A complete guide to cryptocurrency trading

Trading cryptocurrencies using CFDs is a common way of gaining exposure to a range of digital markets without owning the underlying asset. Read on for more about what cryptocurrencies are, why they’re important and how they can be traded.

What are cryptocurrencies?

Cryptocurrencies are digital assets, typically based on blockchain technology, that can be used for various purposes including online purchases, investment, and as a means of transferring assets across borders without the need for intermediaries like banks. They’re decentralised, meaning they operate on a network of computers rather than being controlled by a single central authority. On a trading level, this means they have 24/7 accessibility, as opposed to shares, for example, whose trading hours are linked to the exchanges on which they’re listed.  

When it comes to how to trade cryptocurrencies, cryptos can be traded through financial derivatives such as CFDs, which give leveraged exposure to the price movements of the underlying market, such as bitcoin and ether. It’s these movements that traders attempt to profit on when taking a position. 

It’s important to understand that cryptocurrency CFDs are based on the price of the underlying assets, which are vulnerable to sharp changes in price due to unexpected events and fluctuating market sentiment. This often creates a high level of volatility, making cryptocurrency trading and leveraged CFDs risky in general.

Why are cryptocurrencies important?

Cryptocurrencies are important for a variety of reasons. Their decentralised nature means they are not controlled by any single government or financial institution, reducing reliance on traditional banking systems. This means individuals can participate in global financial transactions through borderless transactions, regardless of location or economic status. 

Cryptos also often rely on blockchain technology, which creates the potential for security, transparency and immutability for transactions. Since transaction records are distributed across a network of computers, they are potentially more resistant to tampering or manipulation. 

On the trading front, cryptos can offer a potential hedge against inflation, and opportunity to diversify alongside more risk-off assets for a balanced portfolio. That means that traders may find it suitable to hold historically volatile assets such as cryptos alongside assets regarded as more ‘safe’, lessening the effect of being exposed to single large price movements. 

Like other asset classes, studying the economic calendar for the latest market-moving events may help you prepare for cryptocurrency trading.

How to trade cryptocurrencies with leverage 

Whether using CFDs, cryptocurrency trading enables you to trade with leverage, also known as trading on margin. This means you can control large positions with a relatively small amount of capital (the margin itself). However, leverage can also amplify losses, so it's risky. This means it’s important to use it with caution and have a solid risk-management plan in place. 

Cryptocurrencies on Capital.com have a margin of 50%, meaning you only have to put down 50% of the total value of the trade, while being exposed to the price movements of the full position. The remaining 50% of the value of the trade is effectively advanced to you by us.

Let’s say you’re trading one CFD contract on a cryptocurrency at a price of $1,000. The total value of the trade is $1,000 (or currency equivalent), but you’ll only have to put down $500 (50%) as margin. If the price increases by 30 points to 1,030, you will earn the full $30 profit. Similarly, if the price fell by 30 points to $970, you will incur the full $30 loss. 

Overall, how to trade cryptocurrencies with leverage will depend on your trading strategy, risk management strategy and market conditions, so ensure you have a comprehensive trading plan in place that explores each of these crucial factors.

Why traders trade cryptocurrency CFDs

Traders may choose to speculate on cryptocurrencies for a number of reasons, ranging from diversification to liquidity to pure speculation. Here are a few of the more common ones. 

Speculation: some trade a cryptocurrency purely to speculate on the direction of the overall market. This can be done using technical or fundamental analysis to make predictions about market movements. Due to many cryptos historically showing high volatility levels, many traders view speculating on them as a potentially high-profit endeavour. However, their volatility naturally means trading cryptos on leverage is risky and amplifies losses as well as gains. 

Diversification: while there are more prominent and high-profile examples than others, cryptocurrencies represent a broad range of assets. Trading cryptocurrency prices live allows you to diversify and with more risk-on assets to enable exposure to a range of markets in your portfolio.

Liquidity: major cryptos like bitcoin and ether are highly liquid, meaning they see a high volume of trading activity. This liquidity makes it easier to enter and exit positions at desired prices. However, you should be aware that lesser-known and emerging coins often have a lack of liquidity, making them potentially more prone to slippage and higher spread costs. 

Flexibility: gaining exposure to cryptocurrencies through leveraged trading can be more accessible and practical than owning the asset outright, since you only have to put down a percentage of the total value of the position, as well as being able to speculate on prices falling as well as rising. 

Innovative products: trading cryptocurrencies means having relatively new, dynamic and highly technological assets in your portfolio. Since cryptocurrencies represent a fairly young market, those with a strong knowledge base of the industry and products may be better equipped to understand the factors that drive price movements than those trading assets in more mature markets.

What are the most popular cryptocurrencies to trade?

There is a wide range of cryptocurrencies available to trade, such as bitcoin, ether and tether. Each of these has different properties that affect how they are traded, so it’s worth reading up on them and how they interact with each other in certain market conditions. 

Bitcoin (BTC)

  • Bitcoin is the first and most well-known cryptocurrency, created by an anonymous person or group of people using the pseudonym Satoshi Nakamoto in 2009.

  • It is often referred to as ‘digital gold’ due to its limited supply and store of value properties.

  • Bitcoin operates on a decentralised peer-to-peer network, using blockchain technology to record transactions.

  • Its price is influenced by factors such as market demand, adoption by institutional investors, regulatory developments, and macroeconomic trends.

Ether (ETH)

  • Ethereum is a decentralised platform that enables the creation of smart contracts and decentralised applications (DApps).

  • It was proposed by Vitalik Buterin in late 2013 and development began in early 2014, with the network going live in 2015.

  • Ethereum's native cryptocurrency, ether (ETH), is used to power transactions and execute smart contracts on the Ethereum blockchain.

  • Ethereum's blockchain is known for its programmability and flexibility, allowing developers to build a wide range of applications, including decentralised finance (DeFi) protocols, decentralised exchanges (DEXs), and non-fungible tokens (NFTs).

Ripple (XRP)

  • Ripple is a digital payment protocol and cryptocurrency created by Ripple Labs Inc. in 2012.

  • Unlike Bitcoin and Ethereum, ripple is not mined; instead, the XRP tokens were pre-mined, and a finite supply of 100 billion XRP was created.

  • Ripple aims to facilitate fast and low-cost cross-border payments and remittances for banks and financial institutions.

  • XRP transactions are validated by a network of independent validators rather than miners, making it more centralised compared to other cryptocurrencies.

Litecoin (LTC)

  • Litecoin is a peer-to-peer cryptocurrency created by Charlie Lee in 2011 as a ‘lite’ version of Bitcoin.

  • It shares many similarities with bitcoin but has some technical differences, such as a shorter block generation time and a different hashing algorithm (Scrypt).

  • Litecoin aims to provide faster transaction confirmation times and lower transaction fees compared to bitcoin, making it suitable for everyday transactions.

Binance Coin (BNB)

  • Binance Coin is the native cryptocurrency of the Binance exchange, one of the largest cryptocurrency exchanges in the world.

  • It was initially launched as an ERC-20 token on the Ethereum blockchain but later migrated to Binance's own blockchain, Binance Chain.

  • BNB is used to pay for trading fees, transaction fees, and other services on the Binance platform. It also powers Binance Smart Chain, which supports smart contracts and decentralised applications.

Cardano (ADA)

  • Cardano is a blockchain platform that aims to provide a more secure and scalable infrastructure for the development of decentralised applications and smart contracts.

  • It was founded by Charles Hoskinson, one of the co-founders of Ethereum, and launched in 2017.

  • Cardano's cryptocurrency, ADA, is used for transactions and to participate in the platform's proof-of-stake (PoS) consensus mechanism.

  • Cardano distinguishes itself by emphasising peer-reviewed research and a layered architecture designed to enhance scalability, interoperability, and sustainability.

