Crypto Spread Betting – How to Trade and What Broker to Choose?

Cryptocurrency spread betting is a way to speculate on the price of cryptocurrencies without actually buying them and it’s quite popular with traders seeking an opportunity to trade Bitcoin and other cryptos in a tax efficient way. If you’re not familiar with cryptocurrency exchanges, this might be your best option if you want to start trading in cryptocurrencies but don’t want all the hassle that comes along with owning them outright.

Spread betting allows you to buy or sell a predefined amount per point of movement in the asset you’re trading, such as £1 per point. This is the size of your spread bet’s stake. This means that for every point the instrument’s price rises in your favour, you’ll gain multiples of your investment. On the other side, each point the price moves against you results in a loss of multiples of your wager. It’s important to remember that spread betting losses are calculated on the total value of the position. Even Bitcoin and Ripple can be very volatile and unpredictable, and leverage can amplify your potential losses so make sure you understand the risks (see below).

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The Benefits of Cryptocurrency Spread Betting

There are many benefits of cryptocurrency spread betting. Some of the most notable benefits include:

1. You can trade cryptocurrencies without owning them. This is a great option for traders who don’t want to deal with the hassle of owning cryptocurrencies directly. Spread trading offers a tax and cost effective way to bet on the price of your coin (such as Bitcoin, Ripple, Litecoin) to go up or down in value.
2. You can trade in both rising and falling markets. Spread betting allows you to take advantage of both rising and falling markets, which is not possible with traditional cryptocurrency exchanges. When you go long on a cryptocurrency, you are betting that the price will increase. When you go short, you are betting that the price will decrease. This allows you to make profits in both bullish and bearish markets.
3. You can trade a wide range of cryptocurrencies. Spread bet platforms allow you to trade many different cryptos so you’re not stuck only with Bitcoin.
4. You can use advanced order types to trade with more flexibility. Spread betting allows you to use a wide range of advanced order types, including stop losses and limit orders. This gives you more flexibility when it comes to trading.

The Drawbacks of Cryptocurrency Spread Betting

Although cryptocurrency spread betting sounds great, there are some drawbacks to consider before opening a position. Some of the most notable drawbacks include:

1. Traders can lose more than they deposit (without negative balance protection). When you trade with leverage you might end up owing the broker money that you don’t have in your account. The great news is that you can always apply guaranteed stop loss orders to stay safe.
2. Leveraged trading is risky. Cryptocurrency spread betting allows you to trade on leverage. Margined trading increases your profit potential, but it also increases how much risk is involved with a trade. If the market moves against you, you can quickly lose more than what you expected if you don’t use a stop loss.
3. Slippage could occur from long and short trades. When you go long or short on an asset, there’s always a chance that slippage could occur when entering or exiting a position, which would prevent you from making the expected return.
4. It’s difficult to buy cryptocurrency with spread betting firms. You can only trade cryptos with spread betting providers. If you want to own bitcoin outright, you will have to find a platform that buys and sells cryptocurrency directly.

Conclusion

Cryptocurrency spread betting is a great opportunity for traders who want to profit from rising and falling markets. You even trade in cryptocurrencies that you don’t own yourself, which means there’s no need to go through the hassle of buying them.

As with any investment, however, there are the drawbacks – some more serious than others. Therefore, it’s important to find the right broker that suits your trading needs.