Trading CFDs on Cryptocurrencies
Trade CFDs on Bitcoin, Litecoin, Ripple and other cryptocurrencies with Capital.com.
How to trade cryptocurrency?
A trader has two options to enter the crypto market and take advantage of the opportunities it offers.
You buy actual cryptocurrency on exchanges with ownership involved. The investment is considered long-term as it may take time for the price to rise significantly.
You trade CFDs on a particular cryptocurrency and speculate on the price difference. In this case, it’s a short-time investment as they generate income during a limited timeframe.
You just purchase the right to get the difference between two prices – the future one and the current one. If you foresaw the trend direction, you gain. If the trend moves against you, you suffer losses.
Trading cryptocurrencies vs. CFDs on cryptocurrencies
Stored in digital wallets, the benefit is the ease of access. The risks include loss of access to your digital wallet and exchange hacks.
In your account, assets are protected. The benefits include segregated accounts, account security and broker services, regulated by a financial authority.
Liquidity is limited on crypto exchanges, meaning crypto assets are not always easily convertible into real-world comparatives. Their value is also highly volatile – losses and gains come quickly.
Low liquidity and high volatility often apply on CFDs as well.
Trading CFD you’re not tied to the asset, you only speculate on its price movements, so you’re free to switch between markets.
Cryptocurrencies offer flexibility of payment, they can be exchanged, sold or gifted.
CFDs cannot be used for shopping, exchange or sending to a friend. As you do not own the currency itself, you are only trading on its price movements.
The cryptocurrency ‘peer-to-peer’ transaction system is largely unregulated. As a newcomer, it lacks a legal ecosystem. This means traders do not benefit from protection from the Investor Compensation Fund and cannot refer to the relevant Financial Ombudsman should problems arise. Additionally, exchanges can be located in shady jurisdictions.
CFD trading can only be offered by regulated companies that follow set policies to protect the business and their clients. These regulations include the segregation of client’s money, meaning trading is more secure, protection against fraud, account security standards and data protection to ensure the trading process is as safe as possible.
Cryptocurrency trading involves commissions on selling and buying the cryptocurrencies.
Capital.com charges no commission on buying and selling, overnight fees may be incurred if your position is open after the end of the trading day.
In general, cryptocurrencies are considered a long-term investment.
CFDs are by nature short-term investments, offering traders variety in their choice of trades.
There have been cases where cryptocurrency has been related to terrorism or other illegal activities.
Due to the lack of regulations criminals can more easily send finances via these cashless transactions. Traders should always be careful with whom they trade.
CFD trading is strictly regulated so such problems do not occur in this type of trading.
Cryptocurrency traders are required to pay tax on their earnings.
However, with crypto it’s more complicated as not all countries have developed a sufficient tax infrastructure or legislation to support this.
With CFD trading, tax payments are clear. As it is well regulated, it is more straight-forward to explain losses and gains in tax reporting.
Capital.com is very easy-to-use and fully regulated trading platform that features a range of educational materials and AI-powered newsfeed. SmartFeed analyses your trading journey, detects the trading biases you act upon and provides you with exclusively tailored content. The neural network offers videos, feature articles, analysis that fit your needs and investment objectives.
The platform is made in a way so that you can access the capital markets in a few taps. The web version allows to conduct a full-scale trading analysis due to its in-built technical indicators.
Trading CFDs on cryptocurrencies with Capital.com, you can:
- Open short and long positionsLike in traditional cryptocurrency trading, Capital.com offers long and short positions. The strategy depends on the market’s behaviour and your personal investment goals.
- Receive real-time updatesThe platform supplies you with the latest market updates and handy charts available in various types.
- Trade on marginCapital.com provides an attractive leverage of up to 1:5 for cryptocurrency CFDs.
Capital.com is about safety. The tool has all that it takes to provide enhanced security settings for your funds:
- Withdrawals within 24 hours
- Clients' money segregation
- Personal data encryption
- Negative balance protection
What are cryptocurrencies about?
