Most people know that you can trade cryptocurrencies via exchanges or trading platforms, but there are other financial instruments that allow you to make a profit by trading with bitcoin or other digital assets.
In today’s article, we will see how a CFD can help you trade cryptos and how it compares to other options available.
What Is A CFD?
A contract for difference (CFD) is a popular form of trading in derivatives that follows the price movement of an underlying asset without requiring the buyer to own that asset.
The contract calculates the movement of assets between the entry and exit of transactions, calculating only the price change without taking into account the underlying value of the asset.
CFD negotiates the buyer if the contract speculates on the price movements of many financial instruments such as cryptocurrencies, stocks, indices, commodities, currencies and treasury bills.
CFDs are a leveraged product, which means that a small percentage of the total transaction value must be deposited before opening a position. This is also known as margin trading. Margin trading can help you increase your profits, but there is also the risk of losing the increased value of the CFD position.
CFDs and the crypto market
When you normally move large amounts of crypto from one wallet to another, it usually affects the market price of the asset. But this is not the case with CFDs. Any CFD, even with billions of dollar positions, will not move market prices.
Indeed, bitcoin CFDs are not real bitcoins. As we said earlier, opening a position does not mean you, but cryptocurrency, you buy the contract at the current asset price. If the asset then increases in value, you can sell the contract and profit from the resulting difference.