Spread Betting: How It Works In Bitcoin
Bitcoin, a popular cryptocurrency, was the first digital currency unveiled in 2009 that continues to spread its fame even now. This digital currency has been touching new highs every day as many favorable investors are betting big on the cryptocurrency to become a mainstream asset. Due to Bitcoin’s popularity it becomes an online version of cash.
The currency is decentralized and charges the lowest transaction fee. It offers more anonymity compared to fiat and other digital currencies. You can use Bitcoin as a payment for your international travels and other services, for your food or even for investment. Also, you can use bitcoin in spread betting. Unfortunately, spread betting is outlawed in the US, although it is allowed in the UK.
Bitcoin Spread Betting, thus, requires that you decide on whether the price of the crypto will go up or down and place your wager. If you correctly predict the direction in which the asset’s price will move, you’ll make a profit. However, the amount of profit you make will be greater if the price movement is large.
So how do you engage in spread betting? You start your spread betting by choosing a cryptocurrency you plan to place a wager on. Depending on your prediction, you will decide to go long or short. If you predict the price to rise, you buy. On the contrary, you place a selling wager if you expect the bitcoin price to fall.
After you choose to go long or short, you must decide how much money to invest in every point of price movement. This is referred to as the stake. You may then choose to manage your risks using the stop loss tool.
Note that you can place your wager anytime. However, bitcoin spread betting has a time frame within which they automatically end. But you can use the stop loss or take profit to end the wager or choose to close it any time you wish.
Choosing Currency Pair
When you choose to spread a bet in bitcoin, you will be betting based on the crypto’s price vis a vis that of the currency you are pairing it with. For instance, you can place a wager on XBT/JPY, XBT/CNH, XBT/USD, XBT/EUR or XBT GBP. But the wager you place involves leverage trading. This means that you increase both exposure and level of risk. It enables you to place just a fraction of the trade’s overall value.
Trade Margins
Margins refer to the amount of money you’ll need to have in the account for spread betting. For instance, if a broker sets a margin of 10 percent, you must place 10% of the trade value in your account to participate in bitcoin spread betting. However, you must have enough money in your account to protect you from negative market moments.
Therefore, when you decide to place your spread betting wager on bitcoin, expect to have higher margins than you can have in stock spread betting. Also, if the amount in your account falls before certain margins, you’ll get a warning. Alternatively, your account gets closed automatically.
How Do You Manage Risks In Bitcoin Spread Betting?
Spread wagering has a higher risk level, so your broker is likely to place a warning on the website to inform you of the need to trade cautiously. But you can mitigate against the risks using a stop loss tool. The tool closes an order automatically if the price moves in the direction you had not predicted. However, it will only close the trade if the price goes beyond the set price level.
Benefit of Spread Betting
Bitcoin spread betting is tax-efficient since you do not need to own the cryptos. Therefore, you are not required to pay the stamp duty. Of course, you’ll need to pay some varying commissions depending on the platform.
Note that you will not be allowed to engage in spread betting in the US and other countries. But it is legal to do so in the UK or Ireland.
Final Thoughts
Thus, to participate in Bitcoin spread betting, you must assess the latest bitcoin bid/ask spread. You will then need to speculate the direction in which the price is likely to move and calculate your stake on every price movement. You will then place your wager and use a stop loss tool to mitigate the risks.
