Trading Crypto Via CFDs – In our times, people have trouble understanding that things and people usually aren’t totally good or totally bad. Normally, they have the potential for both. One example of this is cryptocurrency with its blockchain ecosystem. There is little doubt that these innovations have the power to improve our lives in various ways but, at the same time, they must be approached with caution. Anybody who denies this is willfully ignoring the evidence we have seen over the past few years.
For those who are interested in cryptocurrency trading, one huge challenge is the price volatility for which digital tokens are notorious. Take. for example, the FTT token issued by the now-defunct FTX exchange. In November 2022, FTT dropped from $22 per coin to below $5 within a day. That implies that someone holding 5,000 tokens would have seen their value plunge from $110,000 to less than $25,000 within 24 hours. And remember that hardly anybody saw the drop coming.
It’s not only price volatility that causes damage. There’s also a domino-like effect that tends to take hold of the industry when a major firm fails. “These firms are deeply interconnected”, explains Lee Reiners of Duke University, “and so, the moment you… have one problem somewhere in the crypto sector, it spreads very, very quickly”. If you had any doubts about the truth of this statement, they should have been dispelled by the events of 2022, when a series of crypto companies expired one after the other in quick succession.
Recalling the events of that year, it was in May that the TerraUSD and Luna tokens evaporated, which swiftly led to the bankruptcy of hedge fund Three Arrows Capital (3AC) in June. When 3AC then defaulted on the loan they had received from Voyager Capital, that lender was shipwrecked in July. Voyager had a plan to rescue itself through selling its assets to FTX, but this prospect disappeared later in the year when FTX itself succumbed. When FTX did fall from grace, another crypto lender – BlockFi – was dragged down with it. You see, then, something of a chain reaction at work here.
All of this illustrates just one aspect of the financial peril associated with crypto trading. While authorities and developers are working on protecting the industry against similar events in the future, is there any way to trade in crypto safely and securely? Yes, there is, and it’s called CFD trading. Join us for a minute or two while we explain.
Holding Crypto on Exchanges
You don’t need to remember a long way back to recall one of the biggest hacks in crypto trading India has ever seen. In July 2024, North Korean hackers stole as much as $230 million from the WazirX platform, leaving token owners without any clear path to recovering their funds. That wasn’t the largest exchange hack of the year, though. That title goes to Japan’s DMM Bitcoin, who were robbed of $305 million in May, ultimately forcing them to shut down their operations later in the year.
These hacks are often accomplished through compromises on token holders’ private keys, which prove ownership and allow you to control your cryptocurrency. Possibly motivated by the desire to increase their nuclear arsenal, North Korean hackers used these and other tactics to steal $1.34 billion last year. “Unfortunately”, write Chainalysis, “it appears that the DPRK’s (Democratic People’s Republic of Korea’s) crypto attacks are becoming more frequent”. If you keep your crypto on an exchange, it is vulnerable to the exploits of hackers, who do their job diligently and relentlessly, day after day.
Sometimes, you can’t trust the crypto exchange themselves to function in an above-board fashion. In January 2025, the Kucoin exchange pleaded guilty to the charge of acting as an unlicensed money transmitter, agreeing to pay $297 million in penalties. US prosecutors said that “Kucoin was used to transmit billions in suspicious transactions and potentially criminal proceeds, including proceeds from darknet markets and malware, ransomware, and fraud schemes”. Indeed, at the beginning of 2022, very few people would have anticipated that the well-known and highly visible FTX exchange – valued at $32 billion – would be found guilty of stealing customer funds on a massive scale within only a few months.
Or in Cold Wallets
Which ever type of cold wallet you choose – paper or metal or digital – the level of security you enjoy is essentially the same. Since these devices, which create and store private keys, are disconnected from the internet, your crypto is, in theory, invulnerable to the efforts of any cybercriminal. There’s a very simple problem with cold wallets, though. If you forgot to remove the slip of paper with your private key from your pants pocket before throwing them in the wash, you would lose every last drop of your crypto forever. “What about metal wallets?”, you ask. Well, these too can be lost or stolen. Note also that anybody who caught a glimpse of your private key would be able to withdraw your crypto.
Trading Crypto CFDs
When you open a CFD (contract for difference) deal on a crypto token, the process goes something like this: Opening up your online trading platform, you choose the token in which you want to trade. Then, you decide whether you want the deal to be a “buy” deal (premised on rising prices) or a “sell” deal (premised on falling prices). This option is itself one of the most pronounced advantages of trading crypto in CFD form, since it allows you to earn from both bull and bear markets.
After setting your stop-loss order the way you want, you open the deal with your trading app and then monitor prices to see how they pan out. If prices follow your prediction, you can manually close the deal with the app and watch the earnings accrue into your account. The CFD deal is entirely an agreement between you and the brokerage to settle on the price difference in an asset from time X to time Y. At no point do you actually purchase any cryptocurrency. As a result of this, there is nothing you need to store, either on an exchange or in a cold wallet. Rather, your earnings sit comfortably in your trading account until you decide to move them into your bank account.
As to the volatility issue, this becomes more of a benefit than an obstacle. Volatility is the bread and butter of any CFD deal, as we have explained, and is actually sought after by CFD traders. Therefore, when trading crypto in CFD form, the value of your earnings cannot be depleted by the swings of an unpredictable market.
Leverage
The CFD trading format also gives you the opportunity to amplify your deal size many times over with the use of leverage. Take the case where you want to open a “buy” deal on Litecoin with a trading balance of $500. If you used all available money for the deal and token prices rose by 2%, your earnings would equal $10 (2% of $500). If, on the other hand, you took advantage of leverage of 40:1, your deal would grow to the size of $20,000 (40 times $500). In that case, that same 2% price surge would earn you, not $10 but $400 (2% of $20,000), which is very respectable indeed after laying down only $500. Take note that leverage also has the power to magnify your losses from the deals that fail, so use this tool with caution.
Summing Up
The security issues in the crypto sector have not gone away, nor are they likely to do so for some time to come. Cybercriminals are constantly chipping away at the security protocols used by crypto exchanges, so the tokens stored on them remain in a genuinely risky position. While developers are making efforts to combat the problem, the fact is that they haven’t succeeded.
The crypto trading India has seen thus far has mostly been of the traditional type, but this leaves your digital wealth at the mercy of an extremely volatile asset that regularly sees price swings of up to 10% or more. And this is without the influence of unforeseen events like sudden bankruptcies.
Trading crypto in CFD form elegantly sidesteps these issues. When you open an account with a CFD brokerage, you will be able to trade, not only cryptocurrencies, but a range of assets like shares, commodities, and forex pairs, all from the convenience of a single platform. The appeal of this setup continues to draw interest from traders of all backgrounds and skill levels. If you decide to try out CFD trading, make sure that the brokerage you sign up with is regulated by an official watchdog.