Slightly more than 2 months ago, on Oct 10th, we launched Bitcoin trading for our global client base. The thing was trading then at 4,700 US dollars. Today it trades at 14,500 dollars.
What we have learned these 2 months is that the traders of Bitcoin are much different from ordinary FX, commodities or stock traders. Bitcoin traders seem to be having some sort of religious aspect to trading which means that they don’t take profits like ordinary traders. They just keep the profits running as if they don’t care about the fiat they would get when they close the trades. They own Bitcoin not to speculate but to own it.
So we have seen some guys go in at 5,000 and close only at 15,000. A lot of the Clients don’t seem to be closing their profitable trades any time soon which is really strange because they log in to their trading accounts every day and see the open profits but they somehow seem to have psychologically distanced themselves from these profits.
Most of the Clients who trade Bitcoin trade only Bitcoin and don’t touch any other trading instrument. Most of the Bitcoin traders are new Clients – we didn’t have them a few months ago. So clearly, they came to us only to trade Bitcoin.
The challenging issue we have faced with Bitcoin is to actually find a decent venue where to clear the trades of our Clients. We expected that when Bitcoin futures will be launched on CBOT and CME then the situation would improve but we can admit that the market is still really thin. The issue is also that no major LP including CBOT/CME do not provide the services over the weekend which means that both Clients and brokers face risks with potential gaps on Sunday night.
Some of the larger liquidity providers in the FX space have still not activated Bitcoin trading while others have recently left the space or are thinking to do so. As a result, we have seen lately massive interests from FX brokers to get the Bitcoin liquidity from Tickmill Prime.
We have cautiously provided the liquidity to our long-term institutional FX Clients like brokers and some hedge funds who have started to experiment with cryptos.
Somewhat illustrative about the issues around Bitcoin and its implications for institutional business for banks and brokers is what Cameron Winklevoss said just recently: “We’ve been working really hard to give Jamie Dimon an opportunity to short Bitcoin… anybody who says that you know, it’s a fraud or a bubble, you can go now put your money where your mouth is, and bet against it”.
Now considering that Bitcoin is still going up then it probably means that Jamie at JP Morgan is still figuring out how to short it. In the meantime, we see at Tickmill that Bitcoin has already become one of the top 10 most traded instruments and there are no signs in sight that would convince us that the interest towards Bitcoin would dissipate any time soon.
We will be continuing to monitor the situation. In the meantime, the only advice anybody can give about Bitcoin these days is that be careful and manage your risks