Trading in Cryptocurrency CFDs is a way of speculating on the price movement without actually owning the underlying asset. The digital currency has become a popular financial instrument among traders because of its high volatility and high liquidity, which offers multiple opportunities to make a profit, and also because it is becoming mainstream and a well-regulated market.
What is Cryptocurrency?
A cryptocurrency is a form of digital currency or virtual currency. These currencies are created by a process called cryptography. Yes, these digital currencies also have monetary value, but they are not the same as the fiat currency. Let’s have a look at the difference between fiat and Cryptocurrency.
The first and the most important difference is that cryptocurrencies are decentralized currencies and are not regulated by central banks or governments like fiat currency which are printed and circulated by either the central bank or government.
The fiat currency has a physical existence as paper notes or coins, while the digital currency is only virtual and has no physical existence.
Types of Cryptocurrencies
With the development in the technology space, many new digital currencies have been discovered, and it is quite difficult to tell the exact numbers of Cryptocurrencies, but according to our current estimations, there are around a thousand Cryptocurrencies. Don’t worry we will talk about only a few popular ones.
Bitcoin is a digital currency that was invented in 2008 by a group of unknown people using the name Satoshi Nakamoto. It is one of the most successful blockchain-based Cryptocurrencies in the world.
Bitcoin is the world’s largest cryptocurrency by market capitalization. It is prevalent among traders who like volatility. Bitcoin has seen significant rallies and crashes since it started trading.
It is an open-source software platform based on decentralized blockchain technology that acts as a digital currency. It is one of the few platforms that can also launch other virtual currencies. Ether is the second-largest virtual currency based on market capitalization.
It is a technology that can be used both as a digital payment network and as a cryptocurrency (XRP) that underpins that network. It was launched in 2012 and was co-founded by Jed McCaleb and Chris Larsen. The cryptocurrency uses principles of the blockchain to facilitate faster, cheaper global payments for banks and other major financial institutions.
Why do traders like Crypto trading?
Now that we know about the most popular Cryptocurrencies, let us understand why traders like to trade cryptocurrency CFDs.
- Leverage – Leverage is a tool trade use while trading cryptocurrencies. It helps them to open a larger position without paying the upfront cost of the trade. It boosts the profitability of traders.
- Volatility–Cryptocurrencies are very volatile instruments. Because of its volatile nature, it provides many opportunities to exploit. Considers these examples to understand how volatile Cryptocurrencies.
Time frame January to August 2017
- Bitcoin value increased by over 340%
- Ripple’s value increased by over 1,200%
- Ethereum’s value increased by 4,500%.
Remember, increased volatility brings many opportunities for high returns, but with higher returns comes higher risk. So use proper risk management strategies.