2022 marked the year of the crypto derivatives market, with a material surge in trading across the industry. We saw the crypto market fall away in the early months of 2022, leading to investor panic. What followed suit was a frenzy to sell, a continued plummeting of prices and ultimately global exchanges in hot water. We are now seeing Bitcoin drop even further, hitting the $16k mark. The reason for such a decline can be attributed to the recent news around FTX and the dismantling of its token. Binance has now pulled out of the deal where it initially agreed to bail out FTX through acquisition. This has left the crypto market and its investors with uncertainty. The worst being FTX’s current client base who can’t pull out their funds due to withdrawals being frozen. This is in stark contrast to when we look back to this time last year, Bitcoin reached its all-time high at $68,000. Given the nature of the current market it appears that there is a shift between traditional investing in cryptocurrencies, to the more sophisticated traders wanting to take advantage of falling prices by speculating. We sat down with the global derivatives broker Eightcap and discussed the future of crypto derivatives trading with its Chief Technology Officer, Bryn Newell.
First and foremost, can you tell our readers a little bit about Eightcap and your current cryptocurrency offering?
Eightcap was established in 2009, in Melbourne, Australia and since then we have rapidly expanded to offer derivatives to traders worldwide. We are regulated in multiple jurisdictions allowing us to offer our products on a global scale. This includes being regulated by the Australian Securities and Investments Commission (ASIC), the Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC) and the Securities Commission of The Bahamas (SCB). Our cryptocurrency derivatives offering is probably the most extensive within the industry, and includes altcoins, crypto-crosses and crypto indices. Our offering is always evolving and we are continuously looking at ways to add different products to our existing suite. In terms of the breadth of financial instruments we offer, we have over 1000 financial assets across Forex, Indices, Commodities, Shares and Cryptocurrency CFDs.
What makes your cryptocurrency derivatives stand out from what exchanges are offering?
Our crypto derivatives offering appeals to the trader that wants to diversify their trading portfolio. There are products in our suite that the trader may not have considered before, or in fact, has considered but their previous provider could not offer it. Along with this is the competitive pricing, the spreads that we offer are ultra-low. For example, to trade a Bitcoin contract with us, you would be looking at anywhere between $12 – $15, this is not only cheaper than other brokerages but also mainstream exchanges too.
With Eightcap, as we are regulated to issue crypto derivatives trading (UK being the exception to this), we ensure that client funds are segregated and kept at Tier 1 banks. This provides a sense of security with retail traders who open an account with us, as their funds are held separately to our own money.
One of the main considerations when traders look to use us for their derivatives trading is the withdrawals and deposit methods. We have seen in the past couple of years where crypto investors have lost trust in their providers due to difficulties when trying to withdraw their funds. This is currently happening with the demise of FTX, with clients unable to withdraw their funds.
Another consideration is that we have various withdrawal and deposit methods available depending on where our clients are located. Our funding and withdrawal methods include PayPal, Credit/Debit Card, Bank Wire Transfer, BTC, Tether, Neteller, Skrill and more. We work on ensuring that our retail traders have a seamless experience right from the moment they open a trading account with us.
What do you think are the current challenges that are facing new entrants in the derivatives space, and how do you solve them?
One of the main challenges new traders are faced with is a lack of knowledge around trading with margin, coupled with a lack of awareness with new instruments. For the new entrants who want to trade crypto, then it would be essential to understand the fundamental basics of the crypto market, understand how the price swings work and what affects price movements. Technical analysis and basic risk management are also key components that will better position new traders to face the market.
At Eightcap, we place education at the forefront, alongside the products we offer. With our trading account, clients will have access to a range of tiered educational resources and tools. We offer what we call TradeZone, this is a recent initiative of ours. We invite professional traders with extensive experience to be our guest analyst for the month. During this period the expert will run a series of exclusive webinars sharing tips on how to approach and place trades on a particular asset. To accompany the webinar the guest analyst will also share market insights with weekly trading commentary that is sent straight to our clients inbox.
To what extent has derivative trading increased throughout 2022, will this continue 2023?
We have seen a significant increase in the past year in the number of accounts opened, specifically for traders that have been interested in our range of crypto derivatives on offer. There has been a shift in demand from holding cryptocurrency to speculating on the market and trying to take advantage of rising and falling prices. Given the current landscape of the crypto market, I would say that we will see even more of a surge than before of investors moving over to the derivatives market to short these dropping prices.
Is there anything you recommend to new derivative traders entering the crypto market for the first time?
In addition to the points on education previously discussed, using tools that can make trading more efficient and accessible would be beneficial to new traders. Eightcap supports new traders through CryptoCrusher, a dedicated dashboard where clients receive daily crypto trade ideas. Trade ideas will include precise trade entry, target and stop levels allowing new traders to enter the crypto market with confidence. CryptoCrusher enables traders to scan the crypto markets relatively quickly by price, trend or even major highs or lows. Users will also have access to live educational resources and exclusive indicators.
It’s important for us to provide our client base with the right tools in order to make their trading experience with us the best possible.