When you trade cryptocurrencies, you are speculating on the market value you have chosen, without ever owning the digital asset. This is done by using derivative products such as CFDs.
The advantages of cryptocurrency trading include:
Although the cryptocurrency market is relatively new, it has seen significant volatility due to huge short-term speculative interests. For example, between October 2017 and October 2018, the price of bitcoin reached $ 19,378 and fell to $ 5,851. Other cryptocurrencies have been comparatively more stable, but new technologies are often likely to attract speculative interest.
The volatility of cryptocurrencies is part of what makes this market so exciting. Rapid intraday price movements can provide traders with a range of opportunities to buy long and short positions, but also come with increased risk. So, if you decide to explore the cryptocurrency market, make sure you have done your research and developed a risk management strategy.
Cryptocurrency Market Hours
The cryptocurrency market is generally available for trading 24 hours a day, seven days a week, as there is no centralized governance of the market. Cryptocurrency transactions take place directly between individuals, on cryptocurrency exchanges all over the world. However, there may be downtime as the market adapts to infrastructure updates, or âforksâ.
With IG, you can trade cryptocurrencies for fiat currencies – such as the US dollar – from 4 a.m. to 10 p.m. on Friday (GMT).
Liquidity is the measure of how quickly and easily a cryptocurrency can be converted to cash, without impacting the market price. Liquidity is important because it allows for better pricing, faster transaction times, and increased accuracy for technical analysis.
In general, the cryptocurrency market is considered illiquid because transactions are scattered across multiple exchanges, which means that relatively small transactions can have a huge impact on market prices. This is part of the reason why cryptocurrency markets are so volatile.
However, when you trade cryptocurrency CFDs with IG, you can get better liquidity because we get prices from multiple sites on your behalf. This means that your transactions are more likely to be completed quickly and affordably.
Ability to go long or short
When you buy a cryptocurrency, you are buying the asset in advance in the hope that it will increase in value. But when you trade on the price of a cryptocurrency, you can take advantage of markets that are priced down and up. This is called short.
For example, let’s say you decided to open a short CFD position on the price of ether because you think the market is going to go down. If you were right and the value of Ether fell against the US dollar, your trade would benefit. However, if the value of the ether were to rise against the US dollar, your position would be in deficit.
Learn more about cryptocurrency trading and how it works
As CFD trading is a leveraged product, it allows you to open a âmarginâ position – a deposit worth only a fraction of the total value of the trade. In other words, you could get a lot of exposure to a cryptocurrency market while only locking up a relatively small amount of your capital.
The profit or loss you make from your cryptocurrency transactions will reflect the full value of the position at the time it is closed, so margin trading gives you the opportunity to make large profits from an investment. relatively small. However, it can also magnify losses, including losses that could exceed your initial deposit for an individual trade. This is why it is crucial to consider the total value of the leveraged position before trading CFDs.
It is also important to make sure that you have an appropriate risk management strategy in place, which should include the appropriate stops and limits.
Faster account opening
When you buy cryptocurrency, you have to buy and sell through an exchange, which requires you to create an exchange account and store the cryptocurrency in your own digital wallet. This process can be overwhelming and time consuming.
But when you trade cryptocurrencies with IG, you won’t need to access the exchange directly as we are exposed to the underlying market on your behalf. You won’t need to set up and manage a trading account, so you could be set up and ready to trade much faster. In fact, you could trade in under five minutes, with our simple request form and instant online verification.