Crypto derivatives boom during crypto winter — Q&A with Eightcap

This year saw the crypto market rocked by numerous crises while the bearish climate was a constant presence. Considering this, many traders have lost confidence in traditional CEX trading and are looking to diversify their strategies.

Turning to alternative trading patterns and products is a way to minimize risk and reduce losses. Cointelegraph’s interview with Eightcap contains more about derivatives trading in the crypto space.

Q: FTX has become one of the biggest crypto disasters lately. What could have been done to avoid that?

The collapse of FTX has taught investors and crypto providers major lessons about security, transparency and trust. FTX was one of the largest crypto exchanges in the world. It is evident they lacked a number of controls across the board, but one thing is certain: The exchange should never have used its customer funds to pay for its own expenses, debts and loans to subsidiary companies (in this case Alameda Research). Unfortunately, in the wake of FTX’s collapse, there is now a considerable amount of distrust in the crypto space, not only from investors but also from government bodies who were once accepting of the benefits of digital currencies.

Q: How can investors approach the market differently in order to make more secure investments?

Understandably, investor trust has taken a hit after the collapse of a significantly prominent and renowned crypto exchange. Due diligence is needed going forward when opening accounts with exchanges and brokers alike. One of the major considerations centers around regulation. It is crucial for investors and traders to research the regulation and licensing of their providers to understand what regulatory body they are licensed under.

Eightcap is regulated in multiple jurisdictions, allowing us to offer derivatives trading to over 130 countries. Investors and traders need to consider the transparency and handling of client funds when choosing a broker or exchange. At Eightcap, we ensure clients’ funds are segregated and held in tier-1 bank accounts, providing our clients with the peace of mind that their money is secure. This is stated in our product disclosure available to all clients.

Q: What are possible ways to boost understanding and knowledge across the crypto space to make it easier for investors to take advantage of complex financial tools?

Knowledge of the crypto landscape is fundamental for beginner traders. Also, the learning and adaptation of tools that can enhance your trading strategy are important. At Eightcap, education is at the core of what we do and the product range we offer.

We encourage all our clients to use the extensive range of educational resources readily available with their trading accounts. We have started a new initiative called TradeZone, where we invite a number of expert guest analysts to provide consistent market insights through written commentary and also weekly webinars.

Q: How can derivatives help reduce the level of risk across a crypto investor’s portfolio?

Managing risk is a crucial aspect of any strategy, and traders should ensure they understand what trading with leverage means. Essentially, you are trading with margin, which means that you’re exposed to price swings, so both profit and losses can be magnified.

Some methods we encourage our clients to consider when trying to reduce portfolio risk are strategies such as working out the profit and loss ratio for each trade. We also want to highlight the importance of using a margin calculator to identify how much capital is at stake if the markets were to move against your position. Hedging is another strategy that we have seen a percentage of our clients adopt. This can minimize risk, as you are taking the opposite position on your open trade.

Q: What does the future of crypto derivatives look like?

With a continued crypto winter into 2023, we can see the adoption of crypto derivatives trading increasing across the industry as investors attempt to take advantage of market volatility. We expect to see an increase in spot crypto traders moving to derivatives due to strong regulation and low trading fees and spreads. At Eightcap, we have some of the lowest fees for traders to enter the market and competitive spreads across all instruments, especially on some of the larger coins with solid liquidity.

Q: How does Eightcap ensure investors’ security when trading on the platform?

Eightcap prioritizes stability and security of our platform when clients trade derivatives. To ensure this, we have teamed up with Amazon Web Services and CrowdStrike, a leading cybersecurity company in the United States, to safeguard our infrastructure and customer data.

We are regulated to issue crypto derivatives trading (the United Kingdom being the exception). Therefore, we ensure that clients’ funds are segregated and kept at tier-1 banks. Ultimately, we guarantee that we adhere to stringent regulatory and security requirements for our retail traders.

Q: What are your plans for Eightcap in the near future?

There is a lot in the works for 2023. We have a new B2B solution that we have launched — it specifically targets consumer-facing companies. By offering our products to their client base, they can extend their current and new client lifecycle and gain an additional revenue stream. We also have some upcoming product launches geared toward enhancing our clients’ trading experience.