When Bitcoin first launched back in 2009, the idea that cryptocurrencies would swoop in and somewhat revolutionise the finance sector undoubtedly seemed a little far-fetched what with the associated volatility for both traders and brokers.
Indeed, it has taken several years for crypto products to gain momentum, but now they’re fully in the spotlight and have attracted the attention of respected brokerage Blackwell Global – a company with a worldwide presence in over 90 countries.
Committed to transparency, integrity and service excellence, has recently evolved its product offerings to become a reputable and thoughtful provider of crypto/CFD trading. We went behind the scenes with Blackwell Global UK CEO, Patrick Latchford, to get a deeper insight everything from developing trading portfolios to crypto-related trading benefits and risks.
As CEO of Blackwell Global- what was your first thought when introducing crypto was suggested?
I’d have to say both fear and excitement in equal measure. It’s the first time in my career that a completely new group of trading products has come to the market and therefore it’s somewhat unfamiliar turf for the industry.
That said; there’s no doubt that our clients are looking for volatility and opportunity – and cryptocurrencies deliver on those measures. The fear factor is that they can potentially be so volatile that risk management for both clients and brokerages is challenging.
Do you think it’s necessary for brokers to add crypto to their trading portfolios?
Cryptocurrencies keep us on our toes and while I think most brokers will have crypto offerings eventually, the need for digital tokens as part of a trading portfolio has certainly divided opinions. I’ve spoken to a couple of fellow CEOs about it recently. One said: “Over my dead body.”
The other said: “It is my top priority.” The issue is certainly getting industry leaders thinking and probably will for quite some time but it ultimately comes down to what segment of the client market they’re targeting.
Is it easy for a traditional forex broker to add a crypto offering? What does this entail?
Is it easy? No, it’s not, especially when you compare it to offering EUR/USD for example. With major trading products you have hundreds of near identical liquidity providers, so you know what you’re going to get. With cryptocurrencies, the providers are few and the product varies in style or scope.
Also, the underlying exchanges on which prices are derived are fragmented and lack liquidity. That’s why it’s still relatively costly to trade as compared to the traditional products.
Are you concerned about protecting your risk department? What are the concerns here?
When it comes to cryptos, risk has to be the first and last thing I think about. Not saying it keeps me awake at nights (much!) Our model is ‘matched principal’ which means that for every trade a client executes, we do the same with our liquidity provider. So, on that basis, I look at my counterpart risk (my liquidity provider) and things like daily percentage movements that may require additional funding.
I also look at market risk in relation to client positions; cryptos can have high volatility in a day, but leverage is significantly lower than other trading products which ultimately reflects their racy nature.
Do you think crypto trading is more reputable with a regulated broker? How do you plan to protect clients? What are your thoughts on scam cryptos?
So many questions but all of them play on the mind of a forex CEO that’s expanding to offer cryptos. It’s fair to say that cryptocurrencies are the ‘Wild West’ of the derivatives market, so trading with a regulated broker should give customers a lot more comfort.
Also, when you trade CFDs you are trading on price movements and don’t actually own the underlying assets. Therefore, CFD trading eliminates the risk of having your ‘wallet’ compromised.
When you look at the crypto space as a whole, all of these ICOs are bewildering and I can’t believe many of them will have value in the long-term. It kind of feels like crowd funding on acid, where valuations bear no relation to the ‘asset’ that is being offered. I would say regulators must be spending a lot of time thinking about how to police this market – the FCA has my deepest sympathies.
Is education important?
Absolutely! The more you know, the better prepared you are to make knowledgeable decisions and trading cryptos is no different. Unfortunately, a lot of information out there is ‘second-hand’, biased or hearsay, so it’s challenging to get to primary sources of information. I’ve always said that our clients are better off trading a few things that they know well, so we aim to educate them about cryptos – minus all the sensationalism that pervades on the internet.
All of the usual rules apply. Keep it simple, start with a small amount of investment funds and get comfortable with crypto CFDs on a ‘low consequence’ basis. It’s all about risk management in a highly volatile space.
Blackwell Global has embraced the challenge of becoming a crypto provider and will host a key crypto event later in the year. They are the of Everton Football Club and no stranger to developing viable, creative solutions within the finance industry having recently initiated the highly-successful #BluesChallenge campaign.
This campaign prompted traders to pit their skills in a demo account against world-famous Everton stars including Wayne Rooney, Jordan Pickford, Morgan Schneiderlin, Phil Jagielka, Leighton Banes and Yannick Bolasie. The challenge attracted more than 1,200 competitors from 75 countries.
Explore your crypto/CFD possibilities now at an established and regulated broker offering 15+ cryptos to trade on its platform.