Majority of people who indulge in buying and selling of cryptocurrency, they normally do it through some cryptocurrency exchange. The process involves purchase of cryptocurrency using some digital or fiat currency, and then holding onto those crypto coins for a certain time period, hoping for their value to appreciate. If their value goes up indeed, you end up making a profit from their sale. It’s a fairly simple and straightforward process of benefiting from the rise in cryptocurrency prices. And you can place the trades on any of the decentralised or centralised crypto exchange platforms out there.
When we talk about CFDs (Contracts for Difference), they provide a slightly more complicated and different method of trading in cryptocurrency. Although these contracts are a relatively new addition to the crypto trading world, CFDs have been in play for a much longer time period in the conventional financial markets like commodities, forex and shares.
The primary difference that sets these CFDs apart from the purchase and sale of cryptocurrencies on an exchange is that whenever you indulge in CFD trading, you are never actually the owner of any cryptocurrency per se. Instead, you simply predict if the value of a certain cryptocurrency will go down or up. Hence, there is no holding onto any cryptocurrency in any of those popular bitcoin wallets. You register profit in the event that the concerned cryptocurrency ends up moving in the direction you had predicted it to move in. On the other hand, you incur a loss if its price goes in the opposite direction instead.
Although CFDs seem more intimidating and involved compared to the straight up purchase and sale of cryptocurrencies, they do enable you to steer clear of the security risks involved in trading cryptocurrency on an exchange. In addition, these CFDs also provide you with an opportunity to profit from the market fluctuations, and potentially avail very high rewards.
Which is Better – Cryptocurrency CFDs or Buying Cryptocurrency
Whether you trade in cryptocurrency CFDs or buy and hold on to some cryptocurrency, or perhaps even indulge in both simultaneously depends entirely on your trading and personal preferences.
Buying and holding on to cryptocurrency, hoping to make a handsome profit from it someday is normally a popular option amongst people who prefer the long-term approach. Unless of course the value of cryptocurrency reaches zero dollar, there is a very low risk of losing everything you have invested. But you will have to contend with higher spreads compared to the CFDs, not to forget the risks and hassles of purchasing cryptocurrency from an exchange. To help you out, here are some of the top cryptocurrency exchanges you can consider.
When we talk about cryptocurrency CFDs, they are commonly observed as worth consideration for advanced level traders, who prefer adopting short-term positions. CFDs’ lower spreads enable traders to make the most of smaller price movements, apart from the opportunity to profit regardless of the direction in which the market goes. Obviously, there is the reality of gains getting magnified because of margin trading too.