What are Crypto-CFDs and how Does Trading Work

What is CFD?

Before we go into how trading with Crypto-CFDs works, we would like to briefly inform you about what it actually is. The abbreviation CFD stands for Contract For Difference, so it is a contract for difference. CFDs are offered for trading by so-called CFD brokers and include leverage. This means that price changes in the underlying asset, for example in the cryptocurrency, have a disproportionate effect due to the leverage. With contracts for difference, you can basically speculate on the price development of the following underlying assets:

Shares
Indices
Raw materials
Foreign exchange
Cryptocurrencies

What are Crypto-CFDs?

Based on the previous explanations in general, Crypto-CFDs are therefore contracts for difference in which a cryptocurrency represents the underlying asset. Currently, Crypto-CFDs are offered for trading in particular as Bitcoin-CFDs. In this case, you are speculating by means of CFDs that the price of Bitcoin will either rise or fall in the future. Crypto-CFDs are therefore nothing other than ordinary contracts for difference, in which the underlying asset is not a commodity, a share or an index, but instead a digital currency.

Where Can Crypto-CFDs be Traded?

Trading in Crypto-CFDs is only possible via so-called CFD brokers. In addition, there are now some Forex brokers, i.e. foreign exchange brokers, who also offer some CFDs in addition to trading in foreign exchange. Such CFD brokers, who also provide cryptocurrencies as underlyings in addition to the aforementioned underlyings, are now often referred to as Crypto-Brokers. A crypto broker is therefore not a special broker in that sense, but simply a Forex or CFD broker that has included cryptocurrencies in the range of tradable underlyings.

How Can You Participate in the Price Developments with Crypto-CFDs?

The question of the return that you can achieve with speculation in the form of CFDs cannot be answered in a general way. First of all, it depends on how the price of the underlying asset develops. For example, if you had speculated on a positive development of Bitcoin at the beginning of the year using Crypto-CFDs, you could have achieved a possible increase of between 10,000 and over 100,000 percent, taking into account the leverage. This return comes about because some CFDs work with a leverage of up to 30:1. This means that an increase in value, for example in Bitcoin, of just one percent could lead to an increase of 100 percent for you under this condition. On the other hand, when trading with Crypto-CFDs, you should note that high losses are possible in a short time. If you have then decided on a CFD broker where there is an obligation to make additional payments, it may even be that you lose significantly more capital than was actually intended for speculation using Crypto-CFDs.