What are the benefits of crypto spread betting?

Using spread betting as a way to trade the cryptocurrency market has a wide range of advantages over traditional types of trading. This beginner-friendly guide picks the top ten benefits of cryptocurrency spread betting to help you decide whether to use this approach.

Top 10 benefits of crypto spread betting

Spread betting is one of the most cost-effective and easy ways to trade the cryptocurrency market. Most traders use it for the tax benefits it attracts, however its advantages are much more diverse. Here we explain the top ten benefits of crypto spread betting. 

1. It’s cost-effective

When you place a spread bet trade the only charge you need to pay your broker is the spread (the difference between the buy and sell price). Compared to other forms of trading, such as on an exchange, there are no commissions or other fees. You also don’t need to worry about paying for a wallet to store your coins. 

2. You can use leverage

Spread betting is a leveraged product, which means you don’t need a large amount of money to open a position. When you make a trade, you only need to put down a small deposit, known as the margin. For example, it is possible to place a bet equivalent to £1000 of Bitcoin with just a few hundred pounds of your own money. 

Profits and loss are calculated based on your full position size and not your margin. This means your profits can be considerably higher than the amount of money you put up initially. However, this can work in the other direction too and you could lose all of the money you deposit. 

3. Tax-free profits

Profits from crypto spread betting are tax-free in the United Kingdom and some other regions. In the countries where spread betting is allowed, there are often very friendly tax rules. In the UK, crypto trading is subject to capital gains tax (CGT). However, when using spread betting, you don’t need to pay any CGT or other taxes. 

4. Low minimum trade size

You can make crypto spread bet trades with very little initial investment. In fact it is possible to trade certain coins with a stake of just £1 per point. Other forms of crypto trading sometimes require large contract sizes before you can buy or sell, but with spread betting the barrier to entry is low, making it accessible to more traders. 

5. Fast execution speed

As spread betting doesn’t take place on an exchange, execution speeds are generally fast and in many cases instant. When you trade on an exchange you need to wait for a counterparty to take the other side of your position. While this normally happens quickly, it’s not required on a spread bet so the process is even faster, making it more attractive to day traders or scalpers. 

6. Spread betting is easy to understand

Investing in the cryptocurrency market can be quite challenging and confusing, especially to beginners. Working out profits, losses, and position sizes can be difficult to calculate. That’s not the case in spread betting and it has a simple transaction structure. 

You get to decide on your stake, which is the amount you risk or make per point. If the market moves up by 100 points and your stake is £10 per point, you make £1000. If it moves down by 50 points, you lose £500. This is especially beneficial in the crypto market, where prices are volatile and sentiment can change quickly. You can quickly work out risk and capitalise on trending moves. 

7. You can go long and short

Some platforms only facilitate the buying of cryptocurrency, but with spread betting you can go long (buy) or short (sell). This is because you’re not actually buying a coin; rather, you’re betting on the direction its price will move. If you think the price of Ethereum is going to go up you can open a long spread bet, or if you think it’s going down, you can open a short. 

8. Spread betting markets are well regulated

The cryptocurrency market is largely unregulated and using exchanges does pose a small risk. On the other hand, brokers that offer spread betting are normally regulated by financial bodies in Europe such as the Financial Conduct Authority (FCA) in the UK. Going with a regulated service provides a safety net if anything goes wrong and you’ll benefit from regional compensation schemes. 

9. More protection with guaranteed stop-loss limits

The cryptocurrency market moves fast and is volatile, that’s why it’s recommended to use a stop-loss when trading it. Stop-losses provide a safety net that closes your trade if it goes against you. However, in fast moving markets like crypto, stop-losses often suffer from ‘slippage’, which means they run the risk of not executing at the price level you set. 

It is possible for your stop-loss to not do its job efficiently and you could end up with a bigger loss than you expected. With spread betting, you have the benefit of using a guaranteed stop-loss. As its name suggests, it’s guaranteed to go through at the price you set, no matter how volatile the price action on Bitcoin or whichever coin you’re betting on. It costs a little bit more to use one, but the safety it provides is often worth it. 

10. Access other crypto related assets

With some spread betting brokers you can trade many other financial markets like stocks, forex, or commodities. The crypto market is diverse and it’s possible to trade ETFs and stocks within the industry. Using a spread betting broker may allow you the choice to trade these other crypto related assets such as mining companies, or Bitcoin ETFs. 

Should I use spread betting to trade crypto?

If you already trade cryptocurrencies and live in a region where spread betting is allowed, then yes, it could be a good idea. As we’ve mentioned in this page, spread betting has many advantages and benefits compared to other methods of trading. There are many other types of trading available and its often worth comparing two, for example, spread betting vs crypto CFDs.  

Before you start you will need to register with a broker to spread bet on crypto. One thing that can be a slight disadvantage is that trading hours for crypto spread betting can vary from broker to broker. Most platforms now let you trade 24/7, but there are a few that don’t, so make sure you check before you start trading.