Benefits of Trading Cryptocurrencies with a CFD Broker

The number of people looking to invest in cryptocurrencies has grown tremendously in the last two years, and even though they hype of 2017 has died down, the interest is still wide-spread. Traditionally, you’ve had two investment methods to choose between - you could either trade on a cryptocurrency exchange or long-term invest with a wallet.

However, lately it has become increasingly popular to trade cryptocurrencies as CFDs, and according to the people that do so, there are many benefits.

BullMarketz.com helped us to outline the benefits of trading cryptocurrencies as CFDs. Note that this doesn’t apply to long-term investors.

Safety: A regulated marketplace

The first and most important reason why more and more people are considering using CFDs for cryptocurrencies is the safety aspect.

Today, the cryptocurrency market is not regulated, rules differ from country to country, and the legislation regarding trading digital assets is confusing to say the least. There is no customer protection or guidelines on how an exchange should operate and that can be a real danger for you. Since Bitcoin was launched in 2009, hundreds of exchanges have disappeared with investors' money.

Not to mention all the cyber attacks. In 2018 alone, hackers have gotten away with hundreds of millions of dollars worth of cryptocurrencies from investors’ accounts and the chances of returning the funds are slim.

CFD trading, on the other hand, is a well-established market that has been regulated and controlled for many years. There is a large number of regulated CFD brokers such as eToro that are legally obligated to protect you and your funds. These brokers are audited on a regular basis, and they operate under strict rules implemented by respected authorities from the European Union, the UK, Australia, South Africa, and more.

Short selling: buy and sell positions

If you open a trading account with a cryptocurrency exchange today, your only option is to make money from buying low and selling high. In the last few months, some exchanges have started playing with the idea of offering short selling opportunities. But generally speaking, there is no way for you to short cryptocurrencies, unless you use CFDs.

When trading CFDs, it is as easy to invest with the market as it is to bet against it. If you think the price of Bitcoin will increase you purchase a buy position, and if you think the price will decrease you purchase a sell position. It’s as simple as that.

This creates twice as many investment opportunities as regular trading does and it’s especially beneficial on a market that is as volatile as the cryptocurrency market.

Leverage and margin: Increase your exposure

As you probably already know, CFDs are leveraged assets meaning you can increase your exposure for each position, thus increasing your potential profits. It also lets you profit from smaller market movements.

Leveraged trading is also almost unheard of on the “regular” cryptocurrency market, and it will most likely take years before this type of trading is widely-available on the world’s exchanges.

Now it appears as if many people are hesitant to use leverage and margin when trading since it can increase the risks, which is true if you trade with 100:1 or even 50:1. However, in early 2018, the European Securities and Market Authority (ESMA) ruled to limit cryptocurrency leverage to 2:1 and they made negative balance protection mandatory.

This means that the risks of trading cryptocurrencies as leveraged CFDs have substantially decreased.

Where is the best place to trade cryptocurrencies as CFDs?

There are a few guidelines that you need to follow when it comes to trading CFDs. The most important is to only use licensed and regulated CFD brokers since they have to protect you as a customer and are forced to offer a fair and unmanipulated product.

Luckily, there is a variety of really good and regulated CFD brokers to choose between, and since 2017, most of them offer cryptocurrencies.

That being said, out of all the regulated CFD brokers that offer cryptocurrencies, there is one that really stands out. IQ Option has been a driving force in the cryptocurrency market for the past few years, and they currently offer one of the largest selections of cryptocurrency CFDs. Also, check out BullMarketz.com’s IQ Option review to learn more about the broker’s brand new cryptocurrency exchange and blockchain network.

Let’s summarize why you should consider cryptocurrency CFD trading

CFDs are the perfect derivative for cryptocurrency day traders since they provide possibilities that an exchange never could. For example, CFD brokers have to be licensed and authorized in order to be taken seriously. They also offer possibilities to invest in negative trends, and you have the option of increasing your exposure to positions using leverage.

All in all, CFDs are perfectly suited for cryptocurrencies, and if the market doesn’t turn soon, this might be your only chance of making any real profit.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.