The cryptocurrency market has been on fire over the last year with Bitcoin being one of the best-performing assets in the financial markets.
The digital currency has moved out of the shadows as more and more large corporations signal their intentions to use the coin or hold it. It looks like Bitcoin is here to stay but should you consider trading it with a spread betting account?
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Bitcoin is Volatile
One of the criticisms of Bitcoin from the mainstream financial heads is that the coin is volatile. Sure, but that is where the opportunity lies for traders.
The digital payment form has been called a scam and a joke by many famous investors and the big-name banking institutions but despite some volatile ups and downs, the crypto space is constantly maturing, and new technology is emerging.
2020 was the year that Bitcoin went further into the mainstream after a huge rally in the coin from the March 2020 pandemic market crash lows. The coin traded near $4,000 before going on a strong uptrend to break through the all-time highs at $20,000 near the end of the year. The start of 2021 brought an endorsement from Elon Musk as he announced that his Tesla company would begin to accept BTC as a form of payment for electric vehicles. Alongside interest from other corporate giants such as PayPal and Visa, Bitcoin went on to see all-time highs of $64,000 in May.
The price of Bitcoin then saw another volatile drop to $30,000 in June and July this year, but the coin bounced back to $50,000 in August. Financial markets are now concerned about the coronavirus variant in the second half of the year as we approach the autumn and winter season. This could bring further volatility to the price of Bitcoin if alternative investments sell-off again.
What’s Next for Bitcoin?
Bitcoin’s meteoric rise in 2020-21 was part of an ongoing growth in institutional investment.
The early growth years of Bitcoin was driven largely by private investors, but the real arrival of cryptocurrency would come when investment institutions can put their hundreds of billions of investment capital into the sector. A further rise in mainstream retail investor adoption is also becoming more possible through the arrival of payment processing companies such as PayPal and Visa to the sector. It is becoming easier for the general public to be involved in cryptocurrency without understanding any of the complex technology.
At the moment there is a fear of regulatory crackdown on Bitcoin, while the coin has also been criticised for its intensive mining footprint on the environment. Those are the two main headwinds to the coin becoming what many hope it will be, which is a digital form of gold and the anchor for a new financial system.
Price Events to Watch Out For
Cryptocurrency coins such as BTC are native to a particular blockchain project, which is worked on by computer engineers and blockchain developers.
Bitcoin is limited in its supply and is mined by the computing enthusiasts using energy-intensive processes. A recent crackdown by China on the country’s dominant Bitcoin mining industry had negative effects for Bitcoin’s price.
Other examples of events are those that can boost the brand awareness and adoption of the coin. This can be done through partnerships and tie-ups, such as with a well-known brand or a retailing merchant. Bitcoin benefited from the news that Tesla would accept the coin as payment for its vehicles, while the famed tech investor Cathie Wood was also a fan of Bitcoin for her ARK Investment funds.
Cryptocurrency versus Spread Bets
There are considerations for holding Bitcoin outright