T4Trade CFD Trading: Discover The Benefits Of CFDs In A Declining Crypto Market

Rising interest rates, war in Europe and inflationary pressures caused a global economic downturn in 2022, slashing valuations across both public and private markets. 

With market proxies like the SPDR S&P500 ETF SPY declining over 30%, investors in traditional markets were hit hard. For investors involved in the cryptocurrency market, the downturn was even more dramatic: Bitcoin BTC/USD’s price declined by over 70%, and many coins lost more than 90% of their value. 

The dramatic loss in value is accompanied by a string of high-profile catastrophes in the industry, amongst them Luna’s collapse, Three Arrows Capital’s capitulation and FTX’s infamous bankruptcy. Unsafe regulatory practices and suspicious intent on behalf of founders were constant themes in 2022, adding to the pain of a declining market.  

A potential silver lining for cryptocurrency investors in 2023 is the idea that fluctuations like these have several historical precedences. In 2015 and 2018, for example, Bitcoin lost approximately 85% of its value. As one delves deeper into the Bitcoin chart, more of these fluctuations become apparent, and on each occasion, Bitcoin rose to make new highs. 

However, investors caught between wanting to speculate on cryptocurrencies but being unwilling to purchase them outright could find potential solace in the derivatives market. 

CFD Trading In Cryptocurrency

One way to trade the cryptocurrency market without purchasing coins like Bitcoin BTC/USD, Ether ETH/USD and MATIC MATIC/USD is through a contract for difference (CFD). 

A CFD is an agreement between a buyer and seller to exchange the difference between the opening and closing price of the asset at contract expiration. CFDs belong to the “derivatives” class of financial instruments; they allow purchasers to speculate on the price of underlying assets like shares, commodities, forex and cryptocurrency without owning them.

The main advantage of CFDs is they allow traders to speculate on the price of assets at a much lower capital cost. Margin requirements for a stock-based purchase, for example, can be as low as 5% for a CFD trade, while traders purchasing the stock outright would have to put up at least 50% in cash at most brokers. Assuming one wants to purchase 100 shares of a $30 stock, a stock purchase would entail a capital cost of $1,500 (30*100*50%), while a CFD purchase could cost only $150 (30*100*5%). 

Margin requirements and leverage vary by CFD broker, but the lower price tag is always present when compared to outright stock purchases. As such, CFDs grant traders a unique leveraging opportunity, meaning higher or lower returns on investment (ROI) for each trade they take. CFDs also allow traders to speculate to the downside with relative ease (i.e. no short locates, stock-borrowing fees, etc.) and to trade multiple markets at the same time. 

Like all financial instruments, CFDs have their drawdowns. CFD markets typically have larger spreads than traditional markets, and this can significantly increase risk on trades. Paired with the irresponsible use of leverage, large spreads could impact a trader’s ability to control risk and eradicate trading edges. 

T4Trade: A Leading CFD Broker

Although obvious risks exist, CFD trading offers some of the best opportunities for capital growth, and this potential is only magnified when paired with a trusted CFD broker like T4Trade.

Offering trade opportunities on more than 300 different assets, including Forex, precious metals, stocks, indices, commodities, CFDs on cryptocurrencies, and more, T4Trade is a go-to destination for traders looking to explore CFDs in the financial markets. The broker boasts a sophisticated trading platform called MetaTrader 4 and is regulated by the Seychelles Financial Services Authority. 

T4Trade tackles the spread and commission issues in CFD trading. The broker has cut its commission fees to $0 and given traders access to average spread sizes as low as $1.1. With T4Trade, traders can easily place directional bets on the cryptocurrency market, and other Futures markets, without expending significant capital and still reap a high ROI. 

While CFDs are not yet available for traders in the United States, for those elsewhere in the world, T4Trade could be a platform to take note of.

Click here to learn more about how T4Trade could help you navigate CFD Trading in a declining cryptocurrency market. 

Featured Photo by Art Rachen on Unsplash

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.