Comparison of Crypto CFD Trading and Actual Crypto Trading

The meteoric rise of cryptocurrencies has brought a world of opportunities for investors. From traditional crypto trading, where you buy and hold the actual digital coins, to the more recent introduction of Crypto Contracts for Difference (CFD) trading. If you’re new to the scene or just want a clearer understanding of the differences between these two trading methods, this blog post is tailor-made for you. So, without further ado, let’s delve into the world of Crypto CFD Trading and Actual Crypto Trading to understand the differences and benefits of each. 

What is Actual Crypto Trading?

Actual Crypto Trading refers to buying and selling cryptocurrencies directly. When you engage in this form of trading, you own the actual cryptocurrency and store it in a digital wallet.

What is Crypto CFD Trading?

Crypto CFD Trading, or Contract for Difference trading, is a little different. You’re not buying the actual cryptocurrency. Instead, you’re entering a contract based on the price movement of the crypto. You’ll profit or lose depending on whether you’ve predicted the movement correctly.

Comparing Crypto CFD Trading and Actual Crypto Trading

Now, when we compare Crypto CFD Trading and Actual Crypto Trading, a few things stand out:

Ownership: In Actual Crypto Trading, you own the digital coin. In Crypto CFD Trading, you don’t.

Security: Actual Crypto Trading requires safeguarding your coins in a wallet. Crypto CFD Trading does not.

Profit Opportunities: Both methods offer profit chances, but they work differently. In Crypto CFD Trading, you can benefit from both price increases and decreases. With Actual Crypto Trading, you generally profit when prices rise.

Complexity: Crypto CFD Trading can be a bit more complex and might be better suited for seasoned traders.

Pros and Cons: A Side-by-Side Comparison

Flexibility in Markets:

Traditional: Can only profit when the market rises.
CFD: You can profit both when the market rises or falls.


Traditional: Typically, no leverage is offered.
CFD: Leverage is available, which can magnify gains but also losses.


Traditional: You own the coin, giving you voting rights and other privileges in some cases.
CFD: No ownership of the coin.


Traditional: You’re responsible for the security of your coins.
CFD: No need for security, as you don’t own the coin.


Traditional: High liquidity for popular coins.
CFD: Depends on the broker and contract terms.


Traditional: Transaction fees, but no overnight fees.
CFD: Might have overnight fees, spread costs, and other associated fees.

Which One is Right For You?

Your decision between Crypto CFD Trading and Actual Crypto Trading should depend on your trading goals, experience, and risk tolerance. If you want to own the cryptocurrency and possibly use it, then Actual Crypto Trading might be your pick. But, if you’re looking to profit from price movements without owning the coin, Crypto CFD Trading could be the way to go.

Final Thoughts

Both traditional crypto trading and crypto CFD trading have their unique sets of advantages and disadvantages. Your decision should depend on your financial goals, risk appetite, and trading experience.

Remember, cryptocurrency investments, whether via traditional means or CFDs, can be volatile. Always do thorough research, consider seeking advice from financial professionals, and never invest money you can’t afford to lose.

Note: The above information is for educational purposes and does not constitute financial advice. Always consult with a financial advisor before making investment decisions.

Frequently Asked Questions (FAQs)

What are the initial capital requirements for Crypto CFD Trading and Actual Crypto Trading?

While Traditional or Actual Crypto Trading often requires the full payment for the purchased coins, Crypto CFD Trading allows for trading on margin. This means that with CFDs, you can start trading with a smaller initial capital but be exposed to the price movement of a larger position. Always check with your broker or exchange for specific minimum deposit requirements.

How does the tax treatment differ between Crypto CFDs and holding actual cryptocurrencies?

Tax treatment can vary depending on your jurisdiction. Generally, owning actual cryptocurrencies might require you to pay capital gains tax upon selling at a profit. With Crypto CFDs, you might be liable to pay tax on any profits as income. It’s crucial to consult with a tax professional in your region to understand specific tax implications.

How do contract expiration dates work in Crypto CFD Trading?

Unlike traditional crypto trading where you can hold the asset indefinitely, some Crypto CFDs have expiration dates, after which the contract closes. However, many brokers offer ‘rolling’ CFDs, which automatically renew at the close of a trading day, but this can come with overnight fees. It’s essential to understand your broker’s terms before entering a trade.

Is there a risk of losing more than my initial investment with Crypto CFD Trading?

Yes, due to the leveraged nature of CFDs, it’s possible to lose more than your initial investment, especially during volatile market conditions. While some brokers offer negative balance protection, ensuring you won’t owe more than you’ve deposited, it’s crucial to understand the risks and employ risk management strategies.