Crypto CFDs are an Elegant Solution

Cryptocurrency prices, like the prices of most other assets, depend on the dynamics of supply and demand. Whenever the number of people out there interested in buying crypto surges over the number who want to sell, this is bullish for prices. When the sellers overwhelm the buyers, prices are sent for a dip.

Still, crypto has a reputation for being unusually volatile when compared to the spectrum of financial assets. It’s more than just a reputation because, between 2020 and 2024, Bitcoin was up to four times as volatile as the indices tracking stocks. This is saying something since stocks are thought of as the riskier elements in a trading portfolio.

The reasons for this asset’s volatility are many, but they come down to the essential nature of digital tokens. The value of Bitcoin at $X is entirely dependent on people’s willingness to pay $X for it at a given time, without anything tangible to stand behind it when confidence wavers. This is the case neither with fiat currencies nor stocks. As a result, provocative news items wield an outsized power over crypto prices. What exacerbates the impact of this is the tendency of traders to rapidly shift into panic-selling or panic-buying mode when they believe, respectively, that their digital asset’s value is under threat, or that a golden buying opportunity is passing them by. This mob mentality works to send crypto prices falling like avalanches or, alternatively, shooting up like rockets at astonishing speeds.

Bearing all this in mind, what is the best and safest approach to trading crypto for those interested in entering this burgeoning market? Join us for a minute or two to get some answers.

Storing Crypto

The task of safely storing your crypto is more problematic than many people think. The most common solution for those who purchase a digital token on an exchange is to store it on the hot wallet provided for free to account holders. Whether crypto tokens are held in such a wallet (which is internet-connected) or whether it’s sitting on the exchange itself, they face a similar risk of theft from hackers.

Experts therefore suggest that cold wallets be used instead. Since these USB sticks are detached from the Web, they are impervious to the activities of criminals. If you lose your USB, however, you’re in real trouble. Even if you don’t, but you forget your recovery phrase (the backup once you lose track of your pin and password), you may have lost all your crypto forever.  How frequently does this sort of thing happen? A recent study found that as much 20% of the Bitcoin in the world appears to have been “lost” in this way!

Trading Crypto CFDs

The advent of CFD trading opens up an appealing avenue for trading in digital tokens. The first reason has to do with storage: None is required. When you trade Bitcoin as a CFD, you do not actually purchase anything at all, but rather establish a contract stipulating that you should be paid in the event prices follow your predictions. It follows that, when they do and you are paid out your earnings, there is no Bitcoin that needs storing.

Another aspect of CFD trading is that you are equally able to open a “sell” deal on your token, benefiting from bear markets just as smoothly as from bull runs. On a CFD trading app, you are presented with two options for your deal: “buy” or “sell”. The choice is yours. You’ll also get to choose the size of your deal, even if it’s very modest – another notable benefit since the high price barrier to owning crypto falls away. This doesn’t mean your power to earn big is reigned in, as we’ll presently explain.

An exciting advantage of CFD trading is the option to use leverage. This is a tool that allows you to enlarge your deal size exponentially and, with it, your potential earnings. Let’s say your trading account holds $1,200 and you want to open a “buy” deal on Bitcoin with all your funds. Needless to say, you normally couldn’t earn more than your $1,200 could eke out on its own. If prices jump by 2%, you will earn $24 (2% of $1,200). Making use of leverage of 400:1, however, your deal grows to the size of $480,000 (400 times $1,200). Then, that same 2% price surge will score you $9,600 (2% of $480,000). Not bad after only laying down $1,200! Since leverage is made possible by borrowing money from your brokerage, it can also magnify your losses when prices don’t go your way, so use it with caution.

Wrapping Up

Opening an account with a reputable CFD brokerage brings you a range of other benefits too. You should get to use cutting-edge trading tools, for instance charting technology and the ability to plot technical indicators directly on your charts. Once you get in the habit of utilizing these features, you’re much better situated to spy price trends in your token and act on them before anyone else can do so. And since you’ll be receiving live rates for your token directly on your phone, you’ll be poised to act at just the right moment.

iFOREX Europe is one of the most empowering CFD brokerages currently available. Their signature trading platform puts you in the driver’s seat like no other, continually educating you about the financial markets and their instruments in order to build you up into a formidable trader.

iFOREX Europe (formerly known as ‘Vestle’) is the trading name of iCFD Limited, licensed and regulated by the Cyprus Securities and Exchange Commission (CySEC) under license # 143/11. The materials contained on this document have been created in cooperation with iFOREX Europe and should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.22% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. Please note: Calculations of past performance movements may represent the futures and not the underlying asset. Full disclaimer: https://www.iforex.eu/legal/analysis-disclaimer.html