Many investors confuse cryptocurrency CFDs trading with actual investing in cryptocurrency. Learn the key differences between investing and trading CFDs on crypto, the pluses and minuses of each product and how to trade the latest digital trend.
22 December, Capital.com - Cryptocurrencies appeared on the financial scene back in 2008 with the release of Bitcoin’s ‘white paper’. The ‘peer-to-peer electronic cash’ system welcomed in a new age in an online transaction. Bitcoin secures its transactions via a trustless system that uses blockchain technology. A digital process that verifies, records and approves transactions through complex cryptography.
Proving popular, in December 2017 Bitcoin hit a high of $19,000, but it’s not the only cryptocurrency out there. Some of the most prominent are Ethereum, Ripple, and Litecoin. Due to the increasing popularity of cryptocurrencies, more investors and traders are looking into trading or investing in these digital currencies.
Yet, many confuse investing in cryptocurrencies with trading CFDs on cryptocurrencies. To avoid any confusion we have listed the key differences between cryptocurrency CFDs trading and investing in cryptocurrencies.
What are CFDs?
Before we look at the key differences between the two concepts, let's get the definition of CFD clarified first. CFD stands for Contract for Difference, it’s a financial instrument. A CFD is a type of derivative trading, wherein one party agrees to pay the other the difference between the value of a security at the start of the contract and its value at the end of the contract.
CFDs are also a useful tool for hedging risks on exchanges and for arbitrage. Say an investor thinks the price of gold will rise, they make a contract with a broker. If the price rises, they are successful and make money, but if the price falls they lose. Grasped the CFD basics, but want to know more?
What are CFDs on cryptocurrencies?
Trading CFDs on cryptocurrencies means trading based on the market prices of cryptocurrency. While you never own the actual crypto coin, you can invest and make profits (or losses) on their price changes.
Cryptocurrency CFDs trading and investing; Let’s compare
How to trade the Crypto revolution?
The most important part, however, is finding a broker you can trust. They should be regulated to ensure your trading security. For instance, Capital.com, a CySEC-regulated broker, offers trading in Bitcoin, Litecoin, Ethereum and Ripple CFDs.
Step 2. Open an account in GBP (£), EUR (€), USD ($) or PLN (zl) and make a deposit in the corresponding currency.
Step 3. Choose a cryptocurrency you want to buy or sell via CFD on.
Step 4. Discover handy cryptocurrency charts and rates on the Capital.com site.
Step 5. Open a long (buy) or short (sell) position on a cryptocurrency CFD and speculate on the market’s movements.
Step 6. Close your position successfully and withdraw your funds within 24 hours.
You must remember that you trade at your own risk. You can lose all your invested capital once you begin trading. Do not in any circumstances trade with money which you cannot afford to lose
Capital.com is a fin-tech startup providing an AI-powered trading platform, designed to take trading to the next level. Available on both desktop and smartphone, the trading platform lets users trade CFDs on the world’s top markets including Forex, cryptocurrencies, commodities, indices and more. The company received a $25 million investment from VP Capital and Larnabel Ventures. Capital.com is licensed by the CySEC.