FXCM released its average Bitcoin/USD contract-for-difference (CFD) spread for October this Thursday. Last month was the first full month of Bitcoin trading for FXCM, with the retail broker only launching BTC/USD CFDs on the 1st of October.
In its statement, the company noted that its spreads were tighter than most other major retail brokers, including Plus500, IG Group and CMC Markets.
Those three companies all averaged spreads hovering around 50 points in October, whereas FXCM managed to average a 32 point spread for the same BTC/USD CFD product.
Moreover, the company released its spread data for all of October. Looking at it, one can see that the company’s spreads progressively tightened over the course of last month.
“As previously announced, we have continued to work with our Liquidity Providers to lower our Bitcoin CFD spreads to be some of the most competitive in our space,” Brendan Callan, CEO of FXCM Group noted. “We’ve been able to do this over the course of the past few weeks and we wanted to take the time to highlight them.”
Low vol + better liquidity = lower spreads
Tighter spreads are likely to have become more commonplace in the cryptocurrency market over the past few months.
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Starting in the summer and running up until this cold, autumnal Thursday, we have seen a plateauing in Bitcoin volatility. No longer are we in the global cryptocurrency craze that pushed the price of Bitcoin up to $20,000 at the start of this year.
For brokers, that means spreads can become tighter as they don’t have to protect themselves against massive price fluctuations.
Concurrent with the decline in volatility has been an increase in the quality of liquidity available to brokers.
Liquidity managers such as OneZero, Gold-i and TradAir have not only been able to connect brokers to better sources of liquidity, they’ve also added tools, such as hedging capabilities, to the solutions they are providing to brokers.
That means brokers can not only be more certain that they will have access to decent sources of liquidity, but that they will also have better means at their disposal to manage it. For their clients that translates into tighter spreads.
FXCM may be the first to release its spread data as a marketing tool but don’t be surprised if we see a trend of tightening spreads for Bitcoin products as market volatility lowers and technical expertise improves.