Some firms have also stopped accepting crypto clients from affiliates
Sources with knowledge of the matter have shared with Finance Magnates that a number of brokers are materially reducing their exposure to cryptocurrencies. After the initial excitement about Bitcoin futures passed, brokers realize that hedging their exposure via the CBOE and the CME Group is not a feasible option for now.Brokers did not expect that the crypto-currency market will continue to be one-sided for so long. Apparently, traders have been making a buck with market makers and clearing, long trades on cryptocurrencies has become extremely difficult.
More Limitations to Crypto CFDs
As a result, some brokers have outright suspended their offerings while others started limiting exposure by preventing new positions from being opened. Some firms have drastically reduced payouts to affiliates on traffic that is bringing them new crypto traders.The one-sided nature of the crypto market so far has surprised risk management teams that are used to be handling flow that is usually advantageous to the broker.Brokers have been losing money not only on the market but also from paying hefty fees to their affiliates. While for the most of the year, there was a reasonable two-way action in the market. Since the beginning of November cryptocurrencies are only moving in one direction: up. Not just that, but the majority of clients are firmly committed to buying.
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Buy and Hold Works
The most commonly used tactic by retail traders is to buy and hold the cryptocurrency until they realize some gains and close out their positions. After they have booked profits, clients are withdrawing their funds, causing a double whamming for brokers that are used to have traders continue trading with the collateral they gather on their account.At the end of November, we reported that some firms have started limiting their exposure and resorted to creative ways to manage their risks. While some companies have been charging exorbitant fees on holding positions overnight, others simply limited trading to close-only. That didn’t help a number of firms from losing millions during the Bitcoin Cash flash action around the SegWit2x fork disaster
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