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Cryptocurrency CFD Trading

Without going into too much detail behind the underlying technology, let’s just have a look at what a cryptocurrency is and how it works.

What is cryptocurrency?

Simply put, a cryptocurrency is digital money, and is often seen as an alternative to what is known as fiat currency.

A defining feature of a cryptocurrency is its decentralized nature; it is not issued or regulated by any central authority, making it immune to government interference or manipulation.

Unlike euros or dollars, which have an unlimited supply, the supply of virtual currencies is tightly controlled by the underlying algorithm. For this reason, a cryptocurrency can be compared to valuable commodities like gold.

How do cryptocurrencies work?

A user makes a request for a transaction.
The requested transaction enters the P2P network which consists of computers. These computers are called «crosspoints», or «nodes».
The network checks the transaction validation and the user status with the help of special algorithms.
After checking, the transaction is combined with other transactions into a new data block of the register.
The block is added to the existing blockchain database in such a way as to exclude the likelihood of unauthorized changes.
The transaction is complete.
  • Blockchain is the technology that brings cryptocurrencies into play. It is a chain of digital blocks that contain records of all transactions that have ever taken place. The blocks are linked to one another and secured through cryptography.
  • Any transmission of a digital coin is instantly recorded on a public ledger, with every user being able to keep track of their transactions with a unique pair of public and private key.
  • The blockchain technology is freely accessible for everyone. It allows users to buy and sell goods with no third party involvement.
  • A blockchain wallet enables users to buy, sell, and monitor balance for their digital currency. It stores secure private keys needed to carry out transactions, which are generated with a high degree of unpredictability so they cannot be guessed.
  • Virtual currencies are easily exchanged for fiat money. Thus, there is increasing investor appetite for crypto assets due to their availability, low transaction costs, and anonymity.
The applications of blockchain stretches far beyond the monetary use-cases. It can hold any type of information, making the technology very versatile and useful.

Benefits of trading cryptocurrencies

Trading 24/7
Tight spreads without requotes
No hidden fees
Trade on cryptocurrency going up or down
Competitive alternative investment to Forex

Risks related to trading CFDs on cryptocurrencies (also known as "virtual currencies")

If you wish to invest in CFDs on cryptocurrencies, you should be aware of the following

Price volatility:

The cryptocurrencies` value and therefore the value of CFDs on cryptocurrencies is extremely volatile. These assets are vulnerable to price instability triggered by unexpected events or shifts in market sentiment.

Charges and funding costs:

Charges tend to be significantly higher than for other CFDs products. Fees can include the spread (the difference between the prices at which a firm offers to buy or sell a CFD position), funding charges and commissions. You should consider the likelihood of generating a profit versus the impact of these fees.

Pricing variations:

Unlike in the case of currencies, there can be significant variations in the pricing of cryptocurrencies used to determine the value of CFD positions. There is a greater risk that you will not receive a fair and accurate price for an underlying cryptocurrency when trading.

Cryptocurrencies are traded on non-regulated decentralized digital exchanges. The pricing of crypto currency CFDs is derived from these exchanges, which may mean the following:

  • Market depth is limited to what is available in the order books of such exchanges which are not regulated and do not provide the relevant protections.
  • Market data and price feeds are subject to disruptions because of the internal rules of these exchanges or their pricing engines.
  • Blockchain technologies, which are the backbone of crypto currency systems, are subject to regulatory bans, hard forks, the activities of hackers, mining cartels and other malicious actors, which may cause further market disruption.
  • Charges and funding costs tend to be significantly higher than for other CFD products. Fees can include the spread, funding charges, and commissions. The impact of these fees, may affect your likelihood of making a profit.
  • Digital exchanges may introduce trading suspensions or other actions that could result in cessation of trading on such exchanges and/or the price and market data feed becoming unavailable. By trading CFDs in Crypto currencies you accept that where trading ceases and then resumes again at either the relevant initial digital exchange or on any successor exchange thereof, there may be significant price differential which may impact the value of your CFD positions in the relevant Crypto currencies and result in significant gains or losses.

Crypto currency CFDs are not suitable and/or appropriate for all clients. Any person who intends to trade or invest in crypto currency CFDs should have detailed and updated knowledge of the block chain industry.

Please make sure that you have carefully read our Terms and Conditions of Business and our Risk Disclosure and that you fully understand the risks associated with trading CFDs on cryptocurrencies.

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