CFDs (contracts for difference) have long been a popular instrument among traders looking to speculate on different asset classes. Yet, for a long time, it has only been possible to trade CFDs by depositing fiat currencies via a broker. This isn’t the case anymore, and certain brokers now allow their clients to trade CFDs with Bitcoin. But what exactly are the benefits of doing so, and should it form part of an investor’s trading strategy? Let’s explore.
1. You can trade outside of an exchange
Many investors often buy and hold their Bitcoins without ever putting them to use. But, by leaving them sitting idle in exchange, they’re missing out on opportunities to return an income. This is known as an ‘opportunity cost’, and it’s a big mistake Bitcoin investors make. Holding Bitcoin in a wallet does not offer a return, so it’s essential investors look for other ways to maximize their returns. Trading CFDs with a broker that provides a Bitcoin-denominated base account, like easyMarkets, represents an ideal opportunity.
2. Trade a range of instruments
One of the great things about trading CFDs with Bitcoin is that it allows investors to speculate on various asset classes outside of the crypto sphere. A whole range of instruments, including stocks, indices, currencies, commodities, and metals, become accessible through a Bitcoin-accepting broker. This means investors can diversify their portfolios and gain exposure to other assets without even exchanging their Bitcoin. It’s a win-win!
.3 No conversion to fiat
Most Bitcoin-accepting brokers don’t convert an investor’s Bitcoin for fiat currencies. This is particularly beneficial as it means investors won’t have to ever worry about fluctuations in Bitcoin’s price, and they’ll also never have to deal with pesky exchange fees.
4. Benefit from both rising and falling markets
When investors hold their Bitcoin on an exchange, they only profit when the asset’s price appreciates relative to its purchase price. However, using Bitcoin to trade CFDs opens the opportunity to profit on both increasing and declining market conditions by going either long or short.
To put this into context, if an investor believed the price of Bitcoin was about to fall but didn’t want to sell the Bitcoin they have within an exchange, they could use CFDs as a hedging tool and open a short position on Bitcoin.
5. Boost your trades with leverage
Investors who keep their Bitcoin locked up with an exchange also miss out on the opportunity to utilize leverage – this involves using borrowed funds from a broker to increase one’s trading position. It’s particularly beneficial for investors who only have a small amount of Bitcoin to deposit as it’s possible to open a position on an instrument that may have been previously unaffordable. For example, buying a share in Amazon outright would be costlier than trading on that company using CFDs. Leverage allows investors to start trading with less capital investment.
Trading CFDs with Bitcoin can be a great option for those investors seeking an opportunity to boost their returns. If you’re interested in the opportunity to trade CFDs with Bitcoin, you can open a trading account with a Bitcoin-accepting broker like easyMarkets.