Friday, April 12, 2024

Are Cryptocurrency CFDs Safe to Invest In?

Cryptocurrency CFDs
Cryptocurrency CFDs

CFDs enable traders to invest in the price of cryptocurrencies with leverage without actually having to buy them. Profits from a contract for difference are calculated using the assets movement between trade entry and exit. The change in price is calculated while the assets underlying value is ignored.

Investing in Cryptocurrency CFDs

Many would argue that CFDs allow for faster transaction times which may help to reduce some of the risks associated with the volatility of cryptocurrency markets. Further, there are more regulated CFD issuers than cryptocurrencies which may install more confidence in investors.

One of the supposed advantages of trading in CFDs is the leverage provided in relation to investment made. With a $500 investment, several platforms allow for the possibility of large gains. Ironically, the volatility of cryptocurrencies open up possibilities for large gains.

CFDs don’t require technical understanding of bitcoin addresses and the associated security considerations. For some investors, this may make the investment process much simpler as they do not have to spend as much time trying to understand cryptocurrency infrastructure.

Many CFD brokers do not charge a commission or fee. Instead, they make money from spreads paid for by traders. While investors with such brokers may benefit from zero commission and fees, they have to pay for spreads which decreases winning trades and increases losses.


Regulatory pressure is increasing on CFDs as more regulators consider implementing a complete ban on cryptocurrency CFDs. For investors, this means that they may be exposed to unexpected closures by their CFD providers. It is no surprise that the US banned CFDs.

There are many CFD brokers which are not regulated. Taking the time to carry out a thorough background check on a broker can help to avoid costly investments. Some CFD brokers have migrated offshore in order to continue their operations. This presents several unforeseen risks for their investors. Although such investors may benefit from higher leverages, their investments are exposed to the whims of unregulated (or lightly regulated) brokers.


Sharp price movements are a part of the CFD spectrum. Stop loss limits help to reduce the losses incurred from such events but even with limits, sudden market closures and associated risks can deepen losses.

Cryptocurrency CFDs present better liquidity than cryptocurrencies. Investors do not have to carry out different conversions with Bitcoin to make withdrawals or investments. An investor simply has to request for a withdrawal or deposit.

In contrast to many cryptocurrency exchanges, CFDs do not experience as many high profile hacks and security breaches. This may be due in part to the amount of regulation which CFD providers are under. With greater regulation comes higher standards for internal procedures for mitigation of cyber security breaches.

Unlike investments in cryptocurrencies, CFD investments are likely to be short-term. Many CFD providers set deadlines for when positions should be closed, asking for fees in exchange for extension of deadlines. This isn’t the case for cryptocurrency investors who can transfer funds out of exchanges and store them safely in a cold wallet.

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