What is Cryptocurrency Trading?

Cryptocurrency trading involves taking a position on the rising or falling price of digital assets such as bitcoin and ether with the intention to profit, using derivatives such as CFDs. This method is the same as when you trade more established asset classes such as shares or commodities, in that you're only trading the underlying price of the asset rather than owning it outright.

CFD cryptocurrency trading is typically undertaken using leverage, giving you access to the full value of the position with only a relatively small outlay, known as the margin. Leverage amplifies both profits and losses beyond your initial deposit, making trading on margin risky. An alternative way to take crypto positions is by physically buying the digital currency using wallets and exchanges, although this means you can't speculate on its price falling, and have to put up the full value of the position in order to invest.

People trade cryptocurrencies for a variety of reasons, from the strong profit potential they perceive, to diversification, to its decentralized nature and the accessibility of its 24/7 market. Assets like bitcoin have seen periods of extreme volatility in recent years that have been highly publicized, making them infamous in popular culture and broadening their speculation appeal.

Some also see cryptos as a potential hedge against fiat currency risk or inflation, and others appreciate the innovative blockchain technology that underpins them.