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Best Sites for FOREX and CFD Bitcoin Trading

The popularity of Bitcoin and other cryptocurrencies has made its way into the world of FOREX and CFD trading. Over the years, several forex brokers have stated that traders can deposit, withdraw and trade a bitcoin-based account given the volatile price swings characterized by the crypto market. Volatility in the crypto markets offers an opportunity for traders to profit either from shorting the market or taking long positions.

However, it also presents many risks unlike what most forex traders are used to with traditional currency pairs.

Overall, there is no denying that the forex and CFD markets have been a big draw for those looking to cash in on the crypto craze as numerous online brokerages now offer cryptocurrency CFD contracts that allow traders to speculate on the price movements of digital assets without actually owning them.

In this guide, we’ll go over what is FOREX and CFD trading, the best sites to trade Bitcoin with a forex broker, and how it all ties together.

Additionally here are some helpful links to get you started with FOREX and CFD trading:

What is FOREX Trading?

The foreign exchange market (Forex) is the largest decentralized market in the world with a daily turnover of over $6.6 trillion. It is a market where currencies are traded and includes all aspects of buying, selling, and exchanging currencies at current or determined prices.

In simple terms, FOREX trading is a lot less complicated than it sounds. For example, when you are traveling from one country to the other, you need to exchange your currency with the currency of the country you are traveling to. The place where you would do this is called a foreign exchange market.

Simply put, forex is the act of buying and selling different fiat currencies to make a profit off the changing value of those currencies. A fiat currency is any national currency that is regulated by a government, such as the US dollar or the British Pound.

Even though some jurisdictions such as El Salvador consider Bitcoin legal tender, cryptocurrencies are not currently considered fiat currencies across the globe, but they are still traded on forex platforms. The most popular cryptocurrency for forex trading is Bitcoin, although a few brokers also support Ethereum and Litecoin.

The Best Exchanges for Forex and CFDs

Here’s a look at some of the best exchanges that potentially offer FOREX and CFD trading. Keep in mind that the product line up might depend on where you are located.

Here are the top FOREX and CFD exchanges:

eToro Exchange Logo

eToro

  • Great for crypto beginners
  • Solid crypto/general trading platform
  • Reliable company with solid trust in the community
  • Fully supports credit cards for deposits and withdrawals
Funding Methods e-Transfer & Wire Transfer
Cryptocurrencies 15+
Countries 70+
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment, and you should not expect to be protected if something goes wrong. eToro USA LLC; Investments are subject to market risk, including the possible loss of principal. Your capital is at risk. This ad promotes virtual cryptocurrency investing within the EU (by eToro Europe Ltd. and eToro UK Ltd.) & USA (by eToro USA LLC); which is highly volatile, unregulated in most EU countries, no EU protections & not supervised by the EU regulatory framework. Investments are subject to market risk, including the loss of principal. Only real cryptocurrencies are available to US customers.
Plus500 logo

Plus500

  • Free demo account for new traders
  • All the top cryptocurrencies including Bitcoin, Ethereum and Solana available through CFDs
  • Trade the most popular assets in the world using CFDs
  • Tight spreads with no commissions
Funding Methods Credit card, debit, bank account (SEPA, ACH), Wire transfer
Cryptocurrencies Bitcoin, Ethereum, Litecoin, Stellar, (All CFDs)
Countries 60+ (No USA currently)
Binance Logo

Binance

  • Easy sign-up process
  • Lowest transaction fees of any major exchange
  • 175+ different digital assets available
  • Free deposits
Funding Methods Debit & Credit Card, Wire Transfer, ACH
Cryptocurrencies 175+
Countries 100+
OUR TAKE
Binance offers a relatively secure, versatile way to invest in and trade cryptocurrencies. The platform could be overwhelming for both beginners and experienced traders. Binance offers lower fees than many other cryptocurrency exchanges.

How Does FOREX Trading Work?

The vast majority of Forex trading takes place between two large banks. For example, the Bank of America might exchange US dollars for Euros with Deutsche Bank.

This is because most international trade between two countries is done using their respective currencies. When US companies want to buy goods from Germany, they will need to exchange US dollars for Euros.

The transaction would then be settled between the two banks involved. The result is that one bank has more US dollars, while the other has more Euros.

To make a profit, banks will often buy and sell currencies between each other at an agreed-upon price that is slightly different from the currency’s actual value. The difference between the two prices is known as the “spread.”

The spread is how forex brokers make their money, as they will often charge a small commission on each transaction.

When you trade forex, you are effectively speculating on the future value of a currency pair. For example, if you think that the US dollar will increase in value against the Euro, you would buy Euro through the USD/EUR trading pair at a lower price.

If the US dollar does indeed increase in value, you would then be able to sell your Euros back for more dollars than you originally bought them for and make a profit. Of course, if the US dollar decreases in value, you would make a loss.

It’s important to note that you can also short sell currency pairs on forex platforms. Short selling is when you sell a currency pair with the hope that the value will decrease so that you can buy it back at a lower price and make a profit.

