IG Poised to Widen Market for Spread Bets on Bitcoin

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IG Group is set to extend its service allowing customers to bet on the wildly fluctuating price of Bitcoin, the virtual currency that has captivated the interest of speculators and divided spread betting operators.

The popularity of Bitcoin bets on IG Group's platform, which were only introduced at the beginning of April, follows the rapid rise in the price of a Bitcoin to $266 earlier this month and subsequent crash just days later to $54.

(Read More: Big Next Step for Bitcoin: Meeting the Regulators)

The biggest spread-betting operator in the UK by sales said that betting on Bitcoin had turned into "one of the more popular specialist markets" IG has ever offered, attracting hundreds of trades each week.

David Jones, IG's chief market strategist, said the volatility of Bitcoin made it attractive to clients. But he added that it was potentially more risky for IG as it takes clients' trades on their own accounts rather than laying them off.

"We're very much acting like a market maker," said Mr Jones. "This is very much us taking a risk on our book."

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The spread-betting operator has been offering so-called binary bets on Bitcoin's price, allowing clients to take a view on whether Bitcoin would be above or below certain prices by the end of May. This offer is likely to be extended.

While IG heralds the success of its new market, peers are yet to follow suit and have questioned the feasibility of betting on a currency that was spawned by an unknown computer scientist – or group of computer scientists – four years ago.

(Read More: Bitcoin Continues Plunge After 'Powerful' Attacks)

Joshua Raymond, chief market strategist at City Index, said: "The fact that Bitcoin is based on virtual value makes it fundamentally a challenge to ascertain true value, and therefore trade with any real sense of confidence."

City Index does not offer any Bitcoin markets, but said that if its clients were to demand it, then that could spur plans to introduce such a speciality market. CMC Markets, said it had no plans to introduce Bitcoin to its offering.

Mr Jones said that IG was in a better position that its competitors to launch a market due its size. He added that after dramatic volatility in the Bitcoin price at the start of the month, the market had become more range bound in the past two weeks.

"When people see it acting more as a normal market . . . people are much more willing to trade it like they would trade the euro or the FTSE," he said.