The volatile nature of cryptocurrencies causes a demand for trading instruments flexible enough to help traders take advantage of both bearish and bullish conditions. Contracts for Difference, or CFDs, are popular with that respect, but just like other assets, you should be aware that there are both advantages and disadvantages to using them.
For the time being, Bitcoin continues to weaken, along with the broad altcoin market, which is why now is a proper time to discuss several aspects related to crypto CFD trading.
Prices fall – short-selling is a good approach
December disappointed thus far in terms of crypto market performance, as many were expecting it to be a positive month, based on seasonal patterns. That’s not the case and the weakening momentum, on the back of a stronger USD as well as poorer risk sentiment since central banks withdraw stimulus, incentivize market participants to trim their exposure.
High uncertainty – prices can move either way
Although crypto adoption took an important leap forward, and today institutions and personal traders are heavily involved, this did not negate the uncertainty associated with any emerging industry. Digital assets are still a new concept and until there is a global regulatory framework alongside the broad usage, price cycles could remain volatile, with potential trade opportunities for sellers and buyers.
Leveraged trading – balancing with risk and portfolio management
Using CFDs also involves margin trading, which can enhance returns, but also increase risk. Combined with the elevated volatility in crypto, it is important for traders to balance things out using risk and portfolio management.
InvestingCrypto is a CFD brokerage covering cryptocurrencies, offering traders the ability to buy or sell a lot of popular tokens. It has been in the industry for a decent amount of time and continues to attract new customers constantly.