The complete guide to cryptocurrency spread betting

Cryptocurrency spread betting has become an extremely popular way for traders to speculate on the prices of digital assets like Bitcoin, Ethereum, and others. But how exactly does cryptocurrency spread betting work, and is it right for you? 

This complete guide will explain everything you need to know about spread betting on crypto.

What is cryptocurrency spread betting?

Cryptocurrency spread betting allows traders to speculate on the price movements of popular cryptocurrencies without owning the underlying asset. Instead of buying Bitcoin itself, for example, you can place spread bets on whether you think the price will rise or fall over a given period of time.

With cryptocurrency spread betting, you are simply betting on how its price will move. If your prediction is correct, you profit. If not, you lose your stake. Spread betting on cryptocurrencies has surged in popularity due to the huge volatility in the crypto markets. Traders have realised big opportunities to profit from correctly speculating on significant price swings.

Unacquainted with crypto? Read this article: What Is Cryptocurrency And How Does It Work?

How does cryptocurrency spread betting work?

Let’s walk through a step-by-step example of how cryptocurrency spread betting actually works:

1. You open an account with a spread betting brokerage firm. This provides you access to the broker’s online platform, where you can place your spread bets.
2. You deposit funds into your account to cover any potential losses. Many brokers require a minimum deposit amount to start spread betting.
3. You find the cryptocurrency market you want to bet on. Let’s use Bitcoin as an example. The broker will provide a spread on the price of Bitcoin, such as $10,000/$10,005.
4. You decide if the price will rise (go long) or fall (go short) before the spread bet expires. 
5. You place your spread bet at the stake amount per point you want. For example, a $2 stake per point. This means you will make or lose $2 for each point the Bitcoin price moves.
6. If the Bitcoin price rises to $11,000 when your bet expires, you profit 1000 points x $2 per point = $2,000. If it falls to $9,000, you lose $2,000 based on the same calculation.
7. You can close your bet before expiration to take profits or limit losses. The broker will cash out your bet at the current market price.

As you can see, cryptocurrency spread betting provides an easy way to speculate on crypto price movements without trading the assets. The main advantages of spread betting include tax efficiency in some jurisdictions, the ability to profit from falling prices by going short, and the power of leverage to enhance profits (and losses). We’ll cover these benefits shortly.

Popular cryptocurrencies in the market

While there are thousands of cryptocurrencies, most major brokerages only offer spread betting markets for the largest and most liquid crypto assets. Here are some of the top cryptocurrencies you can currently spread bet on:

• Bitcoin – As the first and most famous cryptocurrency, Bitcoin spread betting is among the most popular digital assets to speculate on. The BTC price is highly volatile, making it well-suited for spread betting.
• Ethereum – As the second largest cryptocurrency, Ethereum provides another potentially profitable spread betting market due to its price volatility. Smart contract capabilities also give Ethereum utility.
• Litecoin – This “digital silver” to Bitcoin’s “digital gold” status is another popular crypto for spread betting, especially among traders who think it could rise further.
• Ripple – XRP is the native token of the Ripple payment network. Significant price swings make it an intriguing market for speculators to spread bets on.
• Cardano – As a smart contract competitor to Ethereum, ADA is popular among traders betting on it, capturing more dApp market share.

Top cryptocurrencies provide ample spread betting opportunities. You can bet on major coins tracking Bitcoin or potential “Ethereum killers” that could disrupt the crypto market. Just keep in mind crypto prices are incredibly volatile.

Expand your knowledge with this write-up: Day Trading For Beginners
 

Benefits of cryptocurrency spread betting

Now that you understand the basics of how cryptocurrency spread betting works, let’s look at some of the benefits it offers compared to actually buying and owning the cryptocurrencies outright:

Tax advantages – One of the benefits of spread betting is it is not subject to capital gains taxes in many jurisdictions, including the UK. Since you don’t own the underlying asset, profits from spread betting are tax-free.

Ability to short crypto – Going short allows you to profit when crypto prices fall. This is difficult when buying cryptos outright since your loss potential is 100% of your investment. With spread betting, you can quickly go short and profit during bear markets. 

Leverage – Spread betting brokers offer leverage up to 200:1 in some cases. This lets you put up a small deposit while controlling a more prominent position. Leverage magnifies your profits but also losses.

