Where to Get Crypto CFD Liquidity as a Business in 2024

The crypto trading practice has come a long way from a simple exchange of assets, purchases or cash-outs. The recent maturation of the industry has paved the way for numerous advanced trading techniques that lower the capital requirements but raise the requirement for professionalism. To earn substantial profits in the crypto trading field, even retail traders have to become familiar with leveraged trading options and maximise their buying power on the market. 

Retail traders in 2024 have started to adjust their strategies and pursue leverage to maximise profits or hedge risks. The demand for leveraged trading, specifically CFDs, has never been higher in the crypto field. 

To capitalise on this surging market momentum, brokerages can implement CFD trading tools and options within their platforms. However, setting up this advanced investment mechanism requires deep liquidity channels. Today, we’ll discuss why liquidity is essential for CFD brokers and where to get the best liquidity provider for your CFD trading platform.

Contracts for Difference, or CFDs for short, are derivative agreements between an individual investor and their respective broker. They represent a subset of derivative contracts mostly devoid of ownership and have specific timeframes instead of instant execution. CFD contracts are mostly traded over the counter, meaning no central entities are involved in regulating or monitoring the validity of agreements. Due to the lack of transparency and monitoring, it is crucial to choose a crypto CFD broker that is trustworthy and reliable. 

CFDs have become popular for various reasons, including buying power, leverage opportunities, risk mitigation, and flexibility. Buying power is an essential concept in trading, allowing market participants to trade beyond their monetary capabilities. Suppose you only have a $10,000 budget to place buy and sell orders. 

The leverage of CFDs allows you to increase your buying power several times, enhancing your potential profits. As a result, CFDs have managed to accumulate quite a following in the crypto niche. But how are they precisely different from crypto spot trading? Let’s explore. 

The most significant differences between CFDs and spot solutions are the ownership considerations, timetables and flexibility. While spot trading is an excellent solution for direct investment, it is considerably limiting compared to more advanced solutions. In contrast, CFDs can accommodate more complex trading strategies. 

Unlike spot options, CFDs do not require ownership of underlying assets in any capacity. Instead, the investor simply selects the crypto asset class and the desired liquidity. After that, the respective broker acts as a market maker, providing an appropriate price and margin requirement for the chosen position. Finally, the contract is initiated with a pre-determined deadline that will decide the finalisation of the contract. 

On the other hand, spot trading doesn’t include any of the following features. Instead, spot trades are direct currency exchanges that happen on the spot, with complete ownership being transferred to the coin buyer. Naturally, spot trading transfers all relevant obligations to the purchasing parties and doesn’t involve any leverage. In short, what you see is what you get with spot trading. 

Another strength of CFD trading platforms is the ability to open long and short positions, which allows investors to develop more complex strategies without investing massive amounts of money in crypto assets. Long positions are CFD agreements with payouts in case the asset appreciates. 

Conversely, short positions are profitable if the asset devalues in price. Both contract types can be bought and sold within the broker’s platform and have numerous strategy implications. Unsurprisingly, spot trading doesn’t have any viable equivalents to this option.

Risk mitigation is often required in crypto to secure the investment portfolio and ensure long-term profitability in trading decisions. Unfortunately, spot trading has no mechanisms to safeguard the trader's assets against market volatility and exposure. 

Contrarily, risk hedging is not just possible with CFDs but quite straightforward. Suppose a trader purchases Ethereum coins for a long-term bullish investment strategy, probably for several years. However, the short-term projections for Ethereum are pointing toward a decline in the price. To mitigate the losses in the short span, an investor can purchase a short option for the same or even bigger volume of Ethereum. 

As a result, investors can recoup their losses from holding Ethereum in the short term without giving up their long-term strategies. Conversely, it is possible to open two positions at once, one long and one short and minimise the risks of your primary strategy by employing a risk-hedging position on the other side. 

Robust liquidity is a pillar of successful cryptocurrency CFD trading. Liquidity is a stabilising agent in the crypto field, filling the gaps of demand and supply wherever and whenever necessary. It facilitates seamless order execution and minimises bid-ask spreads, enhancing client experience and maximising trading opportunities.  

Order fulfilment can become sluggish in a scenario with insufficient liquidity pools, execution delays may occur, and spreads may widen. This disrupts trading efficiency and hinders your clients' ability to capitalise on market movements. As a CFD broker, the reduced service quality will cause your users to switch to a different provider. 

By prioritising deep liquidity, you can cultivate a strong environment for your CFD business. This translates to faster order execution, tighter spreads, and increased client confidence in your platform's reliability. As a result, your CFD offerings will become much more popular locally and internationally, allowing your clients to open positions in the time window they desire and ensuring competitive pricing. 

As analysed, crypto liquidity is arguably the most important factor in running an optimised CFD brokerage. With sufficient and reliable liquidity channels, you will have a real shot at becoming a top CFD provider within your region, delivering faultless service and timely execution. However, due to the OTC nature of CFD contracts, finding the derivatives liquidity within the market might prove challenging. 

While other options are available, the most reliable way to acquire CFD liquidity is through dedicated financial institutions that specialise in this field. This way, you will receive ample assurance against potential counterparty risks.

B2Prime has established itself as one of the leading multi-asset liquidity providers in the CFD landscape. B2Prime offers diverse asset classes, including the crypto sector and the forex market. B2Prime can supply multi-asset liquidity at once, allowing CFD brokers to branch out in different markets without complicating their workflow. As a result, brokers can cater to a broader group of retail investors. 

B2Prime holds Cyprus, Mauritius, and Seychelles licenses, allowing it to operate within a secure framework. Considering that the CFD niche is far from the most transparent and regulated sector, B2Prime’s strict adherence to international standards will help you avoid counterparty risks. 

With 93 unique trading pairs and margin requirements as low as 10%, B2Prime offers diverse and attractive CFD options for brokers to implement. Combined with deep liquidity, B2Prime’s mixture of quality, transparency and diversity allows brokers to provide the best possible version of a crypto CFD solution. 

Leverate is another trusted institution that provides multi-asset liquidity solutions for Forex, commodities, indices, and shares. It connects brokers to a network of major liquidity providers, ensuring foolproof liquidity that elevates the trading precision and decreases spread margins. 

Leverate focuses on decreasing the latency of order executions and improving order fulfilment efficiency. Moreover, Leverate’s cutting-edge tech stack allows brokers to customise their CFD solutions according to the needs of their end users. 

Finally, Leverate’s broad offering of stock options is a unique advantage, allowing CFD brokers specialising in crypto and forex to enter the largest trading market with the same liquidity channels. 

As a solid third choice, GBE Prime shares many benefits with B2Prime and Leverate. GBE Prime provides deep liquidity through reliable channels, employs state-of-the-art data centres to reduce latency, and strictly follows CySec's guidelines to keep its practices transparent. 

GBE’s robust liquidity package and an optimal distribution of data centres equip CFD brokers with all the essential tools to succeed in the modern trading sector. Moreover, over several decades, GBE’s established reputation underscores its ability to provide consistent and effective liquidity options across different asset classes. 

While dedicated institutional agencies are by far the most optimal option for developing the best crypto CFD broker, there are alternatives on the market. Exploring these options can be helpful if you can’t connect with specialised providers like B2Prime for various reasons. In these circumstances, you can pursue the following options. 

Cryptocurrency exchange platforms often supply liquidity to brokers and smaller exchanges so that they can use their liquidity pools more efficiently. Major exchanges often provide great liquidity deals to CFD brokers, handling the liquidity channels with automated market makers. However, obtaining liquidity from crypto exchanges might be too expensive and cumbersome for CFD purposes. 

In order to accommodate CFD traders as brokers, you require increased liquidity. While you don’t transfer the fund ownership to users, you must have sufficient assets actually to finalise the transaction. As a result, CFD brokers require more liquidity compared to an average broker that provides spot trading services. Acquiring such amounts of liquidity from crypto exchanges can be daunting, requiring a significant initial fee and bloated expenses in the long term.

However, partnering with reputable exchanges can solve the problem of compliance and regulatory considerations, making the exchange order books the second-best CFD provider in terms of liquidity. However, your deal might still be unreasonably pricey, and the lack of dedicated liquidity flow controls might cause some problems with the consistency of provision. 

P2P networks should be considered the last reserve for CFD brokers in liquidity matters. While P2P networks can accommodate decentralised transactions effectively, their limited size, lack of decentralised oversight and processing delays will become a problem in the long term. Firstly, P2P networks cannot access a wide range of assets. So, forex brokers who wish to acquire CFD tools will not get anything from P2Ps. Additionally, P2P networks don’t have a massive volume of liquidity pools, a considerable weakness for CFD providers. 

Moreover, P2P networks are not monitored by any central entity, creating the dangers of poorly optimised liquidity distribution. Since only AMMs are responsible for allocating the liquidity, the already limited supply of P2P fund pools might become a serious problem for brokerages. 

Finally, P2P networks are prone to processing delays. As a result, P2P liquidity services might negatively affect the quality of your CFD services. All in all, P2P networks should only be considered the last resort for CFD brokers to acquire liquidity, as they are the most unreliable and limited providers on financial markets. 

If you are ambitious to become the best crypto CFD broker in the field, you must consider the liquidity considerations. Ample liquidity will lead your brokerage to success, facilitating speedy deal execution, reducing the spreads and allowing you to increase your CFD audience. 

However, the OTC nature of CFD instruments creates problems within this niche, emphasising the importance of reliable and consistent CFD liquidity providers. It is advisable that you seek partnerships with dedicated prime of prime institutions like B2Prime to maximise your service quality and ensure the long-term stability of your CFD offerings.