If you want to spread bet on Bitcoin or other cryptocurrencies here are a few things you need to know.
Please note that since this article was written the FCA has banned retail traders from trading cryptocurrency derivatives. If you would like to speculate on Bitcoin and cryptocurrencies you need to use a cryptocurrency exchange or professional trading account.
First thing first, you need a spread betting broker that offers Bitcoin. The major spread betting brokers currently offer cryptocurrency trading. You can compare FCA regulated brokers that offer cryptocurrency trading here, but if you only want to spread bet on Bitcoin here are the spread betting brokers currently offering cryptocurrencies.
There are a few more CFD brokers that offer Bitcoin, however, if you want to know the advantages of spread betting on Bitcoin read on for our breakdown:
Advantages of spread betting on Bitcoin
- No tax on profits from Bitcoin spread betting
- Spread betting profits are free of capital gains tax. Even through spread betting is a form of betting because it mainly on financial markets it is regulated by the FCA rather than the gambling commission.
- Spread betting brokers are regulated by the FCA
- Being regulated by the FCA means that your funds on account with a spread betting broker are protected under the FSCS. This is not the case with digital wallets on offer from Bitcoin exchanges.
- Trade on leverage
- With spread betting you bet a certain amount per point rather than invest an amount. So you can have more exposure than your risk capital allows.
- Limit risks with guaranteed stops
- When you spread bet on Bitcoin you can use a guaranteed stop to limit your risk even when the market is closed. So if the market crashes over the weekend you are still protected.
Disadvantages of spread betting on Bitcoin
- Leverage is very risky
- As well as being an advantage using leverage when you trade is risky because you can lose far more than your deposit. Especially with a very volatile and unprecedented market like cryptocurrencies.
- Spreads are wide
- The underlying bid/offer of Bitcoin is wide enough, but as Bitcoin is more expensive for spread betting brokers to hedge the cost to buy and sell (the spread) will be wider than typical forex trading.
- Overnight financing is expensive
- Daily rolling spread bets will have an overly expensive financing rate for the same reason as the spreads being wider than usual. You can mitigate this by using a quarterly spread bet with a longer expiry date, but the cost of carry will mean that the price is higher than the market.
Here’s some great info from IG on their clients sentiment Bitcoin spread betting sentiment.