Is CFD Trading on Cryptocurrencies Better than Investing (Buying Outright) in Them?

So I realised that "CFD trading" is a term that a good amount of people in the Cryptocurrency world are not familiar with. There is some kind of division among the ones that do understand what CFDs are as some prefer trading those and others prefer buying the coins outright.

I feel that when someone decides to get involved in Crypto this topic on the distinction between these two is something that they should familiarize themselves with. So in this article I will try to simplify what CFD trading is just so that it gets a little bit more understandable to those that do not understand it.

CFD is an abbreviation for Contract For Differences. Put in simple terms, a CFD is a financial contract that pays the difference in settlement price between the open and closing trades. So essentially you will make money by trading the price movement of an asset, in this case a Cryptocurrency.

When you trade CFDs on Cryptocurrencies you will not own any coins or tokens at any point. Instead you will be speculating whether your selected coin or token will rise or fall in value, thereby profiting from the price movement without owning any of the Cryptocurrency. This fact gives rise to the advantage I like most about trading CFDs, you can make money whether your selected asset is going up or down. Yes, you can make money when Cryptocurrencies lose value 😜.

Investing is a whole different ball game though. this is when you outrightly buy an asset, in this case a Cryptocurrency, to own. A wild example would be when you buy a house. You would have ownership to this house since the title deed is in your name. When it gains in value, your worth that is brought about by ownership of that house increases. When it loses value your worth in turn reduces.

This same methodology applies to your to your holdings in Cryptocurrency. If you had bought into Bitcoin or Ethereum around their $100 valuations and held on to your investments until now, you would been way up in value right now, even though you would have been close to 50% down from the highest you would have been. If you had bought into any of the two during their peak levels, you definitely would have been close to 50% in the negative because you can only make money when the Cryptocurrency gains in value when you use this method. The major advantage that I see on outrightly buying coins is that of great potential for huge long term returns.

If you ask me what I prefer among the two, I'd definitely say trading CFDs on the Cryptocurrencies based mainly on the fact that I can profit from the loss in value of a coin. CFDs are offered by a numerous amount of brokers out there. You could look up XM, Hotforex and FXTM to name a few.

This article in no way financial advice by the way. 😉

I hope you found it understandable and helpful.