Cryptocurrencies have become popular assets in the financial market. In slightly over a decade, the total value of all digital currencies in the industry has ballooned to over $1 trillion. This happened as the number of cryptocurrencies has jumped to almost 20,000.
There are several ways in which people make money in the cryptocurrency industry. First, you can be a crypto investor, where you buy and hold a cryptocurrency for a long period. In the long-term, holders have made substantial returns in the industry.
Second, you can be a cryptocurrency miner or validator, where you are responsible for confirming new blocks. Further, you can make money as a cryptocurrency trader, where you are focused on the extremely short-term profits. In this article, we will look at two main ways of trading digital currencies: spread betting and crypto trading.
What is cryptocurrency spread betting?
Spread betting is a popular method used by people to make money in the financial market. It is a process where a trader makes a prediction about whether a cryptocurrency pair will go up or down within a certain period. In spread betting, a trader is given two options.
If they believe that the price will go upwards, they will place a buy or long position. On the other hand, if they expect the pair to decline, they are given the option to sell or short it. In this case, they will make money as the price retreats.
In spread betting, traders are given cryptocurrencies in pairs such as BTC/USD and BTC/ETH. In these cases, BTC is the base currency while ETH is the counter-currency. As such, if the pairs rise, it means that the price of Bitcoin is rising. Similarly, if the pair is falling, it means that the US dollar is gaining.
Crypto spread betting can be a highly complicated situation for many new people. This explains why most people who start doing the practice fail. To do so, you first need to find a good broker who offers the service at a lower fee. If you would like to learn more, take a look at this helpful guide on the best cryptocurrency spread betting brokers in 2022.
What is crypto trading?
Cryptocurrency trading is also a process of buying and selling cryptocurrency with the goal of making a profit. For example, if you believe that Bitcoin will go up, you can buy it and then sell it once that happens. In many cases, crypto traders hold their positions for less than 1 day.
There are several ways of trading digital coins. First, you can buy and sell real cryptocurrencies using an exchange like Coinbase and Binance. Second, you can trade tokenized assets, which are financial derivatives that represent real digital coins. Third, you can trade cryptocurrency contracts for difference (CFD). CFDs are mostly provided by forex brokers.
Crypto spread betting vs crypto trading
There are several differences between crypto spread betting and trading. First, spread betting companies don’t charge a commission. Instead, the companies make money through what is known as a spread or the difference between the bid and ask prices. In crypto trading, companies like Coinbase are known to charge a commission for every order that they execute. Like with spread betting, CFD brokers also make money through the spread model.
Further, there is usually no capital gains tax when one uses the spread betting mode. Another difference between the two is how your profit or loss is calculated. In spread betting, you find the difference between the price you enter and where you exit and then multiply by your stake. In normal trading, you calculate the profit by subtracting the closing and open prices.
Similarities between spread betting and trading
There are several similarities between spread betting and CFD trading in the market. First, it is possible to use leverage when doing the two. Leverage allows you to use borrowed money with the goal of making more money if the trades move in your direction. Second, the two allow you to make money when the assets go up and down.
Additionally, you can hold your position for an extended period of time. Some spread betters and traders hold their positions for a few weeks or even months. Most importantly, they are both risky ways of making money. This means that while you can make a lot of money trading and spread betting, it is also possible to lose it all. Finally, it is possible to trade and spread bet cryptocurrencies on a 24/7 basis.
Summary
Spread betting and crypto trading are popular ways of making money in the cryptocurrency industry. In this article, we have explained what the two are and identified their similarities and differences. To succeed in both, you need to take time to learn about how they work and how to manage your risks.