Small capital required – You don’t need thousands to invest in crypto to spread bet. You can start with just a few hundred dollars in your account. Lower capital requirements make spread betting accessible.

Drawbacks of cryptocurrency spread betting

While the benefits are clear, cryptocurrency spread betting does come with notable risks. Here are some risks to be aware of:

Volatility risk – Crypto prices are extremely volatile, making significant price swings possible. Volatility makes losses fast and devastating if the market moves against your position.

Spread costs – The spread between the buy and sell prices and the broker’s commissions can consume your profits, especially if trading frequently.

Margin calls – If a position moves against you to the point your funds fall below the margin requirements, your broker will close out your trades. 

Counterparty risk – There is always the tiny risk the brokerage could go bankrupt and not return your funds. Only use and trust regulated brokers.

Tips for spread betting 

From what you have learned about the risks of cryptocurrency spread betting, it is essential to be equipped with some helpful guidance before betting on your favoured cryptos. Here are some tips for spread betting safely as a beginner:

1. Use small position sizes initially representing just 1-2% of your account balance. Smaller positions help control risk.
2. Always use stop losses to limit downside risk on all positions. Remember, crypto markets can gap down rapidly.
3. Beginners should use 10:1 leverage or less. Higher leverage leads to amplified losses that can wipe out new traders.
4. Stick with highly liquid major coins like Bitcoin and Ethereum until you gain experience. 
5. Analyse price charts to identify potential entry and exit points. Knowledge of support, resistance, and trends is vital.
6. Don’t fall into the trap of making increasingly risky bets trying to win back losses. 
7. Practise with virtual funds first to develop your strategy. Then, switch to real money trades.

For further information, read this article: Know The Risk. Know Yourself

How to identify the best crypto spread betting broker

To start spread betting on popular cryptos, you need to open an account with a broker that provides access to the markets you want to trade. Here are some things to look for when choosing a cryptocurrency spread betting provider:

Regulated and reputable 

Choose established brokers regulated in major jurisdictions such as the UK’s Financial Conduct Authority (FCA) or Cyprus’ Cyprus Securities and Exchange Commission (CySEC). These regulatory bodies have strict rules that brokers must follow, including keeping client funds separate from their operating funds and maintaining adequate capitalisation. Doing so helps ensure the safety of your funds.

Competitive spreads and commissions

It’s advisable to look for brokers that provide tight spreads, which means the difference between the bid and ask prices is minimal. This will help ensure that your transaction costs are kept low. Additionally, low trade commissions can help you maximise your returns.

User-friendly trading platforms

A well-designed trading platform should provide an intuitive user experience with clear and concise navigation. It should offer robust charting tools, including technical indicators, real-time market data, and historical price data. Also, it should provide advanced trading views, such as customisable watchlists and heatmaps, to help users make informed investment decisions. 

The platform should also offer a variety of order types, such as market, limit, and stop orders, to accommodate different trading strategies. 

Strong customer service

Look for brokers who offer various communication channels, such as phone, email or chat support, to ensure you can easily reach out for help whenever required. Further, brokers who offer 24/7 customer service can provide peace of mind, particularly those who trade in markets outside regular business hours. Therefore, it is recommended to prioritise brokers who offer quick and effective customer service as a vital aspect of your investment strategy.

Educational resources

If you’re a beginner looking to start trading, it’s essential to choose a broker that not only offers a user-friendly platform but also provides helpful trading resources. Look for a broker that offers detailed information on technical analysis, risk management, and trading strategy development. This can include educational articles, webinars, and video tutorials that will help you better understand the market and make more informed trading decisions. 

Consider markets.com as your cryptocurrency spread betting platform

From what we have learned about cryptocurrency and spread betting, we can now step up more exciting efforts in trading. Spread bets on the cryptocurrencies that you have been observing on markets.com. 

Our platform offers everything you need to trade effectively in one place. Whether you’re new to the markets or a professional looking to maximise your skills, we can help you. We have prepared market analysis to guide your decisions, customisable trading platforms to suit your preferences and various financial assets you can spread bet on. 

Join markets.com today and start trading like a pro!

When considering “Cryptocurrency Spread Betting” for trading and price predictions, remember that trading Spread Betting involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.”