Plus500, an online exchange specializing in contracts for difference (CFDs), had blockbuster top- and bottom-line performance in its first quarter amid heightened demand for cryptocurrency trading, though it warned that market conditions have since returned to more “normal levels.”
The London-listed Plus500, whose headquarters are located in Israel, benefitted from the volatility in cryptocurrency prices, as evidenced by revenue that skyrocketed by more than 280% in Q1 to $297.3 million. Q1 EBITDA rose 400%-plus to $237.3 million, fueled by feverish trading in derivative cryptocurrency trading.
But the company softened its guidance for the balance of the year, cautioning that the robust performance isn’t likely to persist amid a normalization of market conditions and a couple of external hurdles.
First a look at the positive momentum.
“The very strong start to the year, which was referred to in our preliminary announcement of 14 February 2018, resulted from a period of relatively volatile markets and high levels of interest in the Company’s cryptocurrency CFDs offering, and in turn encouraged high levels of New Customer sign-ups and record trading in Q1 2018,” the company said in a statement.
Indeed, active customers who completed a minimum of one trade in the quarter climbed approximately 200% higher versus year-ago levels to more than 218,000. Meanwhile, Plus500 attracted nearly 73,000 new investors to its trading platform in 2018, reflecting more than a 200% increase on a sequential basis. Margins were strong as customers spent more money while the cost of acquisition fell.
But as the Financial Times pointed out, now that social media sites won’t be contributing to cryptocurrency advertising, results may be less rosy next quarter.
“We have since seen market conditions return to more normal levels in the last two months. As such we do not expect such an exceptional performance to be repeated in the remainder of the year,” according to Plus500.
The guidance is a reflection of several forces working against the cryptocurrency market, not the least of which involved moves by social media site Twitter as well as Google to ban cryptocurrency advertising on their sites, which Plus500 suggested could interfere with its ability to attract more traders.
Plus500 and its rivals are also preparing for new regulation that’s coming down the pike, which the company anticipates “will enhance the CFD trading landscape and create a more level playing field.” The new rules are expected to attach stricter limitations on margin trading, and Plus500 is looking to group its “experienced traders” in the “professional trader” category, where they can “trade at higher leverage,” according to the company’s trading update.
Plus500 supports trading in cryptocurrency CFDs, or contracts for difference. They let traders speculate on an upward or downward price move in an investment without having to actually own the underlying digital currency. CFDs are on the rise in the cryptocurrency market amid the opportunity to trade them at more exchanges, including eToro, which recently expanded to also give investors the opportunity to own underlying cryptocurrency assets.
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