Trading Crypto Currencies

Opportunities and risks of crypto currencies.

Although crypto currencies were originally intended to enable a payment transaction system independent of banks, in the vast majority of cases they have so far been used for speculation. Before you decide to speculate with digital currencies, you should know the opportunities and risks. Trading cryptocoins is considered highly speculative, as high losses are also possible.

Trading with digital currencies – Knowing opportunities and risks

Apart from the fact that you can now pay in some local shops as well as in online shops with Bitcoins as the best-known crypto currency, crypto currencies have so far primarily served as a speculative trading instrument. If you want to buy cryptocoins, you can do so via so-called cryptocoin exchanges. The trade then looks like this: you acquire a certain crypto currency on the stock exchange, have it transferred to your wallet and then hope for future price increases in order to sell the coins again at a profit. It is also possible to trade via special crypto CFDs, with the added benefit of leverage. Regardless of where you buy the crypto currencies: You should know exactly what the opportunities and risks are.

What opportunities do crypto currencies offer?

The Bitcoin, for example, has impressively demonstrated the enormous chances of winning when trading crypto currencies in the past. Even in the early years, a Bitcoin was worth less than one franc, whereas today you have to pay over 14,000 francs for a single Bitcoin. In the past ten years, you could hardly achieve such returns with any other financial product, which of course explains the general popularity of crypto currencies. Even this year, Bitcoin was able to achieve a performance of over 1,000 percent, which also applies to numerous other crypto currencies. The chances of very high profits are therefore definitely there when trading in crypto currencies and the amount of profit can be considerably increased again, especially through CFD trading.

What are the risks of crypto currencies?

After you have informed yourself about the opportunities that exist in connection with trading cryptocoins, you should not forget to consider the existing risks. What is certain is that trading in crypto currencies is extremely speculative. In the past, many digital currencies have not only been characterised by prices that have risen considerably in some cases. Instead, some drastic losses within a few days were also the order of the day, including at Bitcoin.

At its peak, the leading crypto currency lost more than 40 percent of its value within a few weeks. As a result, when trading in crypto currencies you must always take into account that significant losses can occur. According to some experts, this danger is currently even particularly high, precisely because the value of many crypto currencies has risen so enormously in the recent past. Some specialists fear therefore the bursting of a possibly existing speculation bubble.

As result it is to be held firmly that the trade with crypto currencies contains on the one hand chances on enormously high profits, it can come on the other hand in addition, at any time to drastic losses. You should always be aware of this fact and weigh up the opportunities and risks before deciding to speculate with digital currencies.

Trading in the world of crypto currencies

Bitcoin, Ethereum, NEM, crypto currencies – these are terms you hear and read more and more often lately.

An even more important question – can the price of Bitcoin & Co. continue to rise?

Crypto currencies are digital means of payment. Thanks to the cryptography used, a decentralized and secure payment system is created. The best known and oldest crypto currency is Bitcoin. But since Bitcoin has become known worldwide, several hundred crypto currencies have been created. Many of them will soon be forgotten again. But some of them have a lot of potential – for investors and speculators at the same time.

What makes crypto currencies attractive to users?

  • Transactions are anonymous
  • Decentralised system – not under the control of a central bank or government
  • No link to the interest rates or economic situation of a country
  • Can be used for payments, investments and speculation
  • Crypto currencies carry a high risk due to price fluctuations. However, this is an area of constant innovation, and the potential is huge. Crypto currencies are not manipulated by a central bank or government, and the technology behind them is already being used in various fields – from financial transactions to data processing and even medicine.

How can you get involved?

You could buy the crypto currencies at one of the crypto exchanges. However, they are unstable and charge high fees. Example: Mt. Gox was one of the largest crypto exchanges in the world, but went bankrupt abruptly in 2014. Many Bitcoin investors lost their entire profits as well as their initial capital.

A much safer way to trade or invest in cryptos is to choose a reputable CFD broker. What are CFDs? So-called Contracts for Difference. This is a financial instrument that allows you to speculate on the future price movement of the underlying asset. CFDs allow you to profit with Bitcoins without actually owning them. This significantly reduces the counterparty risk and allows you to concentrate on your trading.

A summary of the advantages of crypto CFDs:

  • Lower costs
  • More flexibility – benefit from a rise and fall in the price of cryptos
  • Possibility to trade with a 1:30 lever
  • Trading with a regulated and recognised broker
  • No obligation to make additional contributions in Germany

When trading CFDs where the underlying investment is a crypto currency, you should be aware that crypto currencies are not to be treated as financial instruments within the meaning of MiFID. Crypto currencies are traded on unregulated, decentralised digital exchanges. Accordingly, price formation and price movements of crypto currencies depend solely on the internal rules of the respective digital exchange, and these rules may change at any time without notice. In the course of the day, this often leads to very high price fluctuations in the crypto currencies, which can be significantly higher compared to financial instruments as defined by MiFID. By trading CFDs in crypto currencies you therefore accept a significantly higher risk of losing your invested amounts, which can occur within a very short time due to sudden negative price movements in the crypto currencies.