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Trading Cryptocurrencies on CFD Platforms

Trading Cryptos
Written by Andy

While a lot of people think of CFD trading as pertaining primarily to stock shares and currency prices, we have noted in the past that it is also possible to trade commodities with CFDs. To recap, many CFD brokers do list prices for popular commodities (such as gold, silver, oil, cocoa, and wheat, to name a few). While there can be some complications regarding how CFD brokers determine values (with some using the futures market), they ultimately allow traders to make straightforward transactions. In short, you can execute an ordinary CFD trade with regard to most any popular commodity, capitalising on its price movement without investing in shares or assuming any ownership of actual product.

Where this gets interesting is in considering new commodities. For the most part, popular options like the ones listed above (gold, silver, and so on) are long-established assets that are traded every day, in a variety of ways. In recent years though, cryptocurrencies have slowly but surely merged with the commodities market. While these are difficult assets to define exactly, judges have ruled that they’re commodities, and this has impacted popular thinking. At least from a trading perspective, this is increasingly the right way to regard cryptos.

It’s for this reason that we’re pointing out that you can in fact trade cryptocurrencies on a CFD platform. As with other commodities, this means that crypto trades can be executed solely based on the price movements of the asset at hand — with no actual quantity of that asset being owned or exchanged. We should also note that crypto CFD trading can involve pairings between cryptos and fiat currencies. So, for instance, where a normal crypto exchange may only allow you to buy and sell cryptos against one another (say, buying into bitcoin with litecoin), a CFD broker might allow for BTC/USD dealings. That is to say, you can arrange a CFD contract based on the bitcoin’s movement against the dollar.

While trading methodology is ultimately a matter of personal preference and strategy, there are a few reasons one might prefer crypto trading on a CFD platform to typical crypto exchange trades:

  • There is no need to open a cryptocurrency wallet or deal with an exchange — both of which can be complex for newcomers.
  • Volatility is less of a concern. For some time now cryptocurrency has been branded as being too volatile to be used as money, and some feel similarly about trading. Holding cryptocurrency during its wild swings can make traders nervous; arranging contracts predicting losses or gains over time can feel more stable.
  • As mentioned, it is easier to deal in cryptocurrencies as they relate to fiat currencies when trading through CFDs.
  • A transaction of this sort can fit into a broader CFD portfolio, helping to diversify contracts.

As you might expect, the specific cryptocurrencies that can be traded may vary from one provider to another. You’ll need to do an assessment of a few different platforms to determine which one offers you what you want. However, if you’re among the many people who have grown more curious about cryptocurrency investment in recent years, it’s good to know generally that CFD trading is an option.

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