How does crypto spread betting work?

With spread betting, you don’t purchase the underlying asset itself. Instead, you bet on the future price movement of that asset. 

You can either bet that the price will go up (call option) or down (put option). The spread is the difference between the bid and ask prices of the asset. 

The bid price is the price at which you can buy the asset, and the ask price is the price at which you can sell it.

Benefits and Drawbacks

Benefits

Tax Efficiency: Crypto spread betting is not considered a taxable event in most jurisdictions, so you won’t have to pay any capital gains taxes on your profits.

Ability to Profit from Falling Prices: With spread betting on cryptocurrency, you can profit from both rising and falling prices. This is because you can go long (buy) if you think the price will increase, or go short (sell) if you think the price will decrease.

Leverage: Crypto spread betting allows you to amplify your potential profits by using leverage. This means that you can borrow money from your broker to place larger trades than you could with your capital. However, it is important to use leverage responsibly, as it can also amplify your potential losses.

Speculation Without Ownership: Cryptocurrency spread betting allows you to speculate on the price movements of cryptocurrency without actually owning the underlying asset.

This can be a good way to get exposure to the cryptocurrency market without having to deal with the complexities of buying, storing, and selling cryptocurrencies.

Drawbacks

High Risk: Crypto spread betting is a highly risky investment, as the cryptocurrency market is volatile. It is important to only trade with money you can afford to lose. Read more about it in our in-depth article – gambling psychology.

Margin Calls: If the market moves against you, you may be subject to a margin call, which is a demand from your broker that you deposit more money to cover your losses. If you are unable to meet a margin call, your position will be closed at a loss.

Complexity: Spread bet crypto can be a complex investment, and it is important to understand the risks involved before you start trading. It is also important to choose a reputable and regulated broker.

Crypto Spread Odds

Crypto spreading odds are the odds offered by spread betting brokers on the future price of a cryptocurrency. They are expressed as a spread, which is the difference between the price at which you can buy a cryptocurrency and the price at which you can sell it.

For example, if the spread on Bitcoin is $500/$505, you can buy Bitcoin for $500 and sell it for $505. If the price of Bitcoin goes up to $510, you would make a profit of $5. If the price of Bitcoin goes down to $495, you would lose $5.

Crypto spreading odds are based on the current market price of the cryptocurrency and the broker’s assessment of the future direction of the market. They can change rapidly, so it is important to monitor them closely.

Factors affecting odds

• News: Major news events, such as the release of new regulations or the introduction of new products, can cause crypto spreading odds to fluctuate.
• Market sentiment: The overall sentiment of the cryptocurrency market can also affect crypto spreading odds. If investors are bullish on the market, odds will tend to be shorter; if investors are bearish, odds will tend to be longer.
• Technical analysis: Technical analysts use charts and other data to identify patterns in the price movements of cryptocurrencies. These patterns can be used to forecast future price movements and therefore affect crypto spreading odds.

Crypto spreading odds can be a useful tool for traders looking to speculate on the future price of cryptocurrencies. However, it is important to remember that they are only estimates, and there is no guarantee that you will make a profit.

If you are interested in more crypto-related content, check out our article on crypto trading vs crypto investing.

Tips and Tricks

Do your research. Before you start trading, it is important to understand the basics of the cryptocurrency market and the specific cryptocurrency you are interested in trading. 

Use a reputable broker. There are a number of reputable brokers that offer spread betting on cryptocurrencies. When choosing a broker, it is important to look for one that is regulated by a reputable financial authority and has a good reputation.

Set realistic goals. It is important to set realistic goals for your spread betting on cryptocurrencies. Don’t expect to make a fortune overnight. Instead, focus on making steady profits over time.

Use stop-loss orders. A stop-loss order is an order that automatically sells your position if the price of the cryptocurrency falls below a certain level. This can help you to limit your losses if the market moves against you.

Take profits when you can. Don’t be greedy. If you have made a profit on a trade, take it. Don’t wait for the price to go even higher, because it could just as easily turn against you.

Don’t overtrade. It is important to be disciplined and not overtrade. Overtrading can lead to losses, as you may make impulsive decisions and not take the time to analyze the market conditions properly.

Be patient. The cryptocurrency market is volatile, so it is important to be patient and wait for the right opportunities to trade. Don’t try to force trades, as this is likely to lead to losses.

How to Start?

1. Choose a reputable and regulated broker.

There are a number of reputable and regulated brokers that offer spread bet crypto. It is important to choose a broker that has a good reputation and a long history of providing services to its clients. You should also ensure that the broker is regulated by a reputable financial regulator.

2. Open an account.

Once you have chosen a broker, you will need to open an account. This process typically involves providing some personal information, such as your name, address, and contact details. You will also need to verify your identity and proof of address.

3. Deposit funds.

Once your account is open, you will need to deposit funds. The minimum deposit amount will vary from broker to broker, but it is typically a few hundred dollars.

4. Select a cryptocurrency to trade.

There are a number of different cryptocurrencies that you can trade with spread betting. Some popular choices include Bitcoin, Ethereum, and Litecoin.

5. Decide whether to go long or short.

If you think the price of a cryptocurrency will increase, you can go long. This means that you will bet on the price rising. If you think the price of a cryptocurrency will decrease, you can go short. This means that you will bet on the price falling.

6. Set your stake.

Your stake is the amount of money that you are willing to risk on each trade. The size of your stake will depend on your risk tolerance and your trading strategy.

7. Place your bet.

Once you have decided whether to go long or short and set your stake, you can place your bet.

8. Monitor your trade.

The cryptocurrency price will fluctuate, and your profit or loss will depend on how the price moves. You should monitor your trade closely and close it when you have reached your desired profit or loss target.

Conclusion

Crypto spread betting involves betting on the future price of a cryptocurrency without actually owning the asset.

While it offers tax efficiency, the ability to profit from falling prices, leverage, and the chance to speculate without ownership, it also comes with significant risks including high volatility, margin calls, and complexity. 

As such, it’s crucial to diligently research the market and only invest money you can comfortably lose before venturing into crypto spread betting.