The trading of cryptocurrencies comes with an array of difficulties and the process of hedging proves to be an even more formidable challenge. In the past few months, despite a heightened flurry of discussion about institutional investors entering the crypto space, not much has been happening on the ground. Wondering about the slow take-up pace of adoption? Here are some reasons.
Fragmented Liquidity: Liquidity is fragmented across thousands of crypto exchanges who each have their own trading systems with varying levels of incompatibility. As a professional trader, the requirement to manage multiple accounts and maintain respective balances across a number of exchanges simultaneously can make crypto adoption extremely cumbersome and inefficient.
Primitive Technology: In order to get the best trade execution possible within the multiplicity of exchanges, professional traders use APIs to send orders to various exchanges. These APIs are typically not as technologically advanced. This makes it difficult for external developers to build applications on it due to incompatibility with industry standards like the Financial Information Exchange (FIX) API.
Limited Hedging tools: The market for crypto derivatives is still in a nascent stage, with few cost-effective hedging options available for traders. The current options are limited, and cannot be used to hedge crypto exposure effectively. For example, Futures contracts are available for BTC only with no options for altcoins. Furthermore, shorting a cryptocurrency that you do not own can be very difficult as there are no mainstream mechanisms for the lending and borrowing of cryptocurrencies.
Restricted Fiat Support: The majority of exchanges might face numerous hurdles when it comes to obtaining a bank account in most countries. Fiat on-ramp where available is expensive, resulting in high cost charges for deposits and withdrawals by exchanges. Additionally, fiat deposits and withdrawals can take up to several days for processing thus limiting the adoption readiness for crypto.
Unregulated Environment: Most crypto exchanges are unregulated and function without any regulatory oversight. Hence, investors do not enjoy the same level of protection as opposed to when trading with regulated intermediaries. This has prevented the majority of institutions from participating in this space due to the reputation risk associated with dealing with unregulated entities.
The above-mentioned issues limit the range of strategies that institutions can undertake in the trading and hedging of cryptocurrencies. Coupled with the increased risk of dealing with cryptocurrencies, this has caused many institutions to face added deterrence with abated adoption rates.
Introducing Broctagon NEXUS
While trading cryptocurrencies may be challenging, it also provides immense opportunities for growth. Broctagon Fintech Group has taken these challenges head-on, launching a superior tool for gaining exposure to cryptocurrencies. Here is how Broctagon NEXUS, a revolutionary crypto liquidity aggregator, provides a timely solution to each of the above problems and encourage adoption.
Aggregated Liquidity: NEXUS has been built to aggregate the world’s crypto liquidity within a frictionless marketplace. Bringing together the industry’s biggest names with the highest trading volumes, it is connected to over 20 prime exchanges in an ever-expanding global network. Aggregating liquidity from prime crypto exchanges and seamlessly distributing it to a global network of brokers, Multilateral Trading Facilities (MTFs), and crypto exchanges with complete pre and post-trade transparency based on an agency-only Straight Through Processing (STP) model, NEXUS allows everyone to access the forex standard of deep, multilateral, ECN liquidity for the first time ever.
Advanced Technology: NEXUS has taken the primitive exchange APIs and converted them from web sockets into a protocol-agnostic universal FIX API adaptor, the gold standard in the Forex industry. This enables existing investors to easily connect and develop applications on NEXUS via full integration with the MT4/MT5 trading platforms — an industry standard for forex trading. It also allows algorithmic traders to create and execute various algo-based strategies.
Advanced Hedging Tools: NEXUS provides crypto Contracts-For-Differences (CFDs) on a number of popular crypto pairs. These standard industry products enable anyone to conveniently hedge their exposure to major cryptocurrencies, allowing users to go long or short with margin trading.
Extensive Fiat Support: Nexus provides CFDs for both Crypto to Fiat and Crypto to Crypto pairs against 18 major cryptocurrencies and fiat currencies including USD, EURO, GBP and JPY. This provides the flexibility to denominate your account either in Fiat or Crypto currencies.
Regulated Environment: Broctagon NEXUS (incorporated under the name Broctagon Prime Ltd with Registrar of Companies in Nicosia, HE360194) is an EU-regulated prime liquidity services provider driven by a culture of strict compliance and regulatory oversight. We are the first-in-class to operate under CySEC (license number 320/17) and MiFID licensing. By joining the NEXUS regulated ecosystem, you will never have to experience any of the uncertainties that plague existing crypto exchanges.
We strongly believe that crypto adoption will increase. Primed to become one of the major asset classes in the coming decades, the launch of NEXUS strives to play a significant role in making it easier for financial institutions to enter this market.
If you are a crypto fund or a traditional institution looking to provide crypto exposure to your clients or a large crypto trader or a crypto exchange looking expand your existing product portfolio, please get in touch to know how we can help you.
Disclaimer: This article has been written for educational purposes only and does not constitute financial advice. Please do your own research and obtain independent financial advice before making any investment decisions.
Risk Warning: Trading Cryptocurrency, CFDs and Forex entails a substantial risk of loss. Please read and ensure you fully understand our Risk Disclosure Policy.