Crypto CFD Explained: Why Trade Cryptocurrency CFDs?
Date Modified: 26/01/2025
In recent years, cryptocurrencies have been growing in popularity among a variety of traders around the globe. To satisfy this demand, the range of platforms, CFD and otherwise, offering crypto trading has grown rapidly. These trading pairs can include one cryptocurrency, for example, Bitcoin, and one fiat currency, such as the US dollar. Here, the trader makes a profit or loss by forecasting whether the cryptocurrency side of the pair will gain or lose value against the fiat currency.
The other kind of cryptocurrency pair is made up of two different cryptocurrencies, for example, Bitcoin and Ethereum. In this case, the trader makes a profit, or loss, by forecasting whether the leading cryptocurrency of the pair will gain or lose value against its cryptocurrency partner.
In that respect, trading cryptocurrency CFD pairs work in the same way as trading CFDs on forex pairs. In a more general sense, trading cryptocurrency CFDs is executed in the same way as trading CFDs on other, more traditional asset classes like commodities, stocks, or stock market indices in that a trader speculates on the price movements of their chosen instrument.
So, why would a CFD trader choose to trade specifically on cryptocurrencies rather than traditional assets? Let's take a look at some of the most common reasons for trading cryptocurrency CFDs.
TL;DR
- Crypto CFDs enable trading with leverage and offer the ability to profit from both rising and falling markets without requiring cryptocurrency ownership.
- Trading CFDs eliminates the need to manage wallets and private keys, reduces security risks, and simplifies the process.
- Leverage allows for the opening of positions with relatively less starting capital, although the risk of financial losses is also magnified.
- Crypto CFDs offer continuous trading opportunities and cost efficiency by avoiding blockchain-related transaction fees and delays.
Cryptocurrencies as a Market Disruptor
Cryptocurrencies have been around since Bitcoin, the original cryptocurrency, launched in 2009. However, only in the last few years they have developed from something with a limited niche following of mainly tech enthusiasts into a new asset class that promises to carve out a long-term and important role in mainstream financial markets.
The potential that cryptocurrencies have to make a fundamental change to how global markets function has led many to refer to them as 'disruptors'. In 2024 for example, there were several thousand different altcoins on the market. The substantial growth in the number of cryptocurrencies since 2013, when there were only about 66 cryptocurrencies in existence, is not only a distinct example of how cryptocurrencies have shifted the market, but it might also mean that they have the capability to shape it in the future as well.
When disruptive technologies succeed in fundamentally changing markets and also have a financial asset form, they are generally the assets that show the biggest gains in value over time.
Some traders believe the ‘disruptive’ new technology of cryptocurrencies will fundamentally change money and commodity markets in the upcoming years; they are hoping for returns that early investors in promising tech stocks are hunting.1
Cryptocurrencies as a Commodity
There is an argument that some cryptocurrencies are more like commodities. An example of this would be the cryptocurrency Ethereum, which is not intended to be used as an alternative to money but instead pay for the use of its blockchain platform. The purpose of its blockchain platform is to build smart contracts. The price of commodities is influenced by global demand: for example, oil is used in fuels, plastics, and other materials, so its price is influenced by global demand for products made from oil. The price of 'utility' cryptocurrencies, like Ethereum and Chainlink, is influenced by the use of the blockchain platform they are associated with.
Cryptocurrencies Are Much More Volatile Than Traditional Assets
Cryptocurrency traders often make their profits or sustain losses on shorter-term positions rather than when they hold them over a period of 5, 10, or 20 years. They open and close positions to take advantage of price movements over weeks, days, hours, or even minutes2. Trading traditional asset classes over shorter time periods usually involves much smaller price changes than what would be seen over a period of months to years, but with cryptocurrencies being as volatile as they are, it is not unusual to see massive price fluctuations in a much shorter period of time.
For most traditional assets, it is very rare to see a 1% price movement in a single day. These movements usually only happen when something significant is happening in the market that dramatically changes investor sentiment. On the other hand, in the cryptocurrency market, it is relatively normal for individual cryptocurrencies to see their prices change by a few percentage points per day. When something significant happens in the cryptocurrency market, the price movements can be as much as 10% or more. This can potentially give traders many more regular opportunities to make significant profits from short-term trades. Of course, this also makes trading cryptocurrencies riskier than less volatile assets, so traders have to be careful as significant losses can also be incurred.
Cryptocurrency volatility is another sign of their novelty as an asset class. As the market matures, it could be assumed that volatility will gradually drop to a level that would be expected of more traditional asset classes.
Bitcoin has increased from around $38,784 in early February 2022 to $100,000 by 4 December 2024. That's an increase of around 157%.
