Leverage is one of the reasons for many investors to invest money in Bitcoin. They hope for a disproportionately high profit. In addition to leveraged CFD trading, there are other forms of investment where investors use leverage to maximize returns. Leveraged financial products are associated with a high risk. For this reason they are suitable for traders with a high risk affinity.
For this several financial services hold ready-leveraged mini Futures on Bitcoin and other cryptocurrencies. This investment opportunity combines the advantages of a leveraged product with those of an open-end certificate. With a Bitcoin certificate, investors trade with leverage on rising or falling prices. In technical language, these investment forms are called long or short mini futures. A stop-loss threshold is decisive for profit or loss. An example explains the leverage of this financial product. A long certificate goes public at a price of 0.60 euros. At market entry, the leverage is 10.2.
If the Bitcoin price is quoted at 3,400 Euro and rises by 2,220 percent within several months, the certificate records an increase in value of over 2,400 percent. Investors who bet on a Short Mini Future in this example are leaving the market with losses due to the price increase. Regular futures are subject to an obligation to make additional contributions. In the case of mini-futures, this obligation is waived by an inserted stop loss. When trading, investors pay attention to the currencies.
If crypto-mini-Futures are quoted in euros and underlying assets are in US dollars, there is a currency risk. In the best case, this leads to an additional chance of profit due to exchange rate fluctuations. On the other hand, financial losses are threatened due to changes in exchange rates. Trading the Mini-Futures on Bitcoin is proving to be new and innovative. In 2019, the range of suitable trading venues will be manageable. Before beginners enter the market, they inform themselves about the individual financial products. It makes sense to weigh up the advantages and disadvantages of several investment forms against each other.
Trading Bitcoin with Leverage on an Exchange
If investors prefer “real” coins, they trade selected digital currency pairs on crypto-trading platforms with a lever. On corresponding exchanges, Bitcoin is traded against another cryptocurrency. The leverage offered start at 3:1. Exchanges exist in the USA, where leveraged trading functions at a ratio of 5:1. Pure trading exchanges that specialize in virtual currencies are attractive to investors due to their high leverage. For example, they trade Bitcoin with a leverage of 100:1. In addition to flexible leverage, these exchanges offer other advantages:
- They demand low fees from traders.
- The minimum deposit is low or does not apply.
- Trading is 100 percent anonymous.
The latter succeeds because the Exchanges do not require user verification. The resulting security gap is a disadvantage. For example, it happens that dubious traders register several times. In addition, newer platforms in particular have limited performance and insufficient support.
The deposit works with selected cryptocurrencies. Investors who are interested in an Internet currency outside the offer cannot participate in trading. The most traded Internet currency on the Exchanges is the Bitcoin. Due to the high daily trading volume, performance may be limited. Long maintenance times and technical failures occur as a result of the enormous platform load.
These unpleasant events partially affect the entire market. For example, technical breakdowns prevent traders from reacting to a changed Bitcoin price. If the complications affect 30 to 40 percent of Bitcoin investors, the credibility of the market suffers. On the Internet you will find several comparisons to Bitcoin trading platforms. They support you in your search for an exchange that scores with reliability and high execution speed.
The Crypto Trading Exchange vs. CFD Broker: Advantages And Disadvantages
Leveraged trading works with an online stockbroker as well as on an exchange. To find a trading platform, compare the positive and negative aspects of both variants. Among CFD brokers, skeptics complain about the high fee structure. Sometimes the providers demand high costs for deposits and withdrawals. Furthermore, spreads can be large regardless of the size of the trading position. With the large number of Bitcoin trading exchanges there is a volume-based commission. If you trade with small sums, the regulation has a positive effect on the trading costs.
Additionally, the trading platforms differ in terms of verification. If you open a fee-based trading account with a CFD broker, you deposit a number of personal details. In addition to your name, address and e-mail address, providers sometimes require you to provide your telephone number. To qualify for a VIP account, provide information about your previous trading experience.
Subsequently, an identity check is carried out using a post-ident procedure. Modern brokers offer the faster video ident procedure. With both variants you show your identity card or a comparable document. The comprehensive verification is not necessarily a disadvantage. Compared to offshore trading platforms and unregulated crypto exchanges, CFD brokers shine with high security standards. The online stockbrokers allow deposits and withdrawals in Euro or any other Fiat currency. This facilitates the trading entry for traders who are slowly approaching the crypto currencies.
Advantages of CFD Brokers in Terms of Security
CFD brokers registered within the European Union are considered to be legally active financial service providers. They are subject to the supervision of a financial authority. Providers based in Germany are regulated, for example, by BaFin. If the head office of the company is located in Great Britain, the FCA takes over the regulation. For CFD brokers based in Cyprus, the CySEC is used. In case of a problem case, the traders benefit from a contact person who takes action against the online stockbroker in justified cases.
The regulatory authorities will help you to get your rights in case of dispute. This advantage does not exist with a crypto stock exchange. The providers decide according to which principles the trading takes place. In the event of a claim, they are also responsible for processing the case. From 2020, crypto companies operating in Germany – for example Bitcoin Exchanges and crypto exchanges – will be subject to extended BaFin regulations.
The regulations by European supervisory authorities naturally apply to brokers based in the EU. Numerous online stockbrokers operate from the Seychelles or Belize. In their case, regulation and deposit insurance are sometimes inadequate. Furthermore, the regulations established in Europe do not apply to the product range and leverage of these offshore brokers. If you recommend such a provider, examine the financial products carefully.
In addition to the fee structure, you will also find information about the maximum amount of leverage. In some cases, brokers offer flexible leverage. In this variant, traders decide on the level of leverage at their own discretion. Choose a realistic value or do without leverage completely. Numerous offshore brokers work with the obligation to make additional contributions, so that in the event of a loss your private assets are at risk.
If an unregulated crypto company goes offline or coins disappear due to unauthorized access by third parties, those affected suffer an irretrievable financial loss. There is no chance for them to successfully file a claim for damages. The same applies if a trading platform temporarily suspends trading operations due to overloading and investors miss out on profit opportunities.
Renowned online stockbrokers have years of experience in trading. They offer the users:
- high quality services,
- an intuitively operated trading platform,
- fair trading conditions and
- a reliable customer service (preferably 24-hour support in German language).
If you specifically decide on leveraged trading with crypto currencies, look for a broker with good ratings. Serious providers limit the leverage with Bitcoin to 2:1, which prevents inexperienced investors from taking excessive risks. This maximum level of leverage exists for standard accounts. For extended trading accounts, some providers advertise higher leverage. These are used by the traders, for example in forex trading.
Use Bitcoin leverage to optimize profit opportunities in trading
The cryptocurrency Bitcoin aims at revolutionizing the payment system. In everyday life it is slowly being introduced. A faster success celebrates the Internet currency with on-line Trading. Due to the hoped for course rises investors are interested in the levered trade with the Coins. This works via classic contracts for differences, Bitcoin certificates and mini-futures.
Several Exchanges offer trading of Bitcoin with a flexible lever. If you decide specifically in favor of leveraged cryptocurrency trading, contact a reputable broker with headquarters within the European Union. In this way you benefit from high security and reliable regulation. If the exchange rate moves in the desired direction, an enormous return can be expected with high leverage. If investors make a wrong decision when trading, they are threatened with a large financial loss.