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CFD Brokers

Cryptocurrency CFD brokers are becoming more popular as the demand for cryptocurrency continues to grow. This article will explore some of the best crypto CFD brokers and explain how they work. The first broker we’ll look at is eToro, a social trading platform that allows you to trade with many different cryptocurrencies (Bitcoin, Ethereum, etc.). The next broker we’ll discuss is AvaTrade which offers competitive spreads and deep liquidity in various currencies. But first a quick CFD guide.

What is a CFD broker?

A Contract for Difference is an agreement between investors and CFD brokers to pay the difference between the closing price and the opening price for a given asset such as a crypto asset like Bitcoin. CFD brokers are particularly popular with day traders offering low costs and straightforward access to major financial markets. CFDs can also be used by long term investors though it is important to use risk management techniques like stop losses.

Differences between a Crypto Exchange and a Crypto CFD Broker?

Cryptocurrency exchanges like Coinbase and Binance allow you to purchase Bitcoin with fiat currency (USD, EUR etc.) or Cryptocurrency. For example, you can trade an altcoin for Bitcoins. However, some brokers such as eToro also provide access to financial markets using CFDs based on cryptocurrencies such as Bitcoin, Ethereum and Litecoin.

Both Cryptocurrency Exchanges and Crypto CFD brokers offer their own advantages. Some traders prefer buying coins directly where others may feel the spreads are too high on CFDs offered by exchanges like eToro and AvaTrade which can be as low as 0.01% compared to Coinbase’s ~0.25%.

You don’t need to deal with the technical side of Cryptocurrency when trading CFDs. This means that you don’t need to download wallets, obtain a cryptocurrency wallet address or understand how the Blockchain works in order to trade with cryptocurrencies offered by brokers like eToro and Avatrade.

What are Contracts for Differences (CFD)?

In the simplest form, CFDs follow the real-world price of an asset. Not only crypto-assets and stocks are included as a whole but virtually any type of fund imaginable. CFD is trading under leverage and shorting is possible. Selecting the best CFD broker is crucial when considering how much trade you might have to make. The list below shows the top CFD brokers. Are you interested in trading with cryptocurrency but don’t want to hustle with wallets and the whole technical aspect of it, or are you only focused on commissions and low spread rates? Or perhaps you would like more advanced options. Then a CFD broker could be the correct fit for you.

CFD Definition

A CFD is a transaction between two parties that agrees on the paying value or the opening value of two or more investments to the market. None of the parties in this trade own the underlying asset. Because we don’t own the assets when we trade CFD it’s simply speculation of the movements in the value of the asset, whether it is high or low. CFD contract where you expect that the price will come down is known in CFD markets simply as Short Sales, short CUT or going short. A long CFD deal is called going long.

What is leverage? How does it work?

Traders use leverage to enjoy small price movements which are comparatively small. Leverage operates using a deposit (margin) to provide a trading trader with enhanced exposure in an underlying asset. The trader essentially places a portion of the entire value of their trade while their provider lending them the rest. For instance, an investor wants to buy 100 coins worth in total $1000 in a certain crypto asset. The investor pays with $100 of their own money and lends the rest ($900). If the price of the crypto asset rises by 10 per cent then the trader’s investment is valued at 1100. When the trader close the position the profit from the investment is $100. Initially, the trader had $100 and ends up with $200 (1100-900 (for the loan) = 200). So that would result in a 100% profit for the trader.

Top 3 Best Crypto CFD brokers

eToro

eToro is a leading CFD broker and holds the title of one of the first authorized companies to offer cryptocurrency trading through its platforms. The platform supports several cryptocurrencies such as Bitcoin, Ethereum and Litecoin with many more to be added soon. eToro also has an app that can be used on mobile devices and it offers copy-trading features.

Read our eToro review here

AvaTrade

AvaTrade is an established CFD broker that offers cryptocurrency trading. The platform supports both fiat and cryptocurrencies such as Bitcoin, Ethereum, Litecoin and Ripple. AvaTrade has very low fees which are only 0.25% for each transaction making it competitive with others in the marketplace.

Read our AvaTrade review here

Plus500

Plus500 is a CFD broker that offers crypto-trading. The platform supports to trade of both fiat and cryptocurrencies such as Bitcoin, Ethereum, Litecoin and Dash using contracts for difference (CFDs). Plus500 has a very low fee.

Read our Plus500 review here