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A belated merry Christmas to all of you – I hope you had a great day!
There are a couple of points before beginning the final post of 2024.
Firstly, we have a new (video) interview out with Konstantin Shulga. Konstantin is the founder of Finery Markets, a crypto ECN. We actually filmed this in late October but given the boom we saw in BTC after that, it’s probably a good thing we only put it out last week. You can watch the interview here.
Otherwise I’d like to say thanks to all of you for continuing to support TradeInformer, whether that’s sending tips, info, coming for a beer once in a while, leaving comments, or just reading this email every Monday. Happy new year everyone and see you all in 2025!
Crypto comes for CFDs
It feels like a long time ago but during the first year of TradeInformer, way back in the distant days of 2022, we looked a lot at companies in the cryptocurrency space.
At that point in time, it looked like FTX and Binance could end up eating into the CFD industry. What with all the fraud, money laundering, and prison time, that didn’t end up happening.
I also thought crypto would get wrecked by rates going up but that didn’t happen either. Whether or not that proves its utility is another question but the reality is crypto keeps chugging along.
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As we head into 2025, something that feels surreal to me, I figured we should look at crypto again for our final hurrah of this year. There are a couple of reasons for that.
One is that if you look at app downloads in pretty much any country in the world, you will find crypto apps near to the top of the finance category.
It is rare for any CFD-focused company, for example, to have more downloads than Binance, Bybit, or Crypto.com. That includes MetaTrader 4 or 5, which you’d assume would represent the combined downloads of lots of brokers, as opposed to one crypto broker.
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To give a quick example of that, I just went and checked Egypt’s Android app downloads in the Finance category. Binance is in 7th spot. The next player from our space is Olymp Trade, who are in 18th spot. In China, Binance is in 1st spot, followed by OKX, with Bybit in 8th.
The other thing that I found striking recently was Crypto.com’s roadmap for next year. As you can see in the below image, they want to launch stock trading, exchange-traded derivatives, and CFDs in 2025.
They are not alone. Kraken has said in the past that it will add stocks in the US and UK.
Bybit, which is more popular in emerging markets, already has a Mauritius license and offers trading in FX / CFDs via MetaTrader. Its main crypto spot product also looks a lot like a rolling spot FX contract. The company’s founder also worked at XM for about seven years before moving into crypto.
And even though they’ve fallen off the map since CZ went to jail, Binance still has some licenses to offer this same mix of products.
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And so to put those two points in simple terms that your post-Christmas hangover brain can understand…
- Crypto companies are good at getting clients
- Crypto companies are adding CFDs and other products
The latter point is consistent with what we see in the CFD space, with firms also moving into being ‘one stop shop’ type firms for all trading and investment products.
Why could crypto firms do better?
One is that first point – they are good at client acquisition.
You could argue that they are tapping into a wider audience because of crypto’s mass appeal, which makes that easier. They were also operating in unregulated markets for a long time, something that makes client onboarding much smoother. Keep in mind that for a long time you could open a Binance account with just your email.
But even accounting for that, they are good at marketing. Earlier this year we looked at how crypto and other broker apps blew up after the post-Trump boom in Bitcoin. Crypto.com, for example, clearly has a relatively sophisticated app marketing team and you can see that in how they rose up the app download rankings in November and December.
That activity – given the costs associated with it – reflects something else that could work in crypto firms’ favour, namely that they have deep pockets. Working out exactly how much cash they have is difficult, given not many of them are public. The exception to that is Coinbase, which has ~$7.7bn in cash and cash equivalents. Otherwise we can only get ‘glimpses’ of what sorts of sums they’re working with.
Crypto.com, as one example, has a $500m VC fund. Assuming that’s not just BS used for PR purposes, you’d assume that means they have lots more cash lying around. Similarly, Binance was able to pay a $4.3bn fine to the US government and keep going. How many CFD firms could do that?
All of this suggests that crypto firms have cash in the bank to outspend other firms on marketing. Incidentally, I believe Robinhood will end up being the same in the UK and Singapore over the next couple of years.
Things are not all doom and gloom though.
Crypto firms are, unsurprisingly, heavily associated with crypto trading. FX and CFDs remain their own niche. Although they may pick up clients from cross selling, it’s hard to see a company like Bybit or Kraken pivoting so that they focus heavily on trading.
Related to that, I don’t really see any of these companies hiring people that could build a good product in this area. Bybit’s FX/CFD product feels very much like a small bolt on to their main product, rather than something they’re putting a lot of effort into or pushing massively.
Crypto.com has hired some people from IG Group but you don’t get the impression it’s something they’re putting a huge amount of effort into either. The same is true for companies like Kraken and Binance.
Consequently it feels like the crypto firms will end up a bit like Revolut with CFDs over the next 18 months. They have it as a product but it’s not something they focus massively on.
In other words? There is hope yet. Happy new year everybody!