It’s all about the money
In finance and economics, for anything to be defined as money, it must fulfil three basic conditions:
- Be a unit against which to value other goods.
- Be a medium of exchange.
- Be a means of wealth storing.
Basically, money has value because we all accept that it has value.
Nowadays many things are becoming digital. For example, maps, magazines, and newspapers – and so is money, with Cryptocurrencies likely becoming the next evolution of it.
What are Cryptocurrencies?

Cryptocurrencies serve as a form of exchange, but unlike traditional currencies, they are not issued or controlled by a central bank. Additionally, the generation of new units is regulated through encryption. Essentially, cryptocurrencies can be viewed and used like regular money. The surge in crypto transactions has attracted numerous new investors, resulting in quick fortunes being made.
In case you are interested in taking advantage of the opportunities that lie ahead, you need to understand the different ways you can participate in this market.
There are two main ways to trade cryptocurrencies: either by trading CFDs, or trading through an exchange (spot).
Contracts for Difference (CFDs)
CFDs are financial derivatives that allow investors to participate in the movement of asset prices without full ownership of the asset itself. They are traded through a dealer network – over the counter – by simulating the value of the underlying asset. In this contract between a buyer and a seller, the resulting profit or loss of each position is immediately credited to the account balance and is calculated by the difference between purchase and selling prices of the CFD. Speaking of price, the fact that the CFD mimics the price behavior of the coin itself implies that there is no actual difference between buying a real coin and its CFD equivalent.
Advantages of CFDs

Trading CFDs offers several advantages. One can trade both long and short, having the opportunity to make profits in both rising and falling markets. This feature – short selling – is considered a key advantage of CFDs over spot trading as it also allows for hedging strategies to be utilized. Trading through CFDs, which offers deep liquidity far greater than spot markets do, allows for swift and efficient transactions. Greater depth of market is also responsible for less slippage and better execution conditions, leading to a more precise control of risk. While that may not matter much if you are HODLing – “holding on for dear life” – it can prove to be the difference between success and failure for anyone who’s actively trading.
Unlike spot trading, which will be analyzed in more detail later in this article, Crypto CFDs trading doesn’t require investors to deposit the full amount for a trade to take place. The use of leverage allows the investor to have a percentage of the asset’s purchase value, available in the account, which is used as collateral, allowing traders to participate in the market with lower capital requirements.
Trading CFDs also requires no delivery, thus the risk of having to worry about the asset itself is eliminated, meaning that storage and security is not an issue.
Disadvantages of CFDs
Trading CFDs also has its disadvantages. Open positions cannot be transferred to a different provider or broker if required. Additionally, swaps are charged, meaning that if one decides to keep positions overnight, they will be charged with the expense of rolling (holding) the position from one day to the next; a natural cost involved in taking leveraged positions with lower capital requirements.
Trading Through an Exchange (Spot)
Using an exchange, traders buy and sell Cryptocurrencies for immediate delivery. Prerequisite is having a Cryptocurrency wallet. This allows for accessibility to one’s Cryptocurrencies, empowering its owner to send and receive Cryptocurrencies like Bitcoin, Ethereum etc.
Advantages of Spot Trading
The main advantage of trading Cryptocurrencies through an Exchange is that anyone can open an account without having to go through a lengthy, official KYC process. This is very important for those that seek anonymity in their transactions. Spot also offers a greater variety of digital assets if compared to CFDs.
Holding Cryptocurrencies in your wallet for the long term, allows for a potentially greater benefit from capital appreciation as the value of Cryptocurrencies may rise over the long run.
Disadvantages of Spot Trading

Most first-time users often find the above-described processes to be somehow overwhelming, complex, and difficult to understand. Funds are kept in the exchange account and while Bitcoin is extremely secure, exchanges aren’t and hackers, malware and operational glitches have previously caused issues.
In addition, the user is responsible for ownership of keys and passwords. In case one forgets his credentials, there is essentially nothing that can be done about it, implying a loss of assets. There is no third party or payment processor, as is the case with a debit or credit card – hence, there is no protection against loss or fraud.
So, why would someone choose one method of Crypto trading or investing over the other?
Spot Trading or CFDs Trading – That is the Question!
While each has its own perks, it’s up to traders to choose which is best suited to their priorities, expectations, and financial goals. An investor who is looking to buy and hold a Cryptocurrency over the next five years has different requirements to a trader who is looking to profit from a possible rally in the market over the next few hours, days, or even weeks. That said, spot trading remains a great option for those playing the long-term game, seeking anonymity at the same time. Unfortunately, when it comes to actively trading the market, it is far less effective. In this case, the flexibility, and accessibility of the CFD market is superior, allowing shorter term traders to enter and exit positions on both sides of the market, with lower transaction costs, while leverage allows for lower capital requirements.
Bottom Line
Trading Crypto CFDs with FXGT.com, a regulated broker, discards the need for complicated wallets, offering more control through user-friendly procedures on a platform that is easy to access and operate. Open a trading account with FXGT.com and begin your cryptocurrency trading journey with confidence and essential knowledge.