Contract for Difference trading, otherwise known as CFD trading, is a method that enables individuals to trade and invest in an asset by engaging in a contract between themselves and a broker, instead of opening a position directly on a certain market.
Cryptocurrency trading is the act of speculating on cryptocurrency price movements via a CFD trading account, or buying and selling the underlying coins via an exchange.
CFDs trading are derivatives, which enable you to speculate on cryptocurrency price movements without taking ownership of the underlying coins. You can go long (‘buy’) if you think a cryptocurrency will rise in value, or short (‘sell’) if you think it will fall.
Both are leveraged products, meaning you only need to put up a small deposit – known as margin – to gain full exposure to the underlying market. Your profit or loss are still calculated according to the full size of your position, so leverage will magnify both profits and losses.
Cryptocurrencies have also begun to generate a lot of interest as an alternative investment or CFDs.
A large part of this is down to headlines generated by the huge leaps in Bitcoin’s value, as the price of BTC began 2017 worth around $1,000, rocketing to more than $19,000 by December of that year. When prices move quickly, traders pay attention.
This new asset space gained further credibility when established exchanges like the CBOE and CME launched futures contracts in Bitcoin.
Using CFDs allows very fast transaction times, which is useful for such a volatile market.
