Plus500, which provides derivatives called CFDs (contracts for difference), reported a 228% increase in new clients in the first quarter of the year. The first quarter sales of the company also increased from $77.5 million last year to $297.3 million within the same period in the midst of volatile markets and cryptocurrency interest. Shares in Plus500 increased 15% on Tuesday. According to the company, they have seen market conditions go back to more normal levels in the last 2 months. They don’t expect such a great performance to be repeated for the rest of the year.
Contracts for difference allow investors to speculate on the price of currencies, stocks, cryptocurrencies and commodities without having to own them. CFDs have become extremely popular among retail investors even though it exposes them to considerable losses. ESMA (European Securities and Markets Authority) has enforced a veto on the sale of binary options and a limit to the leverage that individuals can take. Plus500 stated that they have yet to see the effect of the organization’s planned changes. According to them, their performance could be further affected by the rate at which clients choose to be considered as professional investors.
Shares in the company have significantly increased since Plus500 first sold shares to the masses in 2013. Plus500’s profits more than tripled amid high interest levels in products associated with digital currencies. Barclays plc, a British multinational investment bank, also indicated that it may start trading in similar products. According to Jes Staley, Barclays’ Chief Executive Officer, the firm is exploring ways to engage in the crypto market.
Although the crypto market sounds lucrative, finance firms are still cautious. CEOs of the largest finance companies in the world have to decide whether the $417 billion market for unfettered cryptocurrencies is a risk or a lucrative opportunity to the international financial system. Staley indicated that while Barclays may deal with some crypto trades for customers, they are also remaining cautious. He said that it is a real challenge for them. The market is innovative and they want to remain in the lead of technological improvement in finance, but cryptocurrency can be used for activities that they don’t want to be involved in. According to Staley, the company will look at some futures market requests related to cryptocurrencies. No trading desk would be created for the products.
Other banks have also issued a warning about the risk of cryptocurrencies and called for regulation of trading activities.