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.
The Truth Behind the Slow Institutional Adoption of Crypto
Trading cryptocurrencies is not easy and hedging crypto is even more difficult. In the past few months, there has been a lot of talk about institutional investors entering the crypto space but not much has been happening on the ground. Ever wondered why the adoption has been slow. Here are some reasons.
Fragmented Liquidity: Liquidity is fragmented across thousands of crypto exchanges who have their own trading systems which are quite different from each other. As a professional trader, you need to open an account and maintain balances with a number of exchanges at the same time. This is cumbersome to manage and very inefficient.
Primitive Technology: Due to the multiplicity of exchanges and in order to get the best execution, professional traders use APIs to send orders to various exchanges. The APIs provided by most exchanges are very primitive and are not properly documented. This makes it difficult for outside developers to build applications on it. They are not compatible with industry standards like the FIX.
Limited Hedging tools: The market for crypto derivatives is currently very nascent with not many cost-effective hedging options available for traders. The currently available options are limited cannot be used to hedge exposure to crypto effectively. For eg Futures contract are currently available for BTC only and not for other liquid altcoins. Also shorting a cryptocurrency that you do not own is very difficult as practically there is no mechanism for lending and borrowing cryptocurrencies.
Limited Fiat Support: Majority of exchanges find it difficult to obtain a bank account in most countries. Fiat on-ramp where available is expensive and exchanges charge a high cost for deposit and withdrawal. Plus the fiat deposits and withdrawals can take several days to process.
Unregulated: Most crypto exchanges are unregulated and function without any oversight. Hence, investors do not have all protections which are available 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 intermediaries.
All these issues limit the range of strategies that institutions can use to trade and hedge cryptocurrencies. It has also increased the risk of dealing with cryptocurrencies which many institutions are not willing to take. This has caused the adoption of crypto by institutional investors to be slow.
Introducing Broctagon NEXUS
While trading cryptocurrencies is challenging it also provides a lot of opportunities for growth. Broctagon Fintech Group has taken these challenges head-on and has launched a superior tool for gaining exposure to cryptocurrencies. Here is how Broctagon NEXUS, a Crypto CFD solution solves each of the above problems.
Aggregated Liquidity: NEXUS has been built to aggregate the world’s crypto liquidity within a frictionless marketplace. NEXUS brings together the industry’s biggest names with the highest trading volumes. It is already connected to more than 20 prime exchanges in an ever-expanding global network. NEXUS aggregates liquidity from prime crypto exchanges and seamlessly distributes it to a global network of brokers, Multilateral Trading Facilities, and crypto exchanges with complete pre and post-trade transparency based on an agency-only Straight Through Processing model. It 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 can enable existing investors to easily connect and develop applications on NEXUS and tap into its deep liquidity pool. It is like a universal electrical socket which can work in any country. NEXUS is integrated with the MT4/MT5 trading platform which is an industry standard for the Forex. It also allows algorithmic traders to easily create and execute algo strategies.
Advanced Hedging Tools: NEXUS provides crypto Contracts For Difference (CFDs) on a number of popular crypto pairs. These standard industry products enable anyone to conveniently hedge their exposure to major cryptocurrencies. You can easily go long, short and trade on margin.
Extensive Fiat Support: Nexus provides CFDs for both Crypto to Fiat and Crypto to Crypto pairs against 18 major cryptocurrencies and fiat currencies like USD, EURO, GBP and JPY. It provides you with the flexibility to denominate your account either in Fiat or Crypto.
Regulated: 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 our 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 the existing crypto exchanges.
We believe that cryptocurrencies are here to stay and will become one of the major asset classes in the coming decades. By launching NEXUS we have played a small part in making it easier for institutions to enter this market and increase its adoption.
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 widen the products for its customers, please get in touch to know how we can help you.
Have questions? Please write to me on nirav.gala@broctagon.com
Risk Warning: Trading Cryptocurrency, CFDs and Forex entails a substantial risk of loss. Please read and ensure you fully understand our Risk Disclosure Policy.
