Trading Crypto Online
The hottest trend of 2018-2017 definitely was the Bitcoin, and cryptocurrencies in general.
People all over the world heard about Bitcoin, LiteCoin, Ethereum, Ripple, Dash, and more other cryptocurrencies.
Nowadays, there are many ways to trade cryptocurrencies,
in this article, we will show and review 2 different ways to trade on Bitcoin or any other cryptocurrency.
The first way is to use CFD’s broker, by doing this you don’t need to buy Bitcoin or any other cryptocurrency in order to trade, because while trading on CFD’s(contract for difference), the investor is not own the asset, he is only trading on the asset value.
Pros and Cons of CFD’s Broker
|Using a local money||No “HODL”|
|Secure||High spread rate|
|Buy and Sell||Not owning the asset|
|Instant||Limited currencies types|
Using a local money– Trading by using “Fiat” currency such as U.S Dollar, Euro, British pound, etc… depending on the account balance.
It means that there is no need to buy any cryptocurrency in order to trade another cryptocurrency.
Secure- Most of the regulated brokers kept the trader funds safe in a segregated bank account. Or providing other money protection service, in case of hackers attack, bankruptcy, or any other reason that mentioned at the CFD’s broker policy.
Buy and Sell- The ability to gain profit even if the price is going up or down, trading on CFD’s allowed you to open a Buy or Sell position, the investor is able to open a sell position without to buy the asset before, and to gain profit if the price will go down.
Leverage- Also mentioned under cons. The leverage is a double edge sword, it can go against you as well as you, by using leverage you can trade on a bigger volume than your actual investment. The profit or loss will be regarding the trading volume including the leverage that given by the CFD’s broker.
Instant- Fast, launch sell or buy position instantly. The CFD’s broker operates as a counterparty for your transactions and therefore is the seller when you are buying and the buyer when you are selling.
No “HODL”– If the investor wants to buy and hold the cryptocurrency for a long-term, it called “HODL” a slang term that used by crypto traders.
When a trade is open for more than one day, the trader will need to pay rollover fee.
Usually, the rollover on cryptocurrencies is very high, and therefore the investor should consider if it worth to pay the rollover for long positions.
High spread rate- The difference between the buy and sell price.
As the rollover rate, most of the time there is a big difference between the current price and the auction price.
Not owning the asset- The trader is not the owner of the asset when trading on CFD’s.
Leverage- Also mentioned under pros. The leverage is a double edge sword, it can go against you as well as you, by using leverage you can trade on a bigger volume than your actual investment. The profit or loss will be regarding the trading volume including the leverage that given by the CFD’s broker.
Limited currencies types- Brokers will usually offer major currencies such as Bitcoin, Ripple, Etherium, Dash, LiteCoin, Bitcoin Cash, etc…
For the next way to trade cryptocurrency, the trader would need to buy Bitcoin or other major Cryptocurrency.
The second way is to use a Cryptocurrency exchange.
With an exchange, you will be able to buy and sell other cryptocurrencies with the Bitcoins that you own.
The trading is against other investors.
For example: if you want to purchase Ripple(XRP) or any other coin, as you can see at https://coinmarketcap.com, each coin has his own rate.
* Important note: Bitcoin is widely accepted and therefore, it is highly recommended to use Bitcoin as a base currency- the coin that you will be trading with.
Some exchanges may accept other cryptocurrencies as well.
Pros and Cons of Exchange
|“HODL”||Not support local money|
|Owning the asset||Security|
|Low Fees||You can’t sell before buying|
|Low spread rate||Instant|
|Variety of currencies types|
“HODL”- Owning the currency allows you to buy and hold the cryptocurrency for a long-term, without an additional fee.
Owning the asset- The trader is the owner of the currency when trading with an exchange.
Low Fees- Usually the exchange will take a small fee, and only for the transaction(around 0.1-0.25%).
Low spread rate- The difference between the buy and sell price.
Not like the CFD’s broker, the difference between the buy and sell price is minor.
Variety of currencies types- Exchange will offer many types of majors and minors currencies.
Not support local money- It means that there is a need to buy cryptocurrency in order to trade with the exchange, what may take you some time.
Security- When owning cryptocurrencies, even though you use the exchange to store them, your currencies are in danger if the exchange is attacked by hackers.
You can’t sell before buying- As we said already, you own the currency and therefore you are able to sell only what you hold, not like trading with CFD’s broker, with exchange you can’t gain profit even if the price is going down.
Instant- The exchange is only the platform for buying and selling, and therefore, When you are the buyer, you will need to wait until another investor would sell to you at the specific price you want to pay.
And when you are the seller, you will need to wait until another investor would buy from you at the specific price you want to sell.
Trading crypto could be complicated and may not be suitable to some of you, therefore CFD’s brokers could be a great solution.
In addition, trading with an exchange could be better for some of you, it all depends on your need and qualifications.
Feel free to comment below If you have any kind of questions, or if you can’t decide which way is better for you.
We will be happy to assist you at any time.