Crypto cfd
Family I · Instruments
Not to be confused with cfd, cfd trading, cfd analysis.
Crypto CFD is a contract for difference that tracks the price of a cryptocurrency such as bitcoin or ether. The position is cash-settled against the underlying price, and no coins are delivered or held. Because the reference asset is a crypto pair, the contract inherits that market's volatility and its 24/7 trading schedule, while leverage, margin and financing terms are set by the venue offering the contract.
How the contract works
A crypto CFD is a bilateral agreement between a trader and a provider. The trader takes a long or short position on a crypto price; profit or loss is the difference between the entry and exit price multiplied by the position size, minus costs. The underlying coins never change hands, so there is no wallet, no private key and no blockchain transfer. The provider quotes a bid and an ask, and the spread between them is one cost of the trade. Overnight financing is typically charged on leveraged positions, and the exact rate, margin requirement and leverage cap vary by provider and by jurisdiction.
Worked example
A trader goes long one contract on an underlying priced at 60,000 with a contract size of 1 unit, at 5x leverage.
The 3,000 gain is 5% of the notional but 25% of the 12,000 margin posted. A 5% fall would produce a loss of the same proportion of margin, before spread and financing.
Costs and risks
- Spread — the difference between the quoted bid and ask, charged on entry and exit.
- Financing — a periodic charge or credit on leveraged positions, calculated from the notional and the provider's rate.
- Leverage — amplifies both gains and losses relative to the margin posted; a small adverse move can trigger a margin call or forced liquidation.
- Counterparty exposure — the position is a claim on the provider, not an asset held on a blockchain.
Leverage limits, financing conventions and whether crypto CFDs may be offered at all differ between regulators and providers.
Often confused with
- cfd
- A CFD is the general contract class that can reference any underlying, whereas a crypto CFD is the subset whose underlying is a cryptocurrency; the visible sign is the reference asset named in the contract.
- cfd trading
- CFD trading is the activity of buying and selling such contracts, while a crypto CFD is the instrument itself; the visible sign is whether the text describes a product or the act of dealing in it.
- cfd analysis
- CFD analysis is the study of price behaviour and contract terms, not a tradeable instrument; the visible sign is that it produces commentary or charts rather than a position.