28. September 2020

What Are Bitcoin CFDs?

BTC CFD tradingMany traders want to use the strong price movements of crypto currencies to generate as much profit as possible. If you trade with leverage, you can increase this profit significantly, as you can trade with larger positions than your own capital would actually allow. Such trading with leverage is classically offered with CFDs.

CFDs are Contracts for Difference. This is a speculation on the course of the price development, in which special levers are used. For this reason, the possible profits can be significantly increased, but the same applies to the risks.

For example, if you want to trade with 100 USD, you only need ten Dollars. These ten USD serve as security for the loan of the remaining 90 USD. In trading with contracts for differences, this security is also called margin.

CFD trading allows you to avoid the problem that many users do not have the necessary capital to trade the cryptocurrency on a larger scale. Another special feature is that the loss of a currency can also be speculated on.

In this case, complicated financial constructions are used in which a sale at a more favorable price is already agreed in the future.

If the price actually falls, profits can also be made with it. There is no doubt that the potential returns are high, and as mentioned above, the same applies to the potential losses.

When trading in contracts for difference, speculation is only carried out over very short periods of time. These short periods of time make it all the more difficult to estimate price developments.

While it may be possible to estimate the value development of Bitcoin in the coming weeks and months based on a few key figures, these possibilities hardly exist in the case of short-term fluctuations.

In addition, interested parties should also consider that the loss can be far greater than the amount invested. This applies in particular to capital, which also hardly seems to be dispensable.

How can the Bitcoins be secured?

The problem of being able to shoot accounts has already been pointed out. This risk does not exist in every case, but your own credit should be protected.

A secure wallet is advantageous for this: especially larger credit balances should be secured in a hardware wallet. This guarantees that there is no loss because the account is hacked or even blocked. Alternatively, it is also possible, for example, to place a small portion of your own Bitcoin assets in a mobile wallet.

This makes it particularly convenient to be able to process payments with your own smartphone while on the move. Alternatives such as a free web wallet can be conveniently used from any end device, but are not quite optimal in terms of security aspects – all data is backed up on a provider’s server. Consequently, data loss or hacks may occur during transmission.

What Advantages are associated with Bitcoin Trading

The crucial question – regardless of which is the best Bitcoin trading platform – naturally arises with regard to the sense of trading the popular cryptocurrency.

Trading Contracts for Difference naturally enables high profits regardless of the price development, but due to the risks it is only recommended if the capital is not urgently needed.

In principle, trading CFDs is also possible if no cryptocurrencies are used for this purpose. In other words: whoever wants to trade with CFDs does not specifically need the Bitcoin for this, but can also speculate on commodities or bonds.

Trading is interesting above all because one speculates on a possible increase in value of the Bitcoin. According to experts, this increase in value may indeed occur soon.

After Bitcoin initially recorded considerable increases in value in 2017, the collapse came at the beginning of 2018. Basically, there are now two ways of valuing these price slumps.

On the one hand, it could be assumed that the boom in Bitcoin is over. However, the popularity among many investors does not suggest this, especially since there were good reasons for the price slump. These reasons lead to the second possible assumption that it is possibly only a breather. The crackdown by many regulatory authorities has unsettled investors, which is why there were many quick sales.

Incidentally, the current share price must of course take into account that a fantastic return has still been achieved compared with the starting price a year ago. This could also lead to the conclusion that Bitcoin is about to reach new heights again.

Quite a few analysts still assume that six-digit dollar amounts could be reached in 2018. Therefore, now would probably be the right time to enter Bitcoin and profit from the yields.