Trading company Plus500's shares jump 25% thanks to 'strong volumes in cryptocurrency'

  • Plus500 said revenues and profits will be “ahead of market expectations” thanks to a record end to the year.
  • The trading platform said the strong popularity of cryptocurrency CFDs is behind its performance.
  • The UK regulator has expressed concern about people trading cryptocurrency CFDs, warning that customers are at risk of “significant losses.”

LONDON – Online trading platform Plus500 raised its profit forecasts for the year on Wednesday, saying it has benefitted from the booming popularity of cryptocurrencies like bitcoin.

Plus500, which sponsors football team Atletico Madrid, lets retail clients trade contracts for difference (CFD), which are financial instruments that effectively allow people to bet on the price movement of assets without actually owning them.

The idea is that people can gain exposure to assets without incurring the higher fees associated with buying them. But the products are also extremely high risk and the entire industry has come under increasing regulatory scrutiny across Europe over the last year.

Last year a study from Britain’s regulator, the Financial Conduct Authority found that 82% of people who use the products lose money, suggesting it is more akin to gambling than investing.

Israeli-headquartered Plus500 has offered cryptocurrency CFDs since 2013 but said in a trading statement on Wednesday that it has “experienced strong volumes in crypto currency CFDs and has seen increased interest throughout the year.”

Cryptocurrencies exploded in popularity in 2017 thanks in part to the rapid rise of bitcoin against the dollar, which raised the profile of the sector. Bitcoin rose over 1,500% against the dollar last year, while other smaller digital coins enjoyed similar gains. Plus500 offers CFDs for bitcoin, ethereum, ripple, iota, litecoin, and bitcoin cash.

Plus500, which is listed in London, said the surging sector helped it achieve record revenues in the final quarter of 2017. New customer sign-ups over the year more than doubled to 246,000, another record. The board said both revenues and profits for the year will be “ahead of market expectations.”

CEO Asaf Elimelech said in a statement: “Momentum in the business has continued to be strong with increased interest in our crypto currency CFD offering and record new and active customer numbers, demonstrating our ability to serve our customers’ trading needs through product innovation and technology leadership.”

Plus500’s share price jumped over 25% at the open in London on the news:

While crypto CFDs are proving popular for Plus500, Britain’s financial regulator has expressed concern about the appropriateness of these instruments in the cryptocurrency market.

People face potentially unlimited losses with CFDs if they are on the wrong side of a bet on a price movement and cryptocurrencies are notoriously volatile. Bitcoin moved by over 10% on Tuesday alone, for example.

To make matters worse, most CFD providers let people trade on leverage, meaning they lend people money to make bets with. This means traders can end up losing far more than they deposited.

Plus500 offers leverage of 10:1 on its cryptocurrency CFDs, meaning a person who deposits £100 can trade with £1,000.

The UK’s Financial Conduct Authority warned in November that cryptocurrency CFDs “are extremely high-risk, speculative products” that “place you at risk of suffering significant losses.” The regulator said it found some firms offering leverage of up to 50:1.

Plus500 said in Wednesday’s trading update that “remains focused on risk management which includes setting appropriate risk and leverage for all the instruments traded on its platform.”

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