What’s the Difference Between Spot Forex and CFD Forex?

There are two main types of forex trading: spot forex and CFD forex. Spot forex is the traditional type of forex trading, where you buy a currency pair at the current market price and hope that it will appreciate so that you can sell it back at a higher price.

CFD forex, on the other hand, is a contract for the difference where you speculate on the price movement of a currency pair without actually owning the underlying currencies. More on CFD trading is below, for now, let’s take a look at what it means to trade Bitcoin with a forex broker.

What is Bitcoin Forex Trading?

Bitcoin shares a lot of similarities with the fiat currencies that are traded on forex exchanges. For example, Bitcoin can be traded against other cryptocurrencies on cryptocurrency exchanges just as it can be traded against fiat currencies on forex exchanges. This means you can trade Bitcoin for dollars or British Pounds on a forex exchange market just as well as you can trade Bitcoin for Ethereum on a crypto exchange.

However, while both Bitcoin and fiat currencies are priced based on supply and demand, Bitcoin features a unique difference when it comes to its supply. The supply of Bitcoin is not controlled by any central bank or government but rather by the code that creates the Bitcoin blockchain.

There will only ever be 21 million Bitcoins in existence, and the supply of new Bitcoins into circulation will decrease over time as more Bitcoins are mined. This is different from fiat currencies which can have their supply increased by central banks at any time.

The limited supply of Bitcoin is one of the main reasons why the cryptocurrency has been such a popular target for investors over the past few years. Many people believe that as demand for Bitcoin increases, so too will its price.

This is where Bitcoin forex trading comes in. When you trade Bitcoin on a forex platform, you are effectively speculating on the future price of Bitcoin against a fiat currency.

For example, if you think that the price of Bitcoin will increase against the US dollar, you would buy Bitcoins through the BTC/USD trading pair. If Bitcoin does indeed increase in value, you would then be able to sell your Bitcoins back for more dollars than you originally bought them for and make a profit.

Of course, if the price of Bitcoin decreases, you would make a loss. It’s also important to note that you can short sell Bitcoin on forex platforms just as you can with any other currency pair. This means that you can sell Bitcoin in the hope that its price will decrease so that you can buy it back at a lower price and make a profit.

What is CFD Trading?

A contract for difference (CFD) is a contract between two parties, typically described as “buyer” and “seller”, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at the contract time (if the difference is negative, then the buyer pays instead to the seller).

This financial contract is traded on margin/leverage, meaning that you only need to put up a small percentage of the total value of the trade to open a position. This allows you to gain a much larger exposure to the market than you would if you were to buy the underlying asset outright.

CFD forex is generally considered to be a more advanced type of trading, as it requires a greater understanding of the market. However, it does have some advantages over spot forex, such as the ability to trade on leverage and to go long or short on a currency pair.

Leverage or margin is when you trade with more money than you have in your account. For example, if a forex broker offers you the leverage of 1:10, this means that for every dollar you have in your account, you can trade with $10. This can be a great way to increase your profits if your trade is successful, but it can also magnify your losses if the trade goes against you.

What is Bitcoin CFD Trading?

Bitcoin CFD trading works in a similar way to spot forex trading, except that you are speculating on the future price of Bitcoin against a fiat currency rather than against another cryptocurrency.

As with any other form of CFD trading, you can go long or short on Bitcoin and trade with leverage if you wish. This means that you can make a profit even if the price of Bitcoin falls, as long as your prediction is correct and you have used leverage.

CFDs are a popular form of derivative trading that allows you to take a position on whether you think the underlying asset will go up or down in value. Therefore, an investor can tap into the benefits and risks of Bitcoin trading without owning the coin itself.

To further illustrate in an example, an investor who believes that the price of Bitcoin will go up soon and is looking to get some exposure to the Bitcoin market has the option of purchasing Bitcoin outright or a Bitcoin futures contract.

On the one hand, making an outright Bitcoin purchase would require complex steps of having a hardware wallet for safe storage and management of private and public keys for security. Furthermore, the process of buying Bitcoin can be quite expensive as one would need to go through an exchange that supports their country of residence and would also be subject to fees. Going with the Bitcoin futures option will also require the delivery of Bitcoin in the future, which is not different from making an outright purchase.

In contrast, trading Bitcoin CFDs only requires an account with a broker that offers cryptocurrency CFD products and the appropriate software to execute trades. With a Bitcoin CFD option, the investor doesn’t need to manage a digital wallet as the Bitcoin is never actually owned. Moreover, there are no fees associated with Bitcoin CFD trading other than the commissions paid to the broker on the spread, which is the difference between the bid and ask prices.

When trading Bitcoin futures contracts, the delivery of Bitcoin is required at a specific date in the future. On the other hand, trading Bitcoin CFDs doesn’t have any delivery requirements as the contract only entails speculation on price movements.

