It is no secret that here at Two Blokes Trading we are big fans of cryptocurrencies, both investing and trading the things. And when it comes to trading cryptos, there is no better mechanism than the humble Contract for Difference a.k.a. the CFD.
While most of you will probably use CFDs to trade normal Forex, or possibly Shares, an increasing number of traders have turned to CFDs to get Bitcoin or Altcoin crypto exposure without the hassle of crypto exchanges and wallets and the absolute hammering in fees you will receive. Not to mention the ever-present risk of having it all snatched away by some shadowy, anonymous hacker, or disappeared by some filthy ponzi-scheme charlatans. The wild volatility swings that are the daily bread and butter of the crypto trader will provide enough thrills without needing to worry about all that nonsense.
By trading your cryptos with a broker you can profit from the big moves in crypto that we keep hearing about, with no security fears at all.
But, which broker to use?
At this moment in time there are 4 main brokers providing cryptocurrency products.
XTB
IG
PLUS500
CITY INDEX
The Stats
From research to time of publication the stats and facts changed twice so for the most accurate information check out this link; https://www.ig.com/uk/bitcoin-btc
The Blokes trade cryptos with XTB - we tell you why in this review.
Risky Business
As you can see the offerings differ quite significantly. But one thing most experienced traders will notice is that there are more restrictions on trading cryptos compared to Forex or Shares, regardless of which CFD broker you choose.
With leverage offerings as low as 2:1 and a maximum of 10:1, the brokers are sending clear signals that this is a riskier proposition than normal Forex trading. Compare it to up to 500:1 on some Forex CFD broker platforms. But, of course, if you are trading the major Forex pairs a big daily move would be 1%. In Bitcoin a big daily move is 20%!
So trading with a bit more caution is recommended, and don’t forget, what goes up must come down! Even Bitcoin with gains over 1000% in a matter of monhts is not immune to losing 50% of it’s value in a week (as many traders learned to their cost in January 2018).
But.
Many of you will understand the risks and still wish to trade cryptos. We understand - we are right there with you. If you only trade with risk capital and keep your trade size small then there are serious gains to be had in this market.
Swap Costs Can be a Killer
The keen eyed among you will also notice that the Swap costs are much higher on crypto than on Forex. Fees, even in this unregulated market, are unavoidable.
If you are thinking that the Swap might make buying the actual coins more cost effective then consider this: Coinbase will charge you 5% when you deposit in order to buy cryptocurrencies. Yes, that’s right, the leading crypto exchange will charge you FIVE PERCENT just for the privilege of buying Bitcoin or another crypto. Then they charge you transfer fees when you move your crypto to a wallet. That wallet will probably then charge you for sending it back to the exchange when you want to sell out. Then more fees and spread from Coinbase when you change it back to fiat currency. And then exit fees when you withdraw your real money. This is not a hippy revolution, this is Financial Services.
But that’s not to say you shouldn’t be selective. For instance Plus500 are charging 180% Swap on long crypto positions when calculated annually. So...that’s a “no thanks” from me then! Even with the potential for 1000% gains that is just ridiculous!
Punchy Spreads
Spreads are also higher in crypto trading than they are in Forex. But you have to understand the risk that a CFD provider is taking in providing this service - not many Forex traders will be taking 1000% off their broker with one good trade! With far higher volatility, if you trade well your gains should be able to absorb these fees. If you don’t believe us then check out the gains made by the winning traders in our recent crypto trading competition in ONE MONTH using NO LEVERAGE. https://en.xtb.com/crypto-demo-competition
The costs are relatively high, but we find the fees of the more reasonable brokers like XTB or IG to be acceptable. We realise that it is just as bad or worse with the crypto exchanges, so we suck it up!
We Recommend XTB
For us, XTB comes out on top. Which is reassuring because we recommend them on the podcast! The Swap costs are reasonable, the maximum exposure keeps thing sensible and the leverage is high enough to help you benefit from the CFD mechanism. IG and City Index are similar in these regards, but they don’t have the Altcoin offering that XTB does, with City Index only offering Bitcoin.
The only other broker that has the same number of coins on offer is Plus500, but they are having a laugh if they think we’re paying 180% a year in swap costs!!
So, it is up to you, but if you want to trade CFDs then we recommend XTB. If you like the sound of them, click here to check them out. Don’t forget that by signing up through our link you’ll get a 15% spread rebate and of course be helping TBT and ensuring we can keep offering the podcast and all our other good stuff for free.
Check out XTB’s crypto offering at: www.twoblokestrading.com/crypto
Cheers!
The Two Blokes