CFD, spread betting and trading Bitcion on leverage carries a high level of risk and can result in losses that exceed your deposits. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money
Please Note: If you want to buy cryptocurrency rather than trade it you need a Cryptocurrency exchange like Revolut
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How do you trade in Bitcoin?
The world's most famous crypto-currency is an obvious target for investors and traders due to its history of rapid gains and falls in value. This volatility makes it both very risky and potentially very lucrative as an investment.
How Bitcoin trading works
The most obvious way to invest in Bitcoin is simply to buy Bitcoins. However, buying Bitcoins limits the investor to betting on an increase in the currency's value. If you believe that it will decrease in value and you would like to bet on this happening, then you'll need to acquire a contract for difference (CFD) or place a spread bet. These two approaches are fairly similar in operation. A contract for difference could specify that if the value of an asset %28in this case, Bitcoin%29 increases above a particular figure %28ask price%29 then the issuer of the contract will pay you the difference between the value and that figure multiplied by your stake. If the value moves in the opposite direction then you will pay the issuer of the contract the difference multiplied by your stake. Alternatively, the CFD could specify that if the value of Bitcoin declines below a certain price %28bid price%29 then the issuer will pay you the difference multiplied by your stake and you'll pay them if it moves in the opposite direction. Spread bets are similar except that you are placing a bet with a bookmaker. In the UK spread betting is not subject to Capital Gains Tax, which makes it a popular option.
How to get started
If you are buying Bitcoins then you will require a Bitcoin address. This is a code to which the Bitcoins that you buy will be allocated. You can acquire an address by downloading a Bitcoin client to your computer or setting up an online wallet. Once you have your address you can purchase Bitcoins via an online exchange. If you are taking out a CFD or placing a spread bet then you'll need to do so via a broker that offers these services. This will require you to open an account and deposit money. Many traditional foreign exchange brokers now offer the option to trade in Bitcoin. They also generally offer the option of leverage, which is betting using money loaned by the broker.
What to avoid
When using CFDs or placing spread bets it is possible to lose more than your initial stake. This will be amplified if you use leverage. Don't risk more money than you can afford to lose when you take a position. Placing stop loss orders which automatically close down your position when Bitcoin hits a particular value are an essential way to limit the risk that you face.
What to look for
The various Bitcoin exchanges and CFD/spread betting companies have different fee structures for their services. Make sure that you're not being overcharged and that the trading platform on offer is to your liking. As with any investment, the more you know about factors that will impact the price of Bitcoin, the more likely you are to profit.
A trading example
Say that a spread betting company is offering a bid price of 4,300 and and ask price of 4,500. The gambler believes that Bitcoin will increase in value and places a bet of £200 at the ask price. Bitcoin appreciates to 4,550 and the gambler closes their position, taking a payout of £10,000.
A quick comparison of Bitcoin CFD spreads from the major Crypto CFD brokers
Should people be allowed to trade crypto CFDs?
I'm a big believer that traders should have access to markets they want to trade. However, this market needs to be regulated. Crypto trading is not going anywhere and I sincerely hope that the FCA doesn't ban Crypto CFDs, but rather regulators is so we don't have another binary option/carbon credits wild west on our hands.
After all, people want to trade and they should be provided with a safe, secure and regulated environment to do it in.
Who offers the tightest Bitcoin CFD spreads and pricing?
Anyway, if you are want to take on the massive risk of trading Crypto CFDs you can compare bitcoin CFD brokers here, but if you just want to know who has the tightest Bitcoin CFD spreads here is a quick comparison below:
IG Bitcoin Spreads:
7964.64/8000.64 = 36 point (about 0.22%)
ETX Capital Bitcoin Spreads:
7955.1/8008.7 = 53.6 point (about 0.33%)
Plus 500 Bitcoin spreads:
7963.80/7,999.90 = 36.01 point (about 0.22%)
eToro Bitcoin spreads:
7954.53/8014.36 = 59.83 points (about 0.37%)
Can you make money trading Bitcoin?
The answer is, of course, yes and no. You can make money trading Bitcoin, if you buy low and sell high. Or, if you're a bear, sell high, buy low.
But if the question is "can YOU make money trading Bitcoin" I'm afraid the answer is probably no. The majority of people who trade highly volatile products like Forex tend to lose money. In fact, the recent regulatory changes have forced forex brokers to publicise the percentage of the clients that make money trading.
But just because most people lose money trading, it doesn't mean you will. But you probably will, especially if you are trying to make money trading Bitcoin, because unlike Forex trading, index trading or investing in the stock market, where the markets have fundamental value and are swayed by economic events, crypto trading is driven entirely by sentiment.
Which of course makes it harder to predict. And being such a volatile asset class means that crypto prices can move dramatically. A main market stock, for instance, may move 5% a day. An FX pair like EURUSD around 1%. But a crypto can double or half in the blink of an eye.
So, if you do think you can make money trading Bitcoin, be prepared to lose all your money doing so...
Don't get scammed by Bitcoin trading adverts.
From Peter Jones to PSY, new scam adverts advertising get rich quick Bitcoin schemes are flooding the internet.
Despite a global ban from Google on non-regualted brokers advertising derivatives products, they are still getting through. Amazingly you see them in the header of the DailyMail and other mainstream media websites.
What's shocking about this is that they all seem to point to the same scam and no-one has been able to shut it down yet?
Martin Lewis, the money-saving-guru from Money Saving Expert, recently sued Facebook because they failed to stop scammers using his image in scam ads for get rich quick Bitcoin schemes. Martin Lewis settled with Facebook for a £3m charitable donation in the end
So, are there any genuine Bitcoin traders in the UK?
The answer is of course yes. There are many traders who trade Bitcoin. Some do it through spread betting where profits are tax-free. Other clients who want to offset CFD loses against their capital gains allowance may opt for CFDs.
If there is a Bitcoin trader who has a decent track record and wants to try and make some money by being a quasi-fund manager through social trading they'll be on an FCA regulated social trading broker line eToro or ayondo.
They will not, I repeat not, be marketing their services as a get rich quick scheme. In fact they are not allowed to advertise at all.
So if you see an advert for Bitcoin investing, it's a scam (unless it's from an FCA regulated crypto broker).
We're already written about how not to get scammed in crypto trading so won't go into that again.
But suffice to say, if it looks like a scam. It's a scam. And, always check the FCA register for any broker you deal with.
Keep in mind too though that the scammers make clone websites, of real brokerages to scam you. So, double and triple check any broker before sending money.
A quick google search can save you from being a victim.
Where can you get Bitcoin trading ideas and analysis online?
Never believe anyone who says they can make you rich or adopt trading as a career if you are a complete beginner.
Trading CFDs and spread betting are high-risk forms of investment and should only really be used for hedging and a small percentage of a self-managed investment portfolio.
However, if you do want trading ideas you can find news and analysis on Bitcoin here:
Bitcoin News & Trading Idea Sources
- Most brokers like IG, will have a bitcoin news page
- TradingView provides excellent crypto charts and lots of users post trading ideas.
Keep aware and don't get scammed...