Yes, you can spread bet on Bitcoin, although to spread bet on Bitcoin you need a professional trading account as the FCA has banned retail investors from trading cryptocurrency derivatives.
Different types of Bitcoin spread betting:
There are a few different types of Bitcoin spread betting which enables traders to trade Bitcoin in different ways, here we will highlight the most common.
Financial Spread Betting
Financial spread betting is where you place a bet on each move Bitcoin makes. An example of a bitcoin financial spread bet would be to bet £1 per point on Bitcoin going up. That is an example of going long, but you can also go short, and sell £1 per point. The benefit of this is that unlike investing in Bitcoin where you can only buy it and profit when it goes up. With financial spread betting, you can bet on it going down. The disadvantage of this of course is that prices can go up indefinitely, whereas if you are long the price can only go to zero.
The key disadvantage of spread betting on Bitcoin is that you are trading on leverage which means that you only put a small amount of margin down for the trade. So for example you can bet on £10,000 with of Bitcoin with only £5,000 on your account. This is also an advantage as it allows you to diversify your risk capital. There are some brokers that let you adjust your margin rates for certain instruments, so it is possible to spread bet on margin with zero leverage.
For more information on spread betting compare the best spread betting brokers here.
Futures Trading
Futures trading was the original type of spread betting whereby you would speculate on the spread between the prices of different monthly futures contracts. For example, the CBOE Bitcoin futures for May, June and July below trade at different prices, the difference between May and June Bitcoin futures is 55 pips. If you thought that spread would narrow you would buy May and Sell June in the hope that the May/June Spread would decrease. As with financial spread betting you need to be a professional trader to trade cryptocurrency futures through a futures broker.
Bid/Offer Spreads
The bid/offer spread in Bitcoin trading the difference between the buy and sell price of Bitcoin. The Bid, is the price at which you can sell and the offer is where you can buy. Bitcoin brokers, make their money in three main ways, commission, financing and spreads. Commission is earnt if they charge you a percentage when you execute a Bitcion trade. Financing is earnt on the money they charge you for having a leveraged position overnight. Spreads is the markup they charge where they buy and sell Bitcion and the price they offer to you. For example using the above futures prices May, might be trading 39009 bid and 39011 offered, but the broker may quote you a price of 39000 bid and 39020 and will earn 9 pips either way you trade.
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