CFD’s – new levels of control for trading Crypto

Like most tradable markets over the past year, buying strength and selling into weakness has been arguably one of the best trading strategies. So, when the buyers are prepared to pay ever-higher prices and the offer thins out, Bitcoin, Ethereum and crypto more broadly can trend like a dream.

Whether the bull trend continues, or we see mean reversion or messy sideways price action, it’s important to understand the tools at our disposal and the ability to capture the prevailing opportunity. 

(Source: Tradingview)

The Coinbase listing is a step forward in the awareness campaign

The Coinbase listing on the Nasdaq offers investors a new vehicle to gain exposure to Crypto in what's a high beta play on a volatility asset. The awareness and education this brings to Crypto is one clear bullish aspect, but the listing is a sign of the movement underway - as more exchanges come online the cost to transact will fall, liquidity will improve, and institutional players will only increase their involvement.

A world where top of book bid and offer spreads come in and players can transact in size, is a world where high-frequency hedge funds ramp up their involvement. This will only result in a feedback loop, dramatically increasing liquidity and smashing trading costs. It would genuinely signal that Crypto is a mainstream asset class and no longer a niche play.

Capturing opportunity in crypto

The traditional exchanges (such as Coinbase or Binance) remain the default venue for those taking a medium to long-term positive view on Crypto, without the use of leverage. In the institutional and family office space, the exchanges still attract a lot of the flow, but these players are also active in futures, swaps, options, and tokens, as well as the Greyscale Investment Trust. Providing the SEC give it their blessing, we may see at least one Bitcoin exchange traded fund (ETF) rolled out shortly, which will be another leap forward for achieving cost-effective exposure to the price of Bitcoin.

CFDs – the place for short-term traders looking to express two-way opportunity

Contracts for difference (CFDs) can be an effective vehicle for capturing trending markets, just as we’re currently seeing. However, for retail traders with the risk profile and keen to be far more active, with a focus on timing the market, not time in the market. CFDs really come into their own as a trading vehicle, offering an almost unique experience to capture two-way price moves.

CFDs are a derivative, which means a trader never actually owns the underlying coins, but simply expresses a view on the direction of the underlying price of a digital asset. Where traders close the position at a time of their choosing and as per strategy, unlike the options market. Instead of putting down the full-face (notional) value that you’d pay on an exchange, traders place a percentage of the underlying exposure as margin or commonly known as ‘leverage’. Leverage carries added risk, but for those with the appetite and tolerance they can reduce risk by achieving correct position sizing relative to the account size and by the volatility in the market. All the while, having greater control with our suite of Smart Trader Tools and dynamic risk management indicators.

CFDs allow for higher frequency trading – long or short

For those looking to be more active or trade higher volume in their Crypto trading, the cost to trade can be the biggest drag on the portfolio. Even if the expected returns in Crypto are superior to any other asset class. We offer clients industry leading bid-offer spreads on a range of Cryptocurrencies. So, for traders adopting an automated (algorithmic) strategy or those making their own decisions, CFDs offer a significantly cheaper alternative than other vehicles in the Crypto trading eco-system. See how we stack up here.

This offers a new level of flexibility to capture two-way short-term opportunity, with traders able to take long (buy) or short (sell) positions – resulting in the control to profit from moves higher or lower in price.

With incredible expected returns, ever flowing news around adoption, changes in the liquidity environment, rapid innovation and acceptance, digital assets will play an ever-greater role in our lives. There's those who want to share in the long-term evolution of Crypto and there's many who want to capture short-term two-way price moves - this is where CFDs can play a unique role. Ready to trade the opportunity?