Bitcoin CFDs vs Bitcoin

I've seen that a lot of people looking to take part in Bitcoin have come across ads that suggest "Bitcoin CFDs" or in some cases, they only make a small mention of the letters "CFD". It's confusing to most people who are not familiar with stocks and commodities. I will walk yyou through what a Bitcoin CFD exactly is along with the advantages and disadvantages.

If you trade a Bitcoin CFD, you are NOT buying actual Bitcoins

This is the most important point that you need to keep in mind. A Bitcoin CFD is essentially a bet, contract, agreement, call it whatever you like between 2 sides over Bitcoin. There is a buy side and a sell side. The buy side would be you if you want to buy Bitcoin hoping it will rise in value. The sell side is a broker, most commonly a forex broker who offers Bitcoin CFDs.

Essentially, what you are doing is buying a "copy" of Bitcoin, with all of the same price value and fluctuations as you would see on the exchange. You would be holding a "virtual" amount of Bitcoin, which is ironic because Bitcoin itself is virtual (not a physical coin). So you could say a Bitcoin CFD gives you a virtual representation of something that is already virtual. Confusing.

Your "virtual" Bitcoin is in every part the same except....

It doesn't have the underlying infrastructure and code that Bitcoin is built on. All that means is you can't actually send this Bitcoin that you bought to somebody, whether as a gift or as payment. Your "virtual" coins is not part of the 21 million Bitcoins that are out there. With not so many places accepting Bitcoin as payment, it probably doesn't really matter. Also, because you aren't actually buying real Bitcoins, you don't have to deal with all the admin work involved in setting up and maintaining a Bitcoin balance or any other cryptocurrency for that matter.

No wallets, no security concerns, no transaction fees, no fidgeting through exchanges. Just click and buy (or sell if you think it will go down).

An example if you bought Bitcoin CFDs

You sign up with a broker and you buy 1 Bitcoin CFD for $17,000. It goes up to $19,000. If you sold, you would be up $2,000. All of this can be done in a few clicks.

Selling Bitcoin CFDs

Now here's where it gets very interesting. Because you are just having a bet or an agreement over which way the price will go, you can actually take the sell side of the agreement. In this case, the broker will take up the buy side. You are hoping the price goes down, the broker is hoping it goes up. It's inevitable that a crash will happen. It happens to everything so if you are of the view that you want to cash in on the collapse, then Bitcoin CFD is the only way you can profit from a declining market.