Cryptocurrencies are digital currencies that can be exchanged or speculated on just like traditional, or ‘fiat’ currencies. They were designed as a means of transferring funds (transaction) between peers, secured by means of cryptography.
All transactions are submitted to a shared ledger, or blockchain, storing all records starting from the creation of a cryptocurrency. The ledgers are publicly accessible; however, the identities of cryptocurrency holders are encrypted.
In comparison with traditional currencies, such as USD or JPY, cryptocurrencies are not controlled by any governmental body or financial institution. In other words, the digital currency has a decentralised nature and is not linked with the policies or economic state of any single country.
So, who is in control of the virtual currency? Cryptocurrency creation and transactions within the system are controlled by computer algorithms and users collectively. Those in charge of confirming transactions and adding to the shared ledger are called miners.
To verify transactions, miners solve complicated computational problems. The miner who breaks cryptographic codes submits the transactions block to the public ledger. Once the block is successfully added, the miner receives a ‘block reward’ to their miner’s wallet. The Bitcoin network, for example, currently offers 12.5 bitcoins.
Mining is about how new coins are released. Any person with a proper internet connection and hardware can participate in cryptocurrency creation.
The cryptocurrency list is long with the following currencies at the top: Bitcoin, Ethereum, Bitcoin Cash, Litecoin, IOTA, Ripple and Dash.
Bitcoin was the first cryptocurrency to meet the world. It was created in 2009 by Satoshi Nakamoto – an anonymous person or group of individuals. In addition to the cryptocurrency itself, they were the first to launch an encrypted blockchain database.
Currently, Bitcoin mining brings a successful miner 12.5 bitcoins per newly submitted block. According to Bitcoin protocol, the reward will be halved every 210,000 blocks. Overall, the supply of the cryptocurrency is finite: it will not exceed 21 million units.
As of December 2017, the community has mined slightly over 16,736,000 Bitcoins, which is around 80% of total Bitcoins to be mined. The cryptocurrency’s market cap amounts to approximately $287,349,268,000.
Ethereum was launched in late 2013 by Vitalik Buterin as a decentralised platform that enables smart contracts. The platform is a Bitcoin’s descendant, meaning it runs on blockchain technology.
Ether is the ‘crypto fuel’ that powers the ecosystem. 60 million Ethers were released to contributors of the presale.
Ethereum is the second largest cryptocurrency by market cap – about $54,852,272,000 as of December 2017.
Litecoin was created in 2011 by former Google engineer Charlie Lee. This is a peer-to-peer and decentralised network to transfer payments.
Just like Bitcoin, Litecoin has a supply limit – 84 million. A successful miner is rewarded with 25 litecoins for creating a new block.
As of December 2017, approximately 54,272,300 coins are in circulation (around 65% of Litecoin to be mined), and the market cap is about $15,784,359,000.
Ripple was launched in 2012 as a transaction protocol, enabling a digital payment system for international transactions, as well as an inner currency, labelled as XRP. Chris Larsen and Jed McCaleb are behind its creation.
Unlike Bitcoin, Ethereum and Litecoin, Ripple can not be generated through mining. The total supply of 100 billion XRP was premined during the release.
The current market cap of the currency is about $10,745,115,000 (as of December 2017).
Trading cryptocurrency CFDs with Capital.com
Capital.com is a trading platform offering CFDs on major cryptocurrencies, including Bitcoin, Ethereum, Litecoin and Ripple.
- Step 1Download the Capital.com mobile app or open the desktop version.
- Step 2Open an account in GBP (£), EUR (€), USD ($) or PLN (zł) and make a deposit in the corresponding currency.
- Step 3Choose a cryptocurrency you want to buy or sell a CFD on.
- Step 4Discover handy cryptocurrency charts and rates.
- Step 5Open a long (buy) or short (sell) position on a cryptocurrency CFD and speculate on the market’s movements.
- Step 6Close your position and withdraw your funds within 24 hours.
Keep in mind that the market can go against you. Trading CFDs is risky and you may lose all of your invested capital.
Get the best of cryptocurrency CFDs trading.