Interesting observations. I have been wondering about this a lot. If I go long 1000$ Bitcoin they have to take the other side. Sure their capital is basically unlimited, but they can't allow significant positions. If 1000 people go long BTCUSD with 1000$ , they have 1 M$ in net exposure short BTCUSD. Imagine that during the last 8 weeks with the price going from 20$ to 200$ and you have a serious problem. Which is why an exchange traded forward has practically no couterparty risk, where as CFD expose serious risk in terms of execution. Because the CFD broker is your direct couterparty, which means they will always rip you off. If they don't have hedging capabilities of their own, that invites trouble. But at least they have a decent backend. I'm not surprised at all that 1broker had to stop trading BTC.
This is the problem with CFDs, gold exchange, options...
It's almost impossible to lay off risk...
In a market where 70% are "hoarding" and has soared 1000%.
In a rational market...
A lot of people would want to short CFD or exchange for gold to lock in profits...
In which case the counter-party gets stuck with a lot of very risky BTC.
In an irrational market everyone wants to go long...
In which case the counter-party is short a lot of very risky BTC.
Basically, you cannot be a naked counter-party...
It doesn't matter how much capital you have...
Only exchanges that MATCH counter-parties can function in this space.
