Cryptocurrencies

Cryptocurrencies Market

Cryptocurrencies are digital or virtual currencies that take the form of tokens or “coins” and exist on a distributed and decentralized ledger. Cryptocurrencies typically use blockchain technology and are generally not issued by any central authority. This makes cryptocurrencies theoretically immune to government interference or manipulation.

Popular Cryptos

While there are thousands of cryptocurrencies available around the world, there is currently an elite group of 20 major coins that constitute over 90% of the total crypto-market capitalisation. The undisputable “king” of all cryptocurrencies is of course Bitcoin. As the world’s first major cryptocurrency, Bitcoin has become the de facto standard for cryptocurrencies, inspiring an ever-growing legion of followers and spinoff cryptos.

How to trade cryptocurrencies?

Trading Cryptocurrency CFDs enables you to speculate on rising or falling prices in relation to another major fiat currency. Bitcoin for example is more often quoted in US dollars. When trading BTC/USD, you are effectively speculating on whether bitcoin will appreciate or depreciate in value against the US dollar. Once you have determined the direction of your position, you then need to define the size of your position. Remember that you are trading with leverage which means that to trade 0.01 lot of BTC/USD, or $1,000 using 1:2 leverage, would only require you to use $500 from your available margin ($1,000/2=$500). However, as the Cryptocurrency Market is highly volatile, you stand to gain or lose twice the amount by which the BTC/USD price moves.

Trading vs Owning Cryptocurrency

It is important to clarify that trading cryptocurrency does not entail taking ownership of the actual crypto pair. You are rather only speculating on the future price direction of the cryptocurrency you are trading. Owning a cryptocurrency requires opening a wallet and storing that cryptocurrency on a secure device. It is also worth noting, that when it comes to buying cryptocurrency at face value, you are not able to use leverage. Selling digital currency also requires that you open an account with a crypto exchange. CFD trading gives you instant access to Buy and Sell cryptocurrencies without having to buy or sell the actual asset you are trading.

Benefits

As previously mentioned, one of the flexibilities of trading cryptocurrencies with CFDs is that it enables you to speculate on both rising and falling prices. With CFDs you are able to Buy or Sell crypto-CFDs and potentially earn from the difference between the entry price and exit price without the need to buy and store cryptos. CFDs also relieve you from the necessity to address security matters, such as setting up and encrypting a wallet or downloading a back-up.

Risks

Cryptocurrencies are relatively new financial instruments that have become notorious for their wild price fluctuations. This makes cryptos incredibly volatile, which means that spreads can vary and your leveraged positions may result in both higher gains and higher losses.