Cryptocurrency trading has taken the capital markets by storm. The surge in Bitcoin prices 11-months ago, brought trading this new asset class to the forefront. As interest increased, more players moved into the market creating several ways for an investor to trade the cryptocurrency market. Prices tumbled in January of 2018 but remain higher relative to levels seen in early 2017. With new cryptocurrency pair offers making their way to the retail markets, its important for investors to understand the best way to trade cryptocurrencies online.
The Best Way to Trade Cryptocurrencies
There are several ways to trade the cryptocurrency market. You can swap your sovereign currency for a cryptocurrency, you can trade a contract for difference at Vestle, or you can trade a futures contract which tracks the future price of a cryptocurrency.
Trading Using a CFD
A CFD (contract for difference) is a product that tracks the changes in an underlying product. For example, a CFD on Bitcoin would track the price of Bitcoin. The benefits of trading a CFD are vast. First, you don’t have to swap your capital for cryptocurrencies. Second, all you are responsible for is the difference from where you purchased your CFD to where you sold your CFD. Third, your broker will likely provide you with leverage allowing you to enhance your bet and generate a larger return.
Trading Using a Futures Contract
In early 2018, several futures clearing houses announced futures contracts that covered cryptocurrencies. Bitcoin was the focus, as the Chicago Mercantile Exchange and the Chicago Board of Option Exchange released specific futures contracts. These contracts hold a specific amount of cryptocurrency. One of the benefits of trading futures contracts on cryptocurrencies is that it is regulated. The CBOE and CME futures contracts are regulated by the Securities and Exchange Commission. This is the top securities regulator in the United States and probably the toughest regulator around the globe. If you want safety and security this could be your best choice. The downside is that there is only one increment to trade. The liquidity is also very scares.
Trading Using a Crypto-Exchange
There are also several cash crypto-exchanges. Some are regulated, and some are not. For example, Coinbase is a US regulated crypto exchange. Here you can exchange your sovereign currency, such as dollars or euros for cryptocurrency like bitcoin or ether. These exchanges generally provide liquidity, and many are considered very safe. They generally do not offer any type of leverage, and you need to swap your sovereign currency for cryptocurrency. These means when you want to withdraw in a sovereign currency you need to exchange your cryptocurrency bank into your sovereign currency. While many countries do not allow investors to trade cash cryptocurrencies, they will allow you to trade CFDs and futures contracts. As interest in trading cryptocurrency grows around the globe, regulators will need to get a better handle on the different way’s investors trade the cryptocurrency market.
Founder Dinis Guarda
IntelligentHQ Your New Business Network.
IntelligentHQ is a Business network and an expert source for finance, capital markets and intelligence for thousands of global business professionals, startups, and companies.
We exist at the point of intersection between technology, social media, finance and innovation.
IntelligentHQ leverages innovation and scale of social digital technology, analytics, news and distribution to create an unparalleled, full digital medium and social business network spectrum.
IntelligentHQ is working hard, to become a trusted, and indispensable source of business news and analytics, within financial services and its associated supply chains and ecosystems.