Investors can go long or short with Bitcoin CFDs which means that they can make a profit even if the underlying asset (in this case Bitcoin) falls in value.

Short Selling Bitcoin CFDs

When an investor short sells a Bitcoin CFD, they are selling the contract with the expectation that the price of Bitcoin will fall so that they can buy it back at a lower price and profit from the difference.

For example, if an investor thinks that the price of Bitcoin is going to fall from $9,000 to $8,500 in the next few hours, they would sell one Bitcoin CFD at $9,000. If the price of Bitcoin does indeed fall to $8,500 as expected, the investor can buy back the contract at that price and pocket the $500 difference.

However, if the price of Bitcoin doesn’t fall and instead goes up to $9,500, the investor would incur a loss as they would need to buy back the contract at a higher price than what they sold it at.

It’s important to note that when an investor short sells a Bitcoin CFD, they are actually selling the underlying asset as they are borrowing it from the broker. The investor will then need to buy back the same amount of Bitcoin later on and return it to the broker.

The main benefit of short-selling Bitcoin is that it allows investors to profit from a falling market. However, it’s important to note that the risks are just as high as the potential rewards.

Legal Implications of Trading Bitcoin CFDs

Bitcoin CFD trading is a relatively new phenomenon, and as such, there are still some legal implications that are currently being sorted out. For instance, regulators in the U.S and the U.K do not allow CFD trading. Regulators such as the FCA (Financial Conduct Authority) in the U.K have issued warnings to investors about the risks associated with CFD trading.

Another legal implication has to do with the treatment of Bitcoin as a commodity or a currency. In the U.S, Bitcoin is considered to be a commodity, and as such, it is subject to commodities regulations. However, in the European Union, Bitcoin is considered to be a currency, and as such, it is subject to different regulations.

The legal implications of Bitcoin CFD trading are still being sorted out, and investors need to be aware of these before they engage in any trading activities.

Risks Associated with Trading Bitcoin CFDs

There are several risks associated with trading Bitcoin CFDs, and these need to be considered before entering into any trades.

The first risk has to do with the potential for price manipulation. Because Bitcoin is not regulated by any central authority, there is no way to prevent price manipulation. This means that investors could potentially be cheated by unscrupulous traders who might try to inflate prices artificially.

Another risk has to do with the fact that Bitcoin is a relatively new asset, and as such, there is still a lot of uncertainty surrounding it. This means that prices can be volatile and by extension, the CFDs linked to Bitcoin can be volatile. Investors could potentially lose a lot of money if sharp price changes due to unexpected events in the market take place. It is common for the crypto market, led by Bitcoin, to fall by more than 30% in a matter of hours.

The last risk has to do with the legal implications of trading Bitcoin CFDs. As mentioned earlier, the legal status of Bitcoin is still being sorted out in many jurisdictions. This means that there is a possibility that trading activities could be shut down by regulators in the future.

Despite the risks, many investors still believe that Bitcoin CFD trading is a good way to make money. This is because the potential rewards are high, and the risks can be mitigated by using stop-loss orders and taking out insurance.

How to Trade Bitcoin CFDs

The first step to trading Bitcoin CFDs is to find a reputable broker that offers this service. It’s important to make sure that the broker is regulated by a reputable authority such as the FCA in the U.K or the SEC in the U.S.

Once you’ve found a broker, you will need to open an account and deposit funds. The amount of money you need to deposit will depend on the broker, but it’s usually a few hundred dollars.

Once you’ve deposited funds, you will need to choose a CFD to trade. You can either choose to trade a CFD that tracks the price of Bitcoin or one that tracks the price of a basket of cryptocurrencies.

Once you’ve chosen a CFD, you will need to set up your trading parameters. This includes setting your stop-loss and take-profit orders. It’s also important to set a risk management strategy, such as limiting your trades to a certain percentage of your account balance.

Once you’ve done all of this, you’re ready to start trading Bitcoin CFDs!

Conclusion: Plenty of Opportunity in Forex, CFDs

Trading Bitcoin with a forex broker, as opposed to a traditional Bitcoin exchange such as Coinbase or Binance, has several advantages. The biggest advantage is that you can use leverage to trade Bitcoin, which means that you can make bigger profits (or losses) than if you were simply buying and selling Bitcoin.

Another advantage is that forex brokers tend to offer lower fees than traditional exchanges. And finally, forex brokers are regulated by financial authorities, which gives investors an additional layer of protection.

However, there are also some disadvantages to trading Bitcoin with a forex broker. The biggest disadvantage is that you’re exposing yourself to the risk of price manipulation, as there is no central authority regulating the market.

Another disadvantage is that hidden charges tend to be higher, especially for Bitcoin CFDs. Fees will vary significantly within firms; however, the overall impact of fees on your bottom line needs to be taken into consideration when comparing firms.

All in all, trading Bitcoin with a forex broker is a good alternative for traders looking to profit from Bitcoin’s price movements without the complexity of owning Bitcoin outright.

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CryptoVantage Staff

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