Crypto Spot vs Crypto CFD Guide

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Introduction into Trading

Trading Bitcoin or other cryptocurrencies is not a new concept for many people. Spot trading involves purchasing a digital currency when its price is low and selling it as soon as the price rises to make a profit. Although spot trading has been in existence for some time now, another form of trading digital currencies known as crypto CFDs has recently emerged. The advantage of CFDs over conventional trade is that they enable traders to benefit from price fluctuations without necessarily owning the coins. It is true that this point alone may be enough reason why many people have shown interest in CFD trading, but does it really outweigh owning cryptocurrencies? This is what we explore in this Crypto Spot vs Crypto CFD guide.

What are crypto CFDs?

A contract for difference (CFD) is a financial derivative that works as an agreement between two parties: a trader and a brokerage firm. In this case, however, the trader doesn’t possess any digital currency involved with the transaction while trying to capitalize on potential gains by predicting whether the selected crypto will appreciate or depreciate against its value within a given period of time. If correct, then he earns profit, but if wrong, then he pays losses accordingly. Profit/Loss=Quantity×(Value2−Value1) + Fees

Leverage in Crypto CFDs

In spot trading, traders can use a specific leverage amount during the trade execution process, whereas in crypto CFDs, traders have the flexibility to utilize leverage as well. The merits of having such an option are obvious because traders could potentially deal with several times greater amounts compared with simply buying chosen crypto at once. Nevertheless, one must take into consideration that higher leverages also mean increased risk exposure to losses.

Additional Benefits of Crypto CFDs

Crypto CFDs offer several benefits. Major altcoins like Ethereum and BTC are highly volatile assets. Their prices change rapidly, making them unsuitable for day trading due to emotional stress caused by market fluctuations. Using contracts-for-difference allows for more adaptability. These instruments enable quick entry and exit positions. As well as the implementation of stop-loss orders, enabling the development of hedging strategies. Traders can benefit from the affordability and flexibility of CFDs. CFDs offer an opportunity to hedge against excessive market risk through various crypto rates and quotes in USD or other cryptocurrencies.

Advantages of Crypto Spot Trading

When you trade cryptocurrency directly on an exchange, there are advantages over trading crypto CFDs. For example, when you buy a coin, it becomes yours, so you can use it for making payments and other purposes. Additionally, there are no overnight fees for holding positions long-term, which is ideal for investors looking for long-term returns. This method is suitable for both short-term trades, capitalizing on volatility within a few hours or days, and for holding assets, expecting them to appreciate over time. Finally, some people might not be comfortable with leverage usage in their trades and thus prefer doing things differently.

Why is CFD Trading Banned in Some Countries?

CFD trading is banned in several countries due to the high risks associated with leverage. The United States, Hong Kong, and Belgium have all implemented CFD trading bans to protect retail investors. The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) enforce these regulations in the U.S., while Hong Kong’s Securities and Futures Commission (SFC) and Belgium’s Financial Services and Markets Authority (FSMA) impose similar restrictions. These measures are designed to prevent potential losses that can exceed the initial investments and to ensure investor protection.


Proof suggests that there is often a financing cost for keeping a CFD position overnight. Therefore, crypto CFDs are more popular among short-term traders. It may not be cost-effective to use them for long-term trades. Meanwhile, trading cryptocurrency through an exchange allows you to trade for any strategy for any duration of time – be it a short or long-term trade. Basically, advantages and disadvantages exist with both crypto spot and crypto CFDs; however, they all present an opportunity that can be profitable when the digital currency succeeds. Therefore, the decision that will work better depends on someone’s liking and financial risk tolerance. If you need help with your trading, you can follow one of the best signal groups on Telegram.

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This article is for educational purposes only. We are no financial advisors. The information provided from SmartOptions is for informational purposes only. It should not be considered legal or financial advice. You should consult with a financial advisor or other professional to find out what may be best for your individual needs and risk tolerance.

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A creative entrepreneur in the tech space, whatever that is as long as we keep the human connection. I love to learn new things, Hands-on Crypto enthusiast with an interest in investing in general. Accepting the world for what it is and learn from its history. Anything you can say has been said already we only change the wording to the times we live in.