Leverage on Bitcoin raised to 20x as Bitcoin trading risk is perceived lower.
LeapRate Exclusive…. Very quietly, retail forex brokers have become more comfortable adding Bitcoin trading, while at the same time relaxing the conditions of trading for their customers. These changes are coming as Bitcoin volatility has subsided somewhat, and as traders become more mixed in their outlook for Bitcoin. Not everyone is just buying any more.
The easing of conditions comes mainly in the form of increased leverage allowed to traders. When first introduced, leverage was capped at 4:1 for Bitcoin trading when first introduced by Plus500, creeping its way up to 5:1 when AvaTrade launched Bitcoin trading. These brokers later upped Bitcoin leverage to 10:1, and now AvaTrade has led the move up to 20x.
We would note that these leverage levels are still well below those offered on more heavily traded currency pairs, in the 200x range at most major forex brokers.
The spread on Bitcoin trading remains much wider than for most other forex instruments, in the 1% range — versus just 0.01%-0.03% (or 1-3 pips) for major currency pairs. That will probably continue until more hedging and liquidity options arrive on the scene for brokers. At this point, Bitcoin brokers are b-booking all Bitcoin trades, with little if any ability to hedge client positions, should they get too one-sided.
We expect more forex and binary brokers to add Bitcoin trading capabilities in 2014.