expand/collapse risk warning

CFDs come with a high risk of losing money rapidly due to leverage. 71% of accounts lose money when trading CFDs with this provider. You should understand how CFDs work and consider if you can take the risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

71% of retail investor accounts lose money when trading CFDs with this provider.

Crypto Trading

Benefits of Crypto trading & investing vs the risks

Benefits of Crypto trading: People standing in front of a city with Bitcoin signs, representing the influence of cryptocurrencies in Wall Street.

The introduction of cryptocurrency has offered traders and investors the opportunity to explore a new frontier of change and innovation in the world of finance.

To understand how to engage with cryptocurrencies, it’s crucial to comprehend the various approaches, such as investing, trading, and buying tokens, each possessing distinct advantages and challenges.

This article will explore the following topics:

  • The differences between trading cryptocurrency through contracts for difference (CFDs) and investing directly through an exchange.
  • The benefits of crypto trading and the associated risks
  • The benefits of investing in crypto and the associated risks

Cryptocurrency explained:

The allure of cryptocurrency lies in its unique characteristics. Unlike traditional money that depends on banks and financial institutions to facilitate transactions, cryptocurrency operates on a technology called blockchain.

block-explorer-us.png Source: BlockExplorer.one

This pioneering digital ledger has reshaped how we view money and asset management.

Investing vs trading cryptocurrency:

Investing and trading in cryptocurrencies present different risk and reward scenarios. Investors usually bet on long-term appreciation in value, while traders exploit the market's short-term fluctuations.

The sector's expansion is significantly driven by growing interest from institutional players, which has spiked the demand for crypto derivatives such as futures, options, and CFDs. Participants need to navigate through a landscape filled with regulatory ambiguities and security challenges.

Key differences between investing and trading cryptocurrency:

Aspect Investing Trading
Ownership Full ownership of the cryptocurrency. Price movement speculation without actual ownership.
Platform Crypto exchanges like Binance or Coinbase. Brokerage platforms such as Skilling.
Buy/sell strategy Long-term holding, banking on price appreciation. Short-term positions, capitalising on price fluctuations.
Duration Long-term investment horizon. Short-term, depending on the trading approach.
Costs and fees Involves transaction and custodian fees. Encompasses margin, spreads, and potential overnight funding costs.
Market exposure Direct exposure to the token's value. Exposure influenced by the leverage used.
Risks Includes regulatory changes, risks of exchange failure, and hacking threats. Heightened risks due to leverage, with a possibility of substantial losses.
Analytical approach Based on fundamental analysis of the asset. Relies on technical indicators for pinpointing entry and exit points.

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Risks and benefits of investing in crypto

Investors engage in long-term holding ('HODLing'), basing their decisions on broader asset value trends and the underlying technology's potential.

However, with the collapse of FTX and many crypto wallets falling victim to hacking activities, lack of financial security and regulatory uncertainty remain prevalent.


Risks and benefits of crypto trading


This involves frequent transactions, capitalising on the market's inherent volatility. Traders use technical analysis and current market trends to achieve short-term profits.

Unique features of CFDs, such as leverage and short selling, magnify both potential returns and associated risks.

What is CFD Trading?

CFD trading is a strategy focused on predicting cryptocurrency price changes without the necessity of owning the actual digital currency.

  • Leverage in CFDs: This feature can be likened to a financial multiplier, potentially increasing gains but also escalating losses, especially in the volatile crypto market. It demands careful risk management.
  • Short Selling in CFDs: CFDs allow traders to profit from falling markets by short selling, a strategy not readily available in direct investing. However, this strategy is high risk, particularly in the unpredictable cryptocurrency market.

Comprehensive Conclusion:

To effectively navigate the complex world of crypto finance, one must have a thorough understanding of both CFD trading and direct cryptocurrency investing. The ideal path varies based on individual risk tolerance, financial objectives, and market acumen. Whether opting for the nimble nature of CFDs or the more stable approach of direct investment, prioritising informed decision-making and meticulous risk management is essential.

Balancing knowledge with prudence is the cornerstone of a successful cryptocurrency journey.

Past performance does not guarantee or predict future performance. This article is offered for general information and does not constitute investment advice. Please be informed that currently, Skilling is only offering CFDs.