Cryptocurrencies have dominated the investing scene, both retail and institutional, for the last couple of months. The values of major coins, such as Bitcoin, Ethereum and Ripple, have soared and attracted massive public attention. But despite interest being sky-high, there has been regulatory clampdown in various jurisdictions, with the relevant agencies banning part or all cryptocurrency activities in their respective countries.
But all is not lost for cryptocurrency enthusiasts in such countries, as the massive popularity of the virtual currencies have led to their introduction in the Forex and CFDs trading industry. AvaTrade was one of the first forex brokerage firms to introduce cryptocurrency trading as CFDs on their platform. Trading is also easy to do, allowing investors to quickly learn how to trade Ripple, Bitcoin and other leading cryptos on a platform as opposed to trading it on crypto-exchange:
On the AvaTrade MetaTrader 4 platform, Ripple (XRP) is listed as a CFD (Contract for Difference). When traders select XRP, they are able to speculate on the price movement of the coin. They can buy if they anticipate higher prices or sell when they anticipate lower prices. Their overall profit or loss will depend on how far the price moves away from its entry point. In addition, a trader does not need to own the XRP coin in order to trade its price movement, making it a lot more affordable. Essentially, a CFD allows traders to profit from price movement, whereas trading on an exchange gives them ownership of the underlying coin.
Why Trade Cryptocurrencies on a Forex Platform
It has been reported that the bulk of cryptocurrency investments are done for speculative purposes. Investors basically buy them, hoping they will increase in value. With the recent choppy fluctuations in pricing, it makes sense to trade them on a Forex brokerage platform rather than an exchange. For instance, In January, the price of Bitcoin, the most popular cryptocurrency, dropped from $13,000 to $9,000. An exchange trader would have incurred massive losses. On the other hand, a crypto trader using a Forex platform would have enjoyed the fluctuations as they own no coins and would have been presented with numerous opportunities to either buy or sell Bitcoin, anytime throughout the month.
Another major advantage of trading cryptos with a broker is security. The security of exchanges has always been a concern, with colossal amounts lost in numerous hacks in the past. Traders are even further advised to implement further safety measures by holding their coins in cold storage wallets and to keep their Private Keys safe to avoid losing them if they plan to hold them for the long term. This is not an issue with a broker. Unlike exchanges, Forex brokers are widely regulated by major bodies, such as SEC, FCA and CySEC. Regulators ensure that brokers are well capitalized, hold client funds in segregated accounts as well as commit to a compensation scheme that protects clients against broker bankruptcy. There are no Private Keys to be remembered either.
Investors trade cryptocurrencies to make money, so it makes sense to consider the costs. Brokers provide much flexible and cheaper ways of trading cryptos than exchanges. For instance, AvaTrade offers leverage of up to 1:20, live quotes and detailed charts as well as multiple professional platforms. The spread and swap rates are also very competitive, and the high liquidity ensures instant execution (both entry and exit) on trades. On the other hand, there is some rigidity when trading cryptos on an exchange. Leverage is non-existent on most exchanges, while liquidity is always a concern and closing a transaction may be subject to delays occasioned by many factors, such as mining activity and platform stability. The costs can also be higher as mining fees are also factored, in addition to price delinquencies.
Also noteworthy is that Forex brokers offer a variety of convenient payment methods that include eWallets, credit/ debit cards and other traditional methods which can help traders deposit or withdraw from their trading accounts quickly and with ease. Exchanges, on the other hand, mostly offer Bitcoin and other traditional methods as payments options. This can sometimes be inconvenient for most traders.
Cryptocurrencies are here to stay and there are multiple ways to trade them, even in countries where they have been banned. Investors who want to hold them for the long haul can be well served by exchanges. But for those seeking short term, speculative trading, Forex brokers, such as AvaTrade, provide a compelling platform that can help them discover the full power of cryptocurrencies.