2020 has been a busy and encouraging year for cryptocurrency investors. The top-performing assets in the market withstood the worst of the economic crash, as well as anybody could have hoped, causing many to reassess Bitcoin and others as safe havens akin to gold. And, as we inch closer towards the end of the year, these same assets are only looking more encouraging. Bitcoin approaching $16,000 marks one of its strongest runs since the end of 2017, when, as many remember, it nearly reached the $20,000-threshold.
Naturally, this performance has helped many investors. It has protected some people’s money during a difficult time for other markets, and it has netted others significant gains. But, along the way, the strong year has undoubtedly led more people to consider cryptocurrencies as investments too. A much-discussed prediction by Fortune that Bitcoin would “go mainstream” in 2020 didn’t really come to fruition with regard to the regular, practical use of digital currency. But, it may well be borne out in more people buying in for investment purposes. As people see cryptos withstanding crashes and gaining value, it’s understandable that more will want to capitalize on them.
What ends up holding some of these people back though is a certain discomfort with actually owning cryptos. For those new to the market, a crypto-wallet can seem intimidating, and exchanges can be confusing; it’s still a brand new asset class and one that many seem as being more trouble than it’s worth. Such skeptics don’t need to avoid crypto-investments altogether anymore though because there are other, simplified ways of profiting off of the market. One such way is spread betting, which is what we want to dive into here.
What is Spread Betting?
To explore why this is an interesting option for those who are curious about cryptocurrency investing but skeptical of crypto-ownership, it’s necessary to first explain what exactly it is. To that point, FXCM’s definition of spread betting is perhaps the most helpful – This is a “form of derivatives trade centered on speculation pertaining to the future pricing volatilities facing a specific asset class.” That asset class can be a currency, cryptocurrency, or a number of other things, but the idea is the same. Spread betting means speculating on value, rather than buying at value.
To break down the idea a little bit more, spread betting involves a straightforward wager on an asset’s price moving up or down. To bet on the asset going up, you choose the “buy” or “bid” price for the said asset, select the amount you want to wager per unit of growth, and collect that amount if and when the asset gains value. To bet on the asset going down, you do the same with the “sell” or “ask” price being listed. So, if Bitcoin sits at $15,000 and you want to wager $100 per unit on a rise in value — and we say that a unit is $5 (which may vary), you will stand to gain $100 for every $5 Bitcoin rise, without ever actually owning any of it.
Spread Betting and Cryptocurrency
As mentioned, spread betting can be applied to a number of different markets. There are more and more platforms that do allow for crypto-trading via spread betting though. For the most part, these platforms host activity relating to the biggest and most commonly traded assets in the crypto market — such as Bitcoin, Ethereum, and XRP. It stands to reason though that in time, more cryptocurrencies will be available for spread betting (unless the market unexpectedly consolidates at some point and only a few mainstream cryptos remain).
Other than a potentially limited selection of cryptos to trade though, spread betting on cryptocurrencies looks and works the same as it does in any other financial sector.
Advantages of Spread Betting Cryptocurrency
The main advantage of spread betting cryptocurrencies for the purposes of our discussion here is that it removes the need to purchase and store crypto-coins — which can be daunting particularly for newcomers to the market. Even beyond the issue of wallets and exchanges being complicated for some, a piece on fear and cryptocurrency by Entrepreneur highlighted some other reasons some may not want to buy them – A general lack of understanding, a fear of extreme volatility, and an overwhelming selection. Spread betting essentially offers a means of trading that erases or at least mitigates concerns like these.
More generally though, people often turn to spread betting for benefits such as tax-free profits, commission-free trades, leveraged trading, and the ability to trade price movement in both directions.
Spread betting on cryptocurrency values can still be a difficult process. Crypto-markets remain volatile, and profits are by no means guaranteed. It can be a more appealing trading method for curious crypto-newcomers though, and there are certain advantages to it that make it worth considering.