There’s been no escaping the rise of bitcoin over the past year.The digital currency attracted intense media attention as its value skyrocketed from $13 at the beginning of 2013 to more than $1,000 by the end of November the same year.
Conceived as an anonymous and secure way of conducting transactions on the internet, bitcoin is a completely decentralised electronic currency that is minted and exchanged entirely within a massive network of online users.
There are no physical bitcoins – nothing you could touch or put in your pocket in the real world – and no government or central bank working to stabilise its value.
But, far from being detrimental, the uncertainty and the inescapable hype surrounding bitcoin has fuelled its meteoric rise. Coupled with its extreme volatility, this makes bitcoin an excellent currency to bring diversity to a trading portfolio.
The main problem is that buying and selling bitcoin can sometimes be an intimidating and complicated business.
The advantages of CFDs
This is where CFDs (Contracts For Difference) offer a distinct advantage. With bitcoin CFD trading there’s no need to download bitcoin wallets or understand the way virtual currency transactions work.
The reason for this is that trading with an online broker like AvaTrade doesn’t involve the buying (or selling) of any actual bitcoins. Instead, the trader enters into a contract with the broker based on the difference in value of bitcoin at the time the trade is opened and the time it is closed.
CFDs present several additional advantages. First and foremost of which is security.
There have been a handful of scares involving bitcoin exchanges where clients have lost large amounts of bitcoins. Trading bitcoin CFDs with a regulated broker like AvaTrade greatly mitigates this risk – particularly as no actual bitcoins are involved.
Another benefit to CFD trading is the ability to trade on leverage of up to 1:20 – this presents clients with a real opportunity to boost their potential profits by taking a much larger position in the market than they would otherwise be able to. Of course, leverage can also lead to larger losses – it is a powerful tool that should be used with care. Equally important is the ease with which clients can trade short (selling rather than buying), which makes CFD trading an excellent way to take advantage of bitcoin’s volatility.
Since AvaTrade introduced bitcoin CFDs in August 2013, it has become one of the most popular of the more than 200 instruments that the broker offers for online trading. Whether or not bitcoin turns out to be the future of money in the digital age, it looks set to remain one of the most interesting and promising financial markets for some time to come.
Find out how you can get started trading bitcoin CFDs at: www.avatrade.com/lp/digital-currencies