Lykke is an interesting project. It is a company which aims to provide crypto currency trading, alongside a forex brokerage and a platform which allows start-ups to issue new tokens. We will mostly focus on the first two aspects in this review. While the subject of trading Bitcoin at an exchange vs at a forex broker is an interesting one, which we have discussed, Lykke features both.
The Company. Security of Funds
The company behind Lykke, is based in Switzerland and has two subsidiaries. One of them is registered in the United Kingdom and is currently in the process of applying for an FCA license, as an MTF (Multilateral Trading Facility). The third one is registered in Vanuatu and has the substantially easier to get Vanuatu Financial Services License.
This is a prime example which illustrates the point we often make, when comparing off-shore brokers to well regulated ones. The same company has already received the VFSC license, but is still in the application process with the FCA.
The UK’s Financial Services Authority is one of the most highly reputable financial watchdogs. Other than requiring a lot of documentation and at least € 730,000 in capital, there are two other major rules. First of all, forex brokers must keep their client’s funds in the so called segregated accounts. This rule implies a company can not freely access (and potentially “borrow”) traders’ capital. The second key ruling is the mandatory participation in the Financial Services Compensation Scheme (FSCS). This is a mechanism, which guarantees client funds, against broker bankruptcy. If you trade with and FCA-regulated forex broker, like IG, your account will be covered up to £50,000.
The fouder and CEO of Lykke is Richard Olsen, one of the co-founders of Oanda, a top-rated, US-based forex industry pioneer. This immediately raises the credibility of the company, as his expertise will definitely come in handy. That being said, Lykke is not related to Oanda by any means.
What you can do at Lykke:
Exchanging fiat and crypto currencies for one another.
When opening the Lykke app, the first thing you see is the “Wallets” menu. You can have a lot of different currencies in your account, as illustrated by the screenshot. You can deposit USD, EUR, GBP or CHF to your account. Additionally Bitcoin and Ethereum transfers are available. You can freely transfer your funds from one currency to another.
While you can exchange currencies for one another, for the purposes of your wallet, this is only done without leverage. If you want to speculate, the company offers margin trading on several instruments, which include major currency pairs and BTC/USD. We will get to the trading conditions and platform later on in this review.
Buy equity in the company itself
The LKK coin is an asset which is available for trading on the platform. In essence, it is neither a stock nor a crypto currency. It’s mix of both, a digital token, with no mining nor blockchain involved. The LKK token is equity in Lykke itself. At the time of writing, 100 LKK represents one share in the company. The coins were initially offered in the second half of 2016 to early adopters and are now being traded on Lykke. Forward contracts with a one year delivery are also available, but these are a much more complicated instrument, which we do not recommend trading unless you have experience with similar ones.
Issue your own tokens or trade others’
The technology used to create the LKK token (the so called “colored coins”) can be used to create new tokens. We will not get into details, but in essence, if you have an idea for a new project, you can use Lykke as a platform for raising capital. You can create a token, similarly to how you would issue stocks, had your project been an established company. You could also invest in other people’s tokens (which have been approved by Lykke).
Minimum Initial Deposit
There is no information on the minimum deposit at Lykke. While this is not that unusual in the crypto currency space, when it comes to forex trading, brokers traditionally disclose this information initially. For instance, one can open a cent-account at FXTM, by depositing as low as $5.
Average spreads & Commissions
Spreads at the Lykke demo platform start from 0.3 pips on EUR/USD. While this appears amazing, we are not sure if the real accounts will have similar conditions. We are surprised by this low of a spread level, as most brokers nowadays provide wider ones.
Lykke has set the maximum leverage ratio for forex trading at 1:100. This is considered a conservative level, with lots of brokers offering 1:500 or even higher levels. For instance XM provides 1:888 in leverage.
The ratio for Bitcoin Trading is 1:4, which is again relatively conservative, but trading crypto currencies on margin is very risky. Be sure to familiarize yourself with these risks and the basics of risk management, before you start trading.
Lykke is currently only accessible via a mobile app, which is available for Android and iOS. This will have to change in the future, if the company is to attract serious traders. The platform is not impressive, when compared to traditional Forex platforms, like MetaTrader4(MT4).
Lykke will also have to improve this functionality dramatically, if they are to attract experienced traders. On the other hand the platform can serve as a gateway to the world of forex trading, for people who are interested in crypto currencies.
As you can see, trades are not done in the standard MT4 lot format, but with typing the nominal value of your position. It is interesting to note, there doesn’t appear to be a minimum lot size, as we accidentally traded one unit of EUR/USD.
Methods of Payment
The methods of payments at Lykke include Banktransfer, Crypto currency transfer (of which Bitcoin and Ethereum are currently available) and Credit/Debit Card. The one key thing to note is that Credit/Debit Card payments are only available for your USD wallet. If your card is denominated in another currency, you could still make the transfer, but your funds will be converted to USD.
Lykke is an interesting platform, attempting to bridge the gap between a crypto currency exchange, a forex broker and potentially something similar to a stock exchange. The company is based in Switzerland, has a VFSC license and is currently applying for FCA regulation. When it comes to the cryptoverse this is more than most entities offer. The forex trading platform is currently not up to par with traditional ones, when it comes to charting. On the other hand, spreads (for demo trading) are very competitive. We are not sure if these conditions will be available for real accounts.
Lykke Review Conclusion
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