A CFD (contract for difference) is a trading product that gained a lot of popularity in the past months. Since cryptocurrencies also gained popularity, it was only a matter of fact until online CFDs would allow crypto transactions. As a result, people now have access to a wonderful way to make crypto investments through CFDs. The main advantages are:
- You do not need technical knowledge.
- Security risks are lower.
- You get profit when the market goes up or down.
Understanding Bitcoin CFDs
Through CFD investments, you capitalize on a commodity’s price movements. This does include Bitcoin and other cryptocurrencies. You do not have to buy the commodity. Simply put, CFD can be described as being a bet that is placed between the seller and the buyer in regards to asset future price.
The CFD trader that thinks Bitcoin price will go up take long positions. If you think that price is going to decrease, you take short positions. Brokers manage this process online through a platform.
Just like the traditional contract for difference, Bitcoin CFDs use margin trading or leverage in order to amplify trade volume.
As you utilize a regular cryptocurrency exchange, you need to buy the currency you want to invest in. With Bitcoin CFDs, you do not have ownership of the currency. This practically means that you instantly become active as an investor without having to worry about the security of funds that you would own.
Another thing that should be realized is that when you buy cryptocurrency, its price evolution dictates profits or losses. With CFDs, it does not matter if the price of the currency goes up or down. You can make a profit in both situations, all without owning a single subdivision of a crypto coin.
The Key Takeaways:
- Bitcoin CFDs are derivative trading types.
- As you buy Bitcoin CFD, you do not buy Bitcoin. You do not own the currency. You basically buy a contract that is established between the CFD broker and you.
- With CFDs, you can take advantage of leverage use and margin trading.
- CFDs cannot be withdrawn from one Bitcoin CFD platform to be deposited into another one.
Are Bitcoin CFDs For You?
This is the most important question you need to ask yourself. Bitcoin CFDs are incredibly advantageous for most beginners because not much knowledge is needed in order to make an investment. However, this does not mean that you are instantly a fit for something like this.
You have to understand that you can still lose money when you invest in Bitcoin CFDs. For instance, in the event that you “bet” Bitcoin price will go up but it goes down, you lose what you invested. This is why you still need to understand the market and go through thorough research.
Always take all the time that you need to find signs that Bitcoin's price will go up or down before you buy a CFD. This helps you to control the chances of making money. Only opt for information based investments and you will be profitable.