How to Leverage More Crypto Using CFDs

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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

In the last few weeks, Bitcoin (BTC) and the altcoins market, with cryptocurrencies like Ethereum (ETH), Decentraland (MANA), and Shiba Inu (SHIB), hit all-time highs. When Facebook announced it would change its name to Meta Platforms Inc. FB, coins representing the metaverse increased. And in light of SHIB’s rise to the top of many crypto charts, Dogecoin (DOGE) made a comeback almost overnight.

So, what happens when you think a coin is on its way to the top, but your funds are tied up in some other investment? Leverage is one way to be able to get in.

Although contract for differences (CFD) trading is prohibited in the United States, the rest of the world can use crypto CFDs to trade on leverage.

Find out more about leverage.

What Are CFDs and How Can You Use Them to Trade Cryptocurrencies?

CFDs are popular in countries outside the U.S. It's a type of derivative trade — an agreement between 2 parties that usually includes the investor and the broker.

Trades are opened, and an exchange occurs between the opening and closing price of the contract. Derivative trades allow investors to turn a profit without owning the investment outright.

Trading crypto assets is becoming a norm as traders are able to leverage currencies that they own to obtain additional assets in a short timeframe. For example, when SHIB rose from around $0.000008 USD to more than $0.000089 USD in recent weeks, many could have made a significant profit. 

Unlike options trading, investors have unlimited time to trade their CFDs before taking a profit or loss. The actual profit or loss is then multiplied by the number of shares bid on at the time of the trade. When SHIB fell sharply, it could have made or broken a lot of investors.

Because of the unlimited window for the derivative trading of CFDs, investors may still have suffered little consequence. Instead, they could pay a small nightly fee to continue all plays within the CFD market. And with market sentiment that SHIB would once again “rocket to the moon,” this play would be risky but possible.

Why Would Someone Want To Trade Crypto CFDs Over Crypto Alone?

Even when a surplus of cash is immediately available, traders aren’t restricted to what’s in their bank accounts. Instead, they can trade a higher amount while leveraging buying power as an advance towards upcoming positions.

If a trade is entered at the right time and on the right side of the trade, it can have success. On the other hand, a dramatic dip may mean that a trader will either need to leave the trade early or hold on to it until the next wave or cycle. 

Trading crypto CFDs using leverage would also mean that traders can continue holding existing digital currencies while growing their portfolios.

Can you imagine if someone bought into Ethereum at around $200 and exchanged it for Shiba at its peak because Ethereum’s big update was delayed and the price fell instead of increased?

When SHIB dropped, Ethereum saw its greatest gains. Likewise, Dogecoin made its comeback when traders took major profits from SHIB and bought DOGE.

Where Can You Trade Crypto CFDs? 

Traders will find that they cannot trade crypto CFDs through crypto exchanges so they need to sign up for a trading account with a brokerage like Axi. 

Axi is an Australian startup in the trade and investment space. Axi lets investors trade across a range of assets, including forex, share CFDs, crypto CFDs, indices, and commodities. To learn more about trading crypto CFDs versus buying cryptocurrency with Axi, you can visit their platform and open an account here.

Disclaimer: The information is not to be construed as a recommendation or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.