10 Most Popular Questions about Trading Crypto CFDs

Crypto markets haven given birth to new instruments and derivatives, and this article addresses some of the most popular questions about trading crypto CFDs.

Although crypto trading is flourishing across the world, many investors are still unfamiliar with trading crypto CFDs. CFDs or Contracts for Difference are derivatives that allow you to speculate on the price of an underlying asset, without actually owning it. In a highly volatile market like that of cryptos, CFDs are often considered an ideal way to trade digital assets safely.

Here’s a list of 10 most popular questions investors ask about this method of trading.

1.     Why trade crypto CFDs and not just trade them directly on exchanges?

Although many people gain exposure to the market by directly buying and selling cryptocurrencies, the process is rather tedious. Processing times for these transactions are very long, due to a large burden on exchange networks. Unlike the FX markets, these exchanges are usually unregulated. There have also been instances of wallet hackings in the past.

CFDs, however, allow fast transactions, without exposing you to the risk of theft because you won’t actually hold the underlying asset. CFDs are also provided by FCA-regulated brokers like Blackwell Global giving you peace of mind.

2.     How to buy Bitcoins?

Rather than just buying Bitcoins by exchanging fiat money, and then storing them in wallets, you could purchase a CFD in BTC/USD. You will just have to open a live account and then trade crypto pairs from a chart on the MT4 trading platform.

3.     Will I have to open separate accounts for trading crypto CFDs?

No, brokers like Blackwell Global allow you to trade all assets including cryptos, commodities, forex and such like from a single account.

4.     How do you make profits with crypto CFDs?

Profits are based on the calculations of the difference between the opening and closing price (this can be negative or positive, according to your position), with a positive difference if you go long and negative if you go short. If you are going long on the price of Bitcoin, the percentage price rise should be high enough to offset other costs, such as commission and financing costs, in order to make a profit. The reverse is applicable for short positions.

5.     What is margin in CFDs?

It is effectively the buy-in rate for traders; who are expected to deposit and maintain a certain percentage of the total transaction size in their accounts. This acts as security against any leverage offered. The amount of margin depends on the market and broker concerned.

6.     What are crypto pairs in CFD trading?

Bitcoin, although a significant crypto with the largest market cap, has its rivals in other currencies like Ethereum, Bitcoin Cash, Ripple and many others. Just like forex currency pairs, cryptos also trade in pairs with each other. Popular crypto pairs include ETH/BTC and LTC/BTC. They are also quoted against traditional fiat currencies like the USD and EUR; two major currencies with huge liquidity. BTC/USD, ETH/USD, ETH/EUR are some of the popular pairs. A lot of crypto pairs show strong price correlations with each other.

7.     Why are crypto CFDs the best way to invest in the cryptocurrency market?

The crypto market is highly volatile. Coin prices can rise and fall several times in a day. CFDs allow you to speculate in both rising and falling markets, keeping your losses at a minimum. Compared to other forms of trading cryptos, this is the safest and most logical option. High volatility also means multiple entry and exit positions for day traders and scalpers. CFDs entail lower commissions in the form of spreads, so traders can open interim positions and gain from the low price movements.

8.     Can traders make losses on CFDs?

Yes, like all other financial instruments, trading crypto CFDs also comes with risk. While leverage can multiply the profit, the value of losses is magnified too. For this reason, it is always important to ensure appropriate risk management measures while trading.

9.     Are CFDs tax-free?

CFDs are exempt from stamp-duty fee in the UK, but they are not tax-free.

10.      What affects the price of crypto pairs?

Varied factors affect crypto prices. Rumours and speculation in crypto-communities can lead to buying or selling sprees that affect the prices. Government regulations surrounding the digital asset class also create fluctuations. Apart from this, mainstream adoption of different cryptos from time to time affects their values.

Blackwell Global offers 15 different cryptocurrencies for CFD trading. Start trading crypto-CFDs today!


The publication does not endorse any trading products and this article is not investment advice. Trading-leveraged products involve a high level of risk. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.