Crypto CFDs

Introduction to Cryptocurrency Trading

Cryptocurrencies are decentralised digital currencies and were first introduced to the financial world with Bitcoin in 2008, issued by Satoshi Nakamoto. They exist on a blockchain server and are kept in digital wallets.

Cryptocurrencies have been designed as an alternative payment method using encryption algorithms, yet they are rather seen as a way of investment today.

What is blockchain in simple words?

Cryptocurrencies are operated based on a publicly maintained computer network system called Blockchain. The blockchain system is a distributed ledger record and secures every transaction. It prevents a cryptocurrency from spending twice or more and being duplicated.

Cryptocurrency mining can be defined as creating new coins by using computer power and graphic cards. In addition to this, the mining process requires a significant amount of electricity usage. Mining hardware costs around USD 15,000 to start and may drive higher.

Price volatility is the key risk factor for cryptocurrency mining. In 2021, Bitcoin traded between USD 30,000 and USD 69,000. Volatility in the crypto market makes a huge profit and loss effect on the mining process. On the other hand, regulation disputes for cryptocurrency are unresolved. Governments have sceptical views on cryptocurrencies. In 2021, China banned cryptocurrency trading and mining, while El Salvador became the first country to accept Bitcoin as legal tender.

On the whole, mining may not be the best way to earn cryptocurrency for an average computer user profile.

CFD trading, otherwise known as Contract for Difference trading, is also applicable for cryptocurrencies. By investing in Cryptocurrency CFDs, investors speculate on a change in the price of a cryptocurrency.

In simple terms, CFD investors do not buy cryptocurrency but predict the price changes and receive or lose the difference between long and short positions.

Investors who think the value of a cryptocurrency will rise generally go for a long, known as buy position, while others, on the other hand, predict a fall goes short, known as sell position.

According to the data provided by CoinMarketCap, Bitcoin has the largest market cap (almost USD 1 Trillion as of 19/01/2022) on the cryptocurrency market. Ethereum takes second place while Tether, a stable coin almost always equals USD 1, ranks third.