6, 2016Bitcoin Business

This guest article was written by Marcie Terman, Communications Director, First Global Credit and XBT Corp Geneva. Meet the Infamous Black Swan No, not the character in that painful ballet movie played by Natalie Portman, but the meme that drifts by just beyond our next trade. Everyone is convinced they can see her coming. But in actual fact, no one can. Notice that almost all of the brokers offering mainstream stock trading into the bitcoin market support only a dozen or so markets. The reason for this is that they do not place trades into the market on behalf of their customers and charge a commission. Instead, to make a profit they make a bid / offer spread on the market being traded that is roughly around the live price in the market at that point in time. And that spread is much wider than the actual market. Join the industry leaders at the Finance Magnates London Summit, 14-15 November, 2016. Register here! For instance, I’m looking at the live S&P futures market. Right now it has a bid / offer spread of 25 ticks. Having a peek at one of the bitcoin CFD brokers at the same time I can see a bid / offer spread of 80 ticks. Instead of charging a fixed commission as First Global Credit does, with fills returned to the customers from trades we place on their behalf onto the stock exchange, the CFD broker charges their fluctuating spreads based on market volatility. But if you bear with me for a moment I will point out something even more sordid at play. Let’s say their trading customers have 5,000 shares of the S&P that are long and 10,000 shares of the S&P that are short. The 5,000 longs and 5,000 of the shorts […]

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