Trading Firm Plus500: Cryptocurrency Surge Is Over, Market Has Returned to More 'Normal' Conditions

The frenzy in the cryptocurrency market as coins surged towards the end of last year saw massive revenues for sites that permit customers to buy and sell them.

Among those who profited include the online trading platform Plus500, who claim that the boom in interest around cryptocurrencies has now subsided and the market had returned to more ‘normal’ conditions, according to the Financial Times.

Plus500: Bumper Quarter

Plus500’s revenue reports come after a ‘bumper quarter’ was caused by ‘a period of relatively volatile markets and high levels of interest in the company’s cryptocurrency … offering,’ it said. The platform permits customers to trade in a wide range of cryptocurrency-based ‘contract for difference’ (CFD) products, which track the price of an underlying asset — often accompanied by hefty fees.

By the numbers, Plus500, which is listed on London’s Junior Aim market, on Tuesday reported a 284% year-on-year rise in revenue in the first three months of 2018 to $297.3 million. Comparatively, this is more than double its previous best-ever quarter. The platform also reported triple the number of active users and raised its forecasts for the year ahead.

As for the cryptocurrency markets, the platform describes the current climate as follows:

“We have since seen market conditions return to more normal levels in the last two months. As such we do not expect such an exceptional performance to be repeated in the remainder of the year.”

CFDs and Regulation

Plus500 has sought to calm fears that it would be damaged by restrictions from financial authorities as well as private companies like Facebook and Google on marketing CFDs to retail investors. The new regulatory changes — which are set to come into force within weeks — were brought forth by the European Securities and Markets Authority (ESMA) earlier this year. The regulator banned retail investors from trading binary options and applied limitations to CFDs to help protect investors.

The problem is that global financial watchdogs see CFDs as high-risk products because investors can quickly rack up huge debts. CFDs enable investors to speculate on the rise or fall of the price, level, or value of an underlying asset. They are typically offered with leverage, meaning investors are required to put down only a portion of the investment’s total value.

Plus500 said on Tuesday that it is already aligned with many of the new rules which it said would ‘enhance the CFD trading landscape and create a more level playing field.’ In relation, the platform has begun to look at whether it can reclassify its more experienced customers as professional investors to partially mitigate the impact of the rules.

“Having a flexible business model and a lean cost structure enables us to optimize our performance as necessary despite the recently announced regulatory changes,” Plus500’s chief executive Asaf Elimelech said. “Having the industry leading framework enables us to be confident about the future.”

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