CFD cryptocurrency trading
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Cryptocurrencies are in vogue and CFD/Forex brokers are trying to surf the wave. More and more of them are now offering to trade Bitcoin or other cryptocurrencies. But what's behind them that no one is telling you about clearly?
On their websites, or on their promotional banners, CFD and Forex brokers post messages like: "Buy Bitcoins directly from your trading account"
This is a false message! Why? Because you do not "actually" buy or sell Bitcoin. You buy a CFD that allows you to only speculate on Bitcoin price fluctuations.
1/You do not have the advantage of a real cryptocurrency wallet. It is therefore impossible for you to transfer these cryptocurrencies directly to another private wallet, or to the wallet of another establishment which lets you buy/sell cryptocurrencies.
Therefore, it is also impossible for you to participate in ICO fundraising in a specific cryptocurrency.
Example: on the NEO blockchain there are a lot of ICOs in progress, including APEX and NEX. To participate, investors must hold NEOs. Investors who purchased NEOs via CFD do not actually have NEOs, they have only speculated on the NEO price, and therefore cannot participate in these ICOs.
2/ You can’t take advantage of the "staking" offered by some cryptocurrencies. For example, if you have 100 NEO on a NEON wallet, they generate about 1 GAS per month for free (without having to do anything). That's one hell of a loss...
3/ Your "no dealing desk" broker inevitably becomes a market marker on cryptocurrency trading. Since cryptocurrencies operate on a deregulated market, your broker will therefore be his own creator for the purchase/sale price of the cryptocurrencies he offers to trade for his clients. An additional risk: the broker making the price can, without constraint, overvalue or undervalue the price of a cryptocurrency at any time. And so very easily seek any possible stop losses which are hanging around.
1/ Simplicity. With CFDs its simple, you buy and you sell. There is no wallet, transfers, reconversion to bitcoins, etc… As soon as a position is closed, the gain or loss is directly impacted to your trading account.
2) With CFDs, you can make long or short trades. Meaning, you can sell short bitcoins if you want to do that…
3) Trading cryptocurrencies via a CFD/Forex broker lets you only have one account with a broker which is usually better regulated than current establishments which let you buy and sell cryptocurrencies in a wallet.
4) With a CFD broker, you can trade cryptocurrencies with leverage, but be very careful about this as cryptocurrencies are already extremely volatile!
CFDs bring to cruptocurrency trading major advantages but also some disadvantages. So how can you choose between trading via CFDs or a platform dedicated to trading cryptocurrencies?
Its too bad to only have access to major cryptocurrencies via CFD platforms, but CFD providers are offering more and more cryptocurrencies. Maybe one day they will have all of them, I hope so.
On the other hand, I strongly advise against using leverage when processing cryptocurrencies via CFD; these are volatile enough.
On their websites, or on their promotional banners, CFD and Forex brokers post messages like: "Buy Bitcoins directly from your trading account"
This is a false message! Why? Because you do not "actually" buy or sell Bitcoin. You buy a CFD that allows you to only speculate on Bitcoin price fluctuations.
Disadvantages of crypto currency CFD trading
1/You do not have the advantage of a real cryptocurrency wallet. It is therefore impossible for you to transfer these cryptocurrencies directly to another private wallet, or to the wallet of another establishment which lets you buy/sell cryptocurrencies.
Therefore, it is also impossible for you to participate in ICO fundraising in a specific cryptocurrency.
Example: on the NEO blockchain there are a lot of ICOs in progress, including APEX and NEX. To participate, investors must hold NEOs. Investors who purchased NEOs via CFD do not actually have NEOs, they have only speculated on the NEO price, and therefore cannot participate in these ICOs.
2/ You can’t take advantage of the "staking" offered by some cryptocurrencies. For example, if you have 100 NEO on a NEON wallet, they generate about 1 GAS per month for free (without having to do anything). That's one hell of a loss...
3/ Your "no dealing desk" broker inevitably becomes a market marker on cryptocurrency trading. Since cryptocurrencies operate on a deregulated market, your broker will therefore be his own creator for the purchase/sale price of the cryptocurrencies he offers to trade for his clients. An additional risk: the broker making the price can, without constraint, overvalue or undervalue the price of a cryptocurrency at any time. And so very easily seek any possible stop losses which are hanging around.
The Benefits of Cryptocurrency CFD Trading
1/ Simplicity. With CFDs its simple, you buy and you sell. There is no wallet, transfers, reconversion to bitcoins, etc… As soon as a position is closed, the gain or loss is directly impacted to your trading account.
2) With CFDs, you can make long or short trades. Meaning, you can sell short bitcoins if you want to do that…
3) Trading cryptocurrencies via a CFD/Forex broker lets you only have one account with a broker which is usually better regulated than current establishments which let you buy and sell cryptocurrencies in a wallet.
4) With a CFD broker, you can trade cryptocurrencies with leverage, but be very careful about this as cryptocurrencies are already extremely volatile!
To conclude with CFD cryptocurrency trading
CFDs bring to cruptocurrency trading major advantages but also some disadvantages. So how can you choose between trading via CFDs or a platform dedicated to trading cryptocurrencies?
Its too bad to only have access to major cryptocurrencies via CFD platforms, but CFD providers are offering more and more cryptocurrencies. Maybe one day they will have all of them, I hope so.
On the other hand, I strongly advise against using leverage when processing cryptocurrencies via CFD; these are volatile enough.