Cryptocurrency trading example

Bitcoin CFD trade

How to trade cryptocurrencies with Capital.com 

You might want to trade a more liquid cryptocurrency like bitcoin to try and spread your risk vs other assets you’re trading. Or maybe you have specialist knowledge in a lesser-traded crypto that you feel gives you an edge when speculating on that market. 

Whatever your preferred strategy, you can trade CFDs cryptocurrencies with Capital.com by following these steps:

  • 1. Whatever your preferred strategy, you can trade CFDs cryptocurrencies with Capital.com by following these steps
  • 2. Choose an asset to trade, based on your trading goals
  • 3. Decide on your trade size
  • 4. Consider applying a stop-loss to manage risk 
  • 5. Open your position long or short
  • 6. Manage your position, monitoring fundamental and/or technical drivers
  • 7. Close your position

What are the costs involved in cryptocurrency trading

As with all of our markets, when you trade cryptocurrencies with us, you’ll pay a spread, which is based on the difference between the buy price and the sell price of the market. This is paid on the opening and closing of the trade. The buy and sell prices look like this:


You may also pay additional fees, for example if you use a guaranteed stop-loss or if you hold a trade overnight. As with all Capital.com instruments, you won’t pay any commission when you trade cryptocurrencies CFDs. 

It’s advisable always to make sure you’re aware of the cost of trading before you open a position. You can do this via our charges and fees page.

Trading benefits with Capital.com

At Capital.com, we’re proud to have won a range of awards from some of the leading authorities in the trading world. We’re rated Excellent on Trustpilot, and we’re always working to improve the experience of our 520,000+ clients. Here are just a few reasons to choose us for your cryptocurrency trading. 

  • Clear, easily-navigable interface across desktop, app and tablet 
  • Execution in milliseconds: 0.032-second average speed*
  • Multiple chart types and 75+ technical analysis tools 
  • Insightful education via courses, videos and webinars, as well as an in-platform, asset-specific Reuters feed
  • Round-the-clock support 

So why not join our growing customer base and trade cryptocurrencies CFDs with us today. 

Get started with cryptocurrency CFD trading

*Source: Capital.com Group server data, 2023

What is crypto CFD trading?

Crypto CFD trading refers to taking positions on the underlying price of cryptocurrencies such as bitcoin through derivatives such as CFDs. Using this method, you can speculate on the price of a cryptocurrency either rising or falling, and you can use leverage to access larger positions with a comparatively small outlay, known as the margin. Leveraged trading consequently amplifies your potential profits, but also your losses. This means you are risking more than your initial deposit, making trading on margin risky.

How to trade cryptocurrency CFDs

When it comes to how to trade cryptocurrency CFDs, it’s important to have a strong knowledge base of the assets and the technology involved, as well as a clearly defined strategy. A typical strategy might involve planning your timeframes, deciding on the ratio of technical to fundamental analysis you’ll use, and most importantly, a clear understanding of risk management. Cryptocurrencies can be extremely volatile, so assessment of stop-loss placements, your risk tolerance, as well as risk/reward planning and trading psychology, are all key concepts to explore in preparation.

How to learn trading cryptocurrency CFDs

Learning to trade cryptocurrency CFDs involves educating yourself on the assets and technology involved, as well as the fundamental and technical factors that can impact their price. These are complex and diverse instruments whose prices can move in unpredictable ways. Therefore, it’s key to research the supply and demand forces at play, from interest-rate decisions and regulatory changes to the international macroeconomic landscape, as well as relevant technical support and resistance levels. This research will give you the best possible handle on the market conditions on which you’ll be basing your decisions.

How does cryptocurrency CFD trading work?

Procedurally, cryptocurrency trading works by taking a leveraged CFD position either long or short on the underlying price of a crypto asset such as bitcoin. However, there’s more to the process if you want to maximise your chance of success. Comprehensive preparation will involve background research on the relevant assets, extensive risk assessment and detailed fundamental and technical analysis, before, during and even after you make your trade.

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