- Cryptos are Now an Asset Class
- Forex Brokers Offering Bitcoin CFDs to Consider
- (3) Buy Bitcoin-Related Securities (ETFs, ETPs, etc.)
- Stock Brokers that Offer Bitcoin-Related Securities and/or Futures Trading
- Final Thoughts
- Read Next
- Market Overview
- Forex Risk Disclaimer
- I Tried Day Trading Bitcoin for a Week - Beginner Crypto
Cryptos are Now an Asset Class
- Spreads (trading cost) are usually wider compared to trading the underlying.
- Trades may be cancelled or reversed in the event the broker finds fault in its systems (price, etc.) or if it finds a client violates their particular account agreement with the said broker (agreements vary).
- Clients rely on the creditworthiness of the online broker for managing any risk prudently and ensuring that it is well capitalized (less risk of going defunct).
- Margin trading means there is a chance of a negative balance occurring in the case of huge market volatility, a gap, or other Black Swan systemic event.
- In such cases, counterparty risk falls on the broker, which means if the broker declares bankruptcy, investors may suffer substantial losses and not receive priority among creditors.
Active traders looking to speculate on Bitcoin over the short or medium term may find that trading CFD/derivatives on Bitcoin using an online forex broker will provide them with 24hour trading, potentially lower margin, and the ability to go either long or short.
Because of counter-party risk, choosing a broker is just as important as finding one with the best trading tools or commission rates.
Forex Brokers Offering Bitcoin CFDs to Consider
To trade Bitcoin and other cryptocurrency using CFDs through a forex broker, view our guide of the Best Forex Brokers to Buy Bitcoin in 2019.
Here's an example of trading bitcoin (BTC) and cryptocurrencies on eToro's web platform:
(3) Buy Bitcoin-Related Securities (ETFs, ETPs, etc.)
One good example of a Bitcoin related security would be the Grayscale Bitcoin Trust (OTC: GBTC).
The Grayscale Bitcoin Trust is backed by one of the largest venture capital firms that specializes in Bitcoin and is affiliated with a substantial group of related businesses headed by Barry Silbert – a prominent Bitcoin investor and industry figure.
- Trading a Bitcoin-related security that aims either to replicate the performance of the asset or act as a trust that holds Bitcoins where investors don’t need to hold private keys provides traders an alternative investment vehicle to buy and hold (long only).
- Doesn’t require safeguarding private keys
- Trades as a publicly listed security on exchange under exchange guidelines.
- The price of the security and the price of the underlying asset (Bitcoin) may vary, causing a tracking error, either due to fees or other differences in the portfolio construction methodology.
- The security may only be tradeable during exchange hours, and not 24 hours a day as is the case with Bitcoin.
- Volume of the traded security may be less than the available volume of the underlying asset (making it illiquid).
- Bid/ask spreads and other fees may be different than the cost of buying the underlying directly.
For stock market investors, investing in Bitcoin indirectly through a listed security such as an ETF, ETP, or trust may be suitable for those looking at taking a passive position.
Active traders might find the limited trading hours and potential lack of volume a limiting factor that could hinder their trading. Overall, using listed securities that invest, track, or hold Bitcoin can be a viable alternative to diversify away from the risks of margin trading or safeguarding private keys when buying the underlying.
That said, events such as hard forks can pose issues for Bitcoin-related trusts such as GBTC, depending on how such events are handled and the degree of any proceeds distributions and administrative fees.
For that reason and the pros/cons noted above, Bitcoin-related securities would not be my first choice when looking at the three ways to trade this asset.
Stock Brokers that Offer Bitcoin-Related Securities and/or Futures Trading
To trade Bitcoin related securities or futures, you are likely going to be a US citizen residing the United States. See this guide from our sister site StockBrokers.com, the Best Online Brokers 2019.
Here's an example of trading online with the TD Ameritrade's thinkorswim platform:
There are three ways to trade (buy/sell) cryptocurrencies such as Bitcoin (BTC).
Each way has its own upsides and downsides. As the cryptocurrency market continues to evolve, access to trading crypto will expand and become easier.
In the end, what matters most is using an exchange / online broker that you can trust. Safety of your funds is, first and foremost, most important.
If the exchange or offer looks iffy, don't invest.
For our 2019 Forex Broker Review we assessed, rated, and ranked 28 international forex brokers. Each broker was graded on 81 different variables and, in total, over 60,000 words of research were produced.
While encouraged, broker participation was optional.
Each broker had the opportunity to complete an in-depth data profile and provide executive time (live in person or over the web) for an annual update meeting.
All data submitted by brokers is hand-checked for accuracy.
Ultimately, our rigorous data validation process yields an error rate of less than .1% each year, providing site visitors quality data they can trust. Learn more about how we test.
Forex Risk Disclaimer
"There is a very high degree of risk involved in trading securities.
I Tried Day Trading Bitcoin for a Week - Beginner Crypto
With respect to margin-based foreign exchange trading, off-exchange derivatives, and cryptocurrencies, there is considerable exposure to risk, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or related instrument.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable, or that they will not result in losses." Learn more.