The growth in gambling on the yo-yoing value of cryptocurrencies using risky derivatives products has helped boost the profits of the financial spread betting firm Plus500, reports The Guardian.
The London-listed company’s shares rose 130 per cent in value last year and gained nearly another 25 per cent on Wednesday after it said there had been increased interest throughout 2017 in cryptocurrencies such as bitcoin.
Plus500 said annual profits would be ahead of market expectations after record revenues in the final three months of the year, when bitcoin’s value surged from about $4,000 (£2,960) to more than $19,000 before falling back below $14,000 in late December. The company added about 246,000 customers last year, more than double the number in 2016.
Plus500 and other financial spread betting firms offer derivatives products known as contracts for difference (CFDs), which allow investors to gamble on the price of an asset without ever owning it.
The Financial Conduct Authority has found 82 per cent of customers lose money on CFDs, with average losses of £2,200 per person. Experts warned bitcoin CFDs could result in steeper losses than owning the actual cryptocurrency, should the market crash in the coming months – as forecast by some economists.
“Plus500 has experienced strong volumes in cryptocurrency CFDs and has seen increased interest throughout the year in a category which we introduced in 2013,” the company said in a trading update.