When trading cryptocurrencies, you speculate on whether the market you selected will rise or fall when it comes to value; however, without actually owning the digital asset. This is usually done by applying various derivative products available in the market, such as CFDs.
Trading cryptocurrency can help you make significant profits. This is why crypto trading is gaining more and more popularity every day. Some of the most prominent benefits of crypto trading are discussed below: Better Know
Cryptocurrencies are volatile: The Crypto market is a relatively new one compared to other trading markets. However, in this short span of time, the market has already experienced high volatility. The major reason behind this is short-term speculative interest. For example, in the period between October 2017 to October 2018, the price of bitcoin experienced some unexpected changes. Once, it went as high as $19,378, and there was a time when it fell down to $5851. This was highly unlikely in other cryptocurrencies; however, modern and advanced technology often attracts speculative interest. This volatile nature of cryptocurrencies is what makes them so exciting. Frequent price movements offer so many opportunities for traders to take advantage of. However, nothing comes without risk. Hence, if you wish to enter the cryptocurrency market, you must be through with your concepts and design a risk management strategy for security. Cryptocurrencies are available 24*7: The best thing about the cryptocurrency market is that it is available for trading 24*7 as there is no central authority in the market. Cryptocurrency transactions are done directly between parties through cryptocurrency exchanges worldwide. However, downtime is possible, such as when the market needs time to adjust to infrastructural updates. Better liquidity: Liquidity determines the period required by a cryptocurrency to get converted into cash without affecting the market price. High liquidity means quick transaction times, better pricing and accuracy in technical analysis. Generally, the cryptocurrency market has low liquidity as the transactions are distributed across numerous exchanges, meaning even the smallest trades can hugely impact the market prices. This is why the cryptocurrency market is highly volatile. But, if you trade cryptocurrency CFDs your liquidity improves as you can source prices from various venues. Thus, you can execute your trades quickly at a low cost. Faster account opening Cryptocurrencies are bought and sold through an exchange. Hence, you are required to open an exchange account where you can keep your cryptocurrency in the form of a digital wallet. The process can consume a lot of time if done on your own. But when you choose a reliable broker for cryptocurrency trading, you are not required to access the exchange yourself. You don’t have to go through the hassle of setting up and managing an exchange account as it can be set up quickly by them. Leverage: CFD trading is considered a leveraged product. Therefore, traders can easily open a position on ‘margin’ by depositing just a small fraction of the trade’s full value. Hence, you get significant exposure to the cryptocurrency market with just a small amount of your capital. Trading on margin gives a chance to earn huge profits by making a small investment. However, the traders must understand that it may amplify your losses as well, which can sometimes exceed your initial deposit. This is the reason why it is important to take into account the full value of the leveraged position prior to starting trading CFDs. Additionally, It is vital to ensure a reliable risk management strategy. Ability to go long or short: When buying a cryptocurrency, you purchase the asset up front, hoping its value increases with time. But if you practise trading on the cryptocurrency price, you get to take advantage of markets that are falling or rising in terms of price. This process is called going short. For example, let’s assume you decide to open a short CFD position on the ether price as you believe that the market will fall. If your speculation is right, and the value of ether falls against the US dollar, you earn a profit. On the other hand, if the value of ether rises against the US dollar, you would make a loss.
