Certainly, it shouldn’t be a surprise if you heard that people are making money through cryptocurrency trading. What will, however, make you start thinking fast and hard is the fact that FX brokers are now making astronomical profits because of crypto trading too. Well, consider this, Plus500 Ltd which is one of the FCA regulated CFDs brokers has posted revenues of $297.3 million for Q1-2018. This is more than double what the company reported for Q4-2017. The true gain for Q1-2018 is reflected by the EBITDA figure of $237.3 million.
For the past several quarters, Plus500 Ltd has been reporting record revenues of $100+ million. According to Plus500, the increase in revenues came from the significant rise in both new and active customers. These two customer segments are driven by cryptocurrency trading, the company added. In the preliminary results of the company recorded in February this year, the company recorded significant customer growth in the fourth quarter of 2017 which continued in early 2018.
It is evident that stock market investors expected a good quarter from Plus500. The shares of the company climbed by 40% in late April to touch an all-time high of £14 from a reasonable price of £10 in late March.
Swissquote broker
Swissquote, which is a leading Forex broker in Switzerland and which was one of the pioneers in crypto space reported strong figures in 2017. According to the broker, the bulk of its profits came from cryptocurrency trading. While releasing the results in early January 2018, the company said that it expected to outperform its own forecasts for the full-year by CHF 8 million. The company said that revenue for 2017 was estimated to reach CHF 186 million. This would give a profit of CHF 45 million in pre-tax profits.
Will the trend continue?
According to Plus500, ARPU (average revenue per user) gained from the increased number of customers who were looking forward to trade crypto as well as from the volatile markets. The decrease in AUAC (average new user acquisition cost) is seen to reflect the interest in cryptocurrencies by consumers. However, this interest has subsided since February. Some policies affecting marketing activity through certain online channels have been revised and this might mean a reduction in the number of new customers. Plus500 expects that both of these measures will cause a return to AUAC and sign-ups to relatively normal levels.
According to Plus500, the high profits came about because of the relatively volatile markets and high levels of interest in the company’s cryptocurrency CFDs offering. This new interest meant that new customer sign-ups increased considerably and this led to record trading in Q1-2018. The company noted that ‘more normal levels’ of trading have since returned in the past two months. Subsequently, this means that Plus500 does not expect the exceptional performance to be repeated in the foreseeable future.
What impact do the new cryptocurrency regulations have?
Plus500 conceded that while the profits were exceptionally good, it was still to evaluate the full impact of ESMA’s proposed changes. The company said that it expects the rate at which customers opt to be reclassified as professional investors to impact its performance. The board of the company will continue evaluating the potential impact of these changes on the performance of the company in the years to come and especially when all the changes have been affected. The board is of the opinion that Plus500’s business model which is highly flexible and low-cost base provides confidence in the company’s future prospects. The board also believes that the company’s seven licenses in different jurisdictions, five of which are outside Europe, will also play a significant role in enhancing the company’s future prospects.
In February, Switzerland’s market watchdog FINMA released new crypto-trading regulations. The regulations were specifically designed to target ICOs. This may mean the exponentially high revenues and profits reported by FX brokers in Switzerland were only for the short-term. But the year is still young.
