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Spread betting vs crypto CFDs: Which one is best for me?
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This page outlines the key differences between crypto spread betting and CFDs. Read on to learn the benefits of each and find out which option suits your trading style the best.
What is the difference between crypto spread betting and CFDs?
The main difference between the two is how they are taxed. Spread betting and CFDs are both leveraged products and have many similarities, but with crypto spread betting you pay zero tax on any profits you make. Cryptocurrency CFDs are subject to capital gains tax in the United Kingdom.
It is possible to use both types of derivative from different regions in the world which can impact taxation. Every jurisdiction has different laws and it is recommended that you check which rules apply to your country. While tax is the main difference between both, there are other differences which we’ve explained below.
Cryptocurrency spread betting vs CFDs
Before comparing spread betting and CFDs, it is important to understand how each works. Here is a brief explanation.
- Spread betting. With spread betting you stake an amount of money per point in the cryptocurrency you’re speculating on. A point is usually equal to $1 or $0.10 for most crypto coins. For example, if you buy and stake £5 per point in Bitcoin you will make £5 each time its value increases by $1. If it rises by $100, you will make £500.
- CFDs. CFD trading exchanges the difference in price from the start to the end of the agreed contract. Unlike spread betting, you’re not allocating an amount of money per point, rather speculating on where a crypto coin’s price will move in the future. The difference in price between where you open and close is your profit or loss.
Below we have compared the main differences between spread betting and CFDs. We’ve included the main features each provides and explained how they are applicable to each.
|Tax||Profits from crypto spread betting are exempt from capital gains tax.||Any profit you make from CFDs are subject to capital gains tax, although losses can be offset against profit.|
|Commissions||When trading crypto using spread betting, no commission charges apply.||Crypto CFDs usually charge a commission for opening and closing a position, although this will vary from broker to broker.|
|Going long and short||You are able to go both long (buy) and (short) when spread betting on crypto. ||Just like spread betting, you can go long and short on crypto CFDs.|
|Using leverage||Spread betting is a leveraged product meaning you only need to deposit a small percentage of the total value of your trade.||CFDs offer the same benefits as spread betting and are leveraged products allowing you to trade on margin.|
|Trading hours||Cryptocurrency trading is available 24/7 with most spread betting brokers.||You can trade the crypto market 24/7 with CFD brokers.|
|Trade size||The minimum trade size for most spread betting brokers is £1 per point.||Each broker has a different minimum trade size and it is possible to trade less than 1 contract|
|Retail or professional?||To trade the cryptocurrency market via spread betting you need to be classed as a professional in the United Kingdom.||The same rules apply for CFDs as that of spread betting. However retail traders can trade crypto CFDs using some brokers.|
|Regulation||Crypto spread betting is considered a form of gambling, however brokers offering it are regulated by the Financial Conduct authority.||Brokers offering cryptocurrency CFDs need to be regulated. Most are regulated by various European authorities.|
Should I use spread betting or CFDs for crypto trading?
As you will have seen from our comparison above, the differences between spread betting and CFDs are minimal. The key difference is the way each is taxed. Most other features are the same, or very similar. The choice of which method to use will largely depend on your own circumstances.
If you are able to pass the criteria to gain professional status, then spread betting is probably the better option as you can benefit from tax free profits. Spread betting is also a more user-friendly product as there is less work required for calculating stake size and profit and loss. CFDs are a better option if you’re unable to use spread betting in your country.
Spread betting is only available in the UK and Ireland, meaning much of the world cannot access this type of trading. CFDs on the other hand are available in a wide range of countries and offered by more brokers.
Compare the best crypto brokers
You will need to use a broker to spread bet on crypto or use CFD contracts. Many brokers offer both types of derivatives so you have a lot of options to choose from. Our crypto experts have searched the market and found the top rated platforms around to get started with either spread betting or CFDs right now. Click on any of the links below to register an account.
What should I do now?
Now that you know the main differences between spread betting and CFDs you may want to start trading. To do so, you’ll need to register with an online brokerage account that offers the method you want to use. If you’re new to crypto trading then its a good idea to brush up on your skills. You can use the many free guides we have here on Invezz to help you get started.
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