The chart below shows the price movement of Oil which had a particularly volatile few months in 2022 especially due to the war between Russia and Ukraine, and resulting Western sanctions on Russian energy led to an ostensible hike in its prices. As it neared its 14-year high in the middle of March, Oil reached almost $124 per barrel before dropping to the low $70 range by the end of 2024.

Illustrative prices.
The difference is huge. And it's those big, regular price swings that make trading cryptocurrencies so attractive to traders who wish to take advantage of the volatility. Now let's take a look at how cryptocurrencies can become a part of your CFD trading experience:2
Advantages of Trading Crypto CFDs
Trading crypto CFDs offers several distinct advantages. One key benefit is leverage and margin trading, which allows traders to open positions larger than their initial capital. For instance, with a leverage ratio of 1:2, a 5% price movement in the underlying cryptocurrency can result in a 10% profit or loss for the trader. While this amplifies potential returns, it also increases the risk of significant losses, making effective risk management essential.
Another advantage is the ability to short-sell. CFDs enable traders to profit or lose from falling prices, a feature not as straightforward in spot cryptocurrency trading. This flexibility allows traders to adapt to both bullish and bearish market conditions. Additionally, traders do not need to own the actual cryptocurrency, eliminating the need for managing wallets, securing private keys, or dealing with blockchain network fees. Furthermore, CFD platforms provide exposure to a diverse selection of cryptocurrencies, from major assets like Bitcoin and Ethereum to emerging altcoins. This diversity allows traders to explore opportunities across a wide spectrum of the market.
Since CFDs are derivatives, traders avoid common blockchain-related issues such as network congestion, transaction delays, and wallet compatibility problems. This simplifies trading and reduces associated costs. Like the cryptocurrency market, CFD platforms generally operate around the clock, offering continuous trading opportunities and enabling traders to respond to market movements in real time. Additionally, these platforms often feature sophisticated tools for technical and fundamental analysis, including advanced charting, technical indicators, and risk management options like stop-loss and take-profit orders, which help traders optimise their strategies.
What Sets Crypto CFD Trading Apart
Crypto CFDs present unique features that set them apart from other trading arenas. They offer flexibility by enabling speculation on both rising and falling markets without requiring direct ownership of cryptocurrencies. Cost efficiency is another notable feature, as traders avoid blockchain transaction fees and conversion costs associated with cryptocurrency exchanges.
Leverage enables traders to access markets with smaller initial investments, making crypto CFDs accessible to a broader audience. Additionally, traders can diversify their portfolios by gaining exposure to cryptocurrencies and other asset classes, such as forex and commodities, on a single platform.
While trading crypto CFDs has notable advantages, traders should also be mindful of potential risks. Leverage, while beneficial for amplifying gains, also magnifies losses, potentially leading to rapid depletion of capital. Fees and spreads charged by CFD brokers, including overnight fees for holding positions, can erode profits over time. Additionally, regulatory restrictions in some jurisdictions may limit or prohibit CFD trading, affecting accessibility for certain traders.
Trading Cryptocurrencies CFDs With Plus500
Traders who believe they would be able to trade cryptocurrency CFDs are able to do so on the Plus500 trading platform. A strong selection of individual cryptocurrencies to USD, crypto-to-crypto cross pairs, and even the popular Crypto 10 index are all available to trade as CFDs on their intuitive platform. After successfully opening a trading account, you can select the crypto CFD instruments you would most like to trade and get started.
Traders who choose to trade cryptocurrency CFDs with Plus500, get to enjoy trading with a user-friendly and intuitive platform with trustworthy risk-management tools. Furthermore, they get to trade with leverage and have access to many educational articles and how-to videos to help them get the best out of their trading experience.
Now that you've taken the time to learn about the ins and outs of crypto CFDs, it's time to start trading Crypto CFDs with Plus500.
1 Past performance is not a reliable indicator of future results.
2 Please check your platform’s scalping policy.
FAQs
Cryptocurrency CFDs are derivative contracts that allow traders to speculate on the price movements of cryptocurrencies without owning the actual assets.
They allow traders to profit from both rising and falling markets while avoiding the complexities of owning or managing cryptocurrencies.
The use of leverage can amplify losses, and cryptocurrencies' volatile nature can pose risks as well.
Yes, like the underlying cryptocurrency market, crypto CFD trading on the Plus500 platform is offered around the clock.
Related News & Market Insights
Get more from Plus500
Expand your knowledge
Learn insights through informative videos, webinars, articles, and guides with our comprehensive Trading Academy.
Explore our +Insights
Discover what’s trending in and outside of Plus500.
Stay up-to-date
Never miss a beat with the latest News & Markets Insights on major market events.