The Advantages of Trading CFDs on Digital Currencies

Digital currencies have been around since 2009 when the first cryptocurrency, Bitcoin, was launched. Over the past few years, there has been significant interest in digital currencies and this demand has led to many CFD trading platforms and brokers now offering cryptocurrency trading pairs.

Trading CFDs (Contracts for Difference) on digital currencies involves speculating on crypto price movements via a CFD trading account.

Read on to learn about the benefits of trading CFDs on cryptocurrencies and find out why it has become a popular investment alternative.

What are the most traded digital currencies?

Since the start of the crypto revolution, the two most popular cryptos have been Bitcoin and Ethereum (Ether), and in the last few years Ripple has taken its position among the top three. As well as Bitcoin, Ethereum and Ripple, there are several more popular digital currencies, but their value tends to fluctuate.

The advantages of trading crypto CFDs

When trading crypto CFDs, you are speculating on whether the price of a crypto will rise or fall in value, without taking ownership of the digital currency.

The advantages of trading crypto CFDs include:

Cryptocurrency volatility

The cryptocurrency market thrives on speculation. Investors speculate that prices will go up or down to gain returns. This speculation causes a sudden influx of money, leading to high volatility. Due to the volatility, rapid daily price movements can provide multiple opportunities for traders to go long or short.

Remember, if you want to trade cryptos, make sure that you do your research and develop a risk management strategy.

Cryptocurrency trades around the clock

Crypto markets are available 24 hours a day, seven days a week but levels of liquidity can vary depending on the time of day. Crypto transactions take place directly between individuals on cryptocurrency exchanges all over the world.

Trade on both rising and falling markets

With CFDs, you can trade on the price of a crypto going down as well as up, so you can benefit from selling as well as buying opportunities. This is known as going short or going long.

For example, you decide to open a short CFD position on the price of Ripple because you think that the market is going to fall. If the value of Ripple falls against the US dollar, you would make a profit, but if the value of Ripple rises your position would make a loss.

Trade on margin

One of the main advantages of CFD trading is that you can trade with leverage. This means you can open a position on ‘margin’ without having to put down the full value of a position and gain a large exposure to a crypto market with a relatively small amount of your capital.

The profit or loss you make from your trade will reflect the full value of the position when it is closed. Therefore, trading on margin offers you the opportunity to magnify your returns with a small investment, but it is important to remember that losses can also be magnified.

It is important to ensure that you always have a suitable risk management strategy in place.

Bitcoin vs. Ethereum

Ethereum and Bitcoin are the two biggest cryptocurrencies by market capitalisation. Today, Bitcoin’s market cap is about $900 billion while Ethereum has a market cap of more than $400 billion.

While Bitcoin is the first cryptocurrency, Ethereum is the first cryptocurrency to gain widespread adoption in the fast-growing and still emerging area of decentralised finance (DeFi), where Ethereum is the default blockchain and definite market leader.

Is cryptocurrency a good investment?

Cryptocurrency may be a good investment, but it is also very risky due to the volatile nature and unpredictability of cryptocurrencies. The important thing is to invest in crypto based on the facts, and never invest more money than you can afford to lose.

DISCLAIMER:This information is not considered as investment advice or an investment recommendation, but is instead a marketing communication

Location: United Kingdom

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