In the past few years, interest in cryptocurrencies has surged. This interest has prompted numerous CFD exchanging platforms and brokers currently offering digital money exchanging pairs. Cryptocurrency and fiat currency are also included in these trading pairs. Here, traders gain or lose by predicting whether the value of the cryptocurrency of the currency pair will increase or decrease relative to the fiat currency. If you’re interested in bitcoin trading, you can visit here to know more about Virtual currency.
There are two cryptocurrencies, i.e., ethereum and bitcoin, which forms another cryptocurrency pair. In this case, traders gain or lose by predicting whether the leading cryptocurrency of the currency pair will appreciate or lose in relation to their cryptocurrency partners.
In this regard, the working method of trading cryptocurrency CFD pairs is the same as that of trading foreign exchange CFD pairs. In a more general sense, the way to trade CFDs on cryptocurrencies is the same as the way to trade CFDs on other more traditional asset classes (such as commodities, stocks, or stock market indices), because the trader will guess what the chosen instrument is a Price trend. Anyway, for what reason would a CFD merchant decide to exchange explicitly on digital currencies, as opposed to conventional resources? Let’s find out the reasons behind trading crypto CFDs.
Cryptocurrency as a Latest and ‘Problematic’ Technology
Cryptocurrencies are existing since the creation of bitcoin. However, only in the last 3 or 4 years have they evolved from a niche market with limited technology enthusiasts to a new asset class that is expected to be divested. It has a long haul and significant function in the main budgetary market. The way of functioning of the financial market can be changed by the cryptocurrencies as they are considered the “Disruptors”.
When the whole market is changed and owned by disruptive technologies, they end up having great success over time. In the past ten years, Amazon’s stock price was estimated at around $83. Today, the price of the same stock is approximately $1,900. An increase of nearly 2200%-a considerable profit for early investors and almost only disruptive technology can achieve. In near future, the currency and commodity markets will be changed by the new cryptocurrency technologies. They want the kind of lucrative returns that early investors in promising technology stocks get.
Cryptocurrencies as a commodity
The debate over cryptocurrencies is similar to commodities that have come into existence. Ethereum is an example of this digital currency, which isn’t planned to be utilized as a cash substitute but to pay for the utilization of its blockchain platform. The main motive of Ethereum’s blockchain platform is to establish smart contracts. Due to global demand, the prices of commodities are affected. And Ethereum’s price is affected by the blockchain platform to which it is connected.
To calculate the exposure, leverage is used, while trading CFDs. For example, if the leverage ratio of the selected cryptocurrency CFD is 1:2, and the price fluctuates by 5%, then the CFD trader will actually earn 10% profit (or lose 10%, depending on the price trend) Direction and position type chosen by the trader. Which indicates that CFDs can gain profit or can have huge loss really quick.
Trading Cryptocurrencies As CFDs Means Platform Security
The traders don’t have actual possession on cryptocurrency while trading CFDs instead traders make guesses on its price movements. It means you can freely trade on cryptocurrency because there is no risk of hackers getting into your wallet and using the funds which do not belong to them. Also, most of the trading platforms ensure a safe environment by protecting them with SSL.