Broker to Trading

When trading a Bitcoin CFD, the trader does not own cryptocurrency. Rather they are trading based on the value of the Bitcoin CFD, which is itself based on the value of the underlying cryptocurrency Bitcoin (BTC). This allows the trader to trade without having to put up the full value of the CFD, that is to trade on margin.

Margin specifies the percentage of the value which must be put up to trade the CFD. Leverage is related to margin, as it specifies as a ratio the part of the full value which needs to be put up (as margin decreases, leverage increases and vice versa). Cryptocurrencies including Bitcoin are extremely volatile and decreasing margin or increasing leverage increases risk.

Additionally, as the trader does not own any Bitcoin when trading a Bitcoin CFD, they do not need a wallet or other means to store Bitcoin and can go long (speculate on a rising market) or short (speculate on a falling market). Furthermore, they can access the capabilities and resources of the online trading platforms which the broker provides to trade their range of CFDs.

The underlying cryptocurrency Bitcoin is part of an online network used to send peer-to-peer payments from wallet to wallet. Payments in the cryptocurrency Bitcoin are processed using a technology called the blockchain. The blockchain is a distributed electronic ledger, which records all transactions in Bitcoin. It is called the blockchain because it consists of processed blocks of data, which are securely chained together by cryptography (hence the name cryptocurrency).

The Bitcoin network verifies data, but transactions are actually processed by third parties called miners who create processed blocks of transaction data which are added to the blockchain. Bitcoin payments take from around 30 minutes to a matter of hours, depending on network congestion. Network congestion is an issue because Bitcoin does not use a central processing system, which can be an efficient way of processing data. In return for successfully adding a block, miners are rewarded with Bitcoin. Bitcoin itself is traded in cryptocurrency exchanges with the symbol BTC and the reference value for Bitcoin CFDs is based on its values on cryptocurrency exchanges.