Buying Bitcoin vs Bitcoin CFD trading

Important notice:
Cryptocurrencies are not legal tender or securities. Cryptocurrencies and Cryptocurrency Contracts For Differences (CFDs), which are derivatives of cryptocurrency, are not regulated by the Monetary Authority of Singapore (MAS). Investors should be aware that they are not entitled to any legislative protection when they deal with Cryptocurrencies CFDs. If you choose to invest in unregulated products, you will not be protected under MAS regulations. Other risks associated with the trading of Cryptocurrency CFDs include high price volatility, lack of price transparency, cybersecurity risks, unregulated status of payment token spot trading market. Please ensure that you are fully aware of the risks involving cryptocurrencies and if in doubt, you should consult an independent financial adviser. To find out more information about cryptocurrencies and risks, you can go to the MoneySense website here.

There are two main ways to invest in Bitcoin online; you can open a virtual wallet and buy Bitcoin through the blockchain at its current market value or you can trade on price movements of Bitcoin by opening a CFD Trading account.

When you buy Bitcoin on a digital asset exchange, it is similar to investing in any other physical asset and you will own the underlying instrument which you can then sell at a later date, should the value of the asset rise.

When you trade Bitcoin as a CFD, you are speculating on the price movement of the underlying Bitcoin market. The price of Bitcoin will be quoted in established currencies, primarily USD, and you will not own the underlying instrument. Additionally, you will be trading on leverage which allows you a greater market exposure without tying up large amounts of capital.

What are the benefits of CFD trading on Bitcoin markets?

• When you trade Bitcoin CFDs you can go long as well as short
• You won’t own the underlying asset so don’t need to set up a virtual wallet
• When you trade CFDs on Bitcoin you are trading on leverage, this means you have a larger exposure to the market with less upfront capital. Remember leverage can magnify profits as well as losses.

What is involved in actually buying Bitcoin?

• When you buy Bitcoin you own the underlying asset and will purchase your chosen amount of Bitcoin at full market value
• You will purchase Bitcoin on a digital asset exchange, this will require you to open a virtual wallet to store your Bitcoin
• It can be expensive to withdraw or fund your virtual wallet, some exchanges charge fees for doing so
• Setting up an account and arranging purchase of Bitcoin can be time consuming and overly complicated

Is Bitcoin risky?

Bitcoin is currently one of the world's most volatile markets and while this represents opportunities for traders it can also present risks. Whether you buy or trade Bitcoin there are some risks involved in the digital currency that you should be aware of.

• Volatility can be extreme and there are likely to be sharp price fluctuations for the foreseeable future
• When you trade on leverage, both your profits and losses are magnified
• As Bitcoin is such a new market there is less mainstream consensus and adoption than for more traditional currencies and financial instruments
• Bitcoin may not be accepted/adopted by certain governments
• Bitcoin may be replaced by alternative cryptocurrencies in the future
• Nobody can predict with certainty how Bitcoin will fare in the future, whether it will fork or how it will react to a major financial crisis