FXCM’s Bitcoin Spreads Rise Slightly Amid Price VolatilityJanuary 27, 2021
In December, FXCM Group charged its traders on average 33.9 pips on the BTC/USD pairing (the ratio of Bitcoin to the US dollar), up from 27.4 pips it last reported in November 2020. The difference between the price at which FXCM traders were willing to buy Bitcoin and the price for which they are willing to sell it, peaked at 41.3 pips last month.
The bid-ask spread on crypto trading has also skyrocketed across digital asset exchanges as it usually tends to widen during periods of increased volatility. The world’s oldest cryptocurrency had a wild start to 2021. After quadrupling in 2020, bitcoin’s price briefly topped a record $41,000 per coin, but then dropped sharply to below $30,000.
This has led to much wider spreads than usual while margin requirements increased on trading platforms run by exchanges and retail brokers.
For the Ethereum and Litecoin instruments, FXCM charged on average 1.0 and 0.3 pips, respectively, also a touch higher from the months prior. These low rates, however, might be a healthy sign that digital-asset markets are maturing.
The spread, which typically narrows as a broker’s order book depth increases, is in a sense the transaction cost of making a trade. It essentially represents liquidity – the degree to which an asset can be quickly bought or sold at stable prices.
FXCM also published its price improvements/slippage statics for December 2020, which showed the following highlights.
- 65.2% of orders executed at price
- 22.7% of orders executed with positive slippage
- 12.1% of orders executed with negative slippage
The company also reported on its execution speed, which is measured from the time a customer’s order is received to the time of filling. The average order execution time was 29 milliseconds in December, compared to 28 in October. Although an important factor in determining where orders are routed, it is only one factor. Some brokers may provide a good speed of execution but fail to provide price improvement or liquidity.
According to figures stated in the report, the average spreads on the EUR/USD, GBP/USD and AUD/USD pairs were 0.2, 0.6, and 0.3 pips respectively.
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