Rising interest rates, the war in Europe and inflationary pressures caused a global economic recession in 2022, cutting valuations in the public and private markets.
With market representatives like the SPDR S&P500 ETF TO SPY With a drop of more than 30%, investors in traditional markets were hit hard. For investors involved in the cryptocurrency market, the downturn was even more dramatic: Bitcoin USD/BTCThe price of decreased more than 70% and many coins lost more than 90% of their value.
The dramatic drop in value is accompanied by a series of high-profile catastrophes in the industry, including Luna collapsethree capital arrows capitulation and the infamous FTX bankruptcy. Unsafe regulatory practices and suspicious intentions on behalf of founders were constant themes in 2022, adding to the pain of a declining market.
One possible silver lining for cryptocurrency investors in 2023 is the idea that fluctuations like these have several historical precedents. In 2015 and 2018, for example, Bitcoin lost about 85% of its value. As one digs deeper into the Bitcoin chart, more of these fluctuations become apparent, and each time Bitcoin rose to hit new highs.
However, investors caught between wanting to speculate in cryptocurrencies but not being willing to buy them outright could find potential solace in the derivatives market.
CFD trading on cryptocurrencies
A way to trade the cryptocurrency market without buying coins like Bitcoin USD/BTC, Ether EUR/USD and MATIC MATIC/USD It is through a contract for difference (CFD).
A CFD is an agreement between a buyer and a seller to exchange the difference between the opening and closing price of the asset at the expiration of the contract. CFDs belong to the class of financial instruments "derivatives"; They allow buyers to speculate on the price of underlying assets such as stocks, commodities, currencies, and cryptocurrencies without actually owning them.
The main advantage of CFDs is that they allow traders to speculate on the price of assets at a much lower cost of capital. Margin requirements for a share-based purchase, for example, can be as low as 5% for a CFD trade, while traders buying the shares outright would need to put up at least 50% cash in most corridors. Assuming one wants to buy 100 shares of a $30 stock, buying shares would involve a cost of capital of $1,500 (30 * 100 * 50%), while buying CFDs might only cost $150 (30 * 100 * 5%).
Margin requirements and leverage vary by CFD broker, but the lower price is always present compared to outright purchases of shares. As such, CFDs give traders a unique leverage opportunity, which means higher or lower returns on investment (ROI) for each trade they place. CFDs also allow traders to speculate down with relative ease (ie no shorting, share borrowing fees, etc.) and trade multiple markets at the same time.
Like all financial instruments, CFDs have their withdrawals. CFD markets often have larger spreads than traditional markets, and this can significantly increase the risk in trading. Along with irresponsible use of leverage, large spreads could affect a trader's ability to control risk and eradicate trading. edges.
T4Trade - a leading CFD broker
Although there are obvious risks, CFD trading offers some of the best opportunities for capital growth, and this potential is only magnified when combined with a trusted CFD broker such as T4Trade.
Offering trading opportunities in over 300 different assets including Forex, Precious Metals, Stocks, Indices, Commodities, Crypto CFDs and more, T4Trade is a go-to destination for traders looking to explore CFDs on the financial markets. The broker has a sophisticated trading platform called MetaTrader 4 and is regulated by the Seychelles Financial Services Authority.
T4Trade addresses the issues of spreads and commissions in CFD trading. The broker has lowered its commission fees to $0 and has given traders access to average spread sizes as low as $1.1. With T4Trade, traders can easily place directional bets on the cryptocurrency and other futures markets, without spending significant capital and still earn a high ROI.
While CFDs are not yet available to traders in the United States, for those in other parts of the world, T4Trade could be a platform to take note of.
Click here for more information on how T4Trade could help you trade CFDs in a declining cryptocurrency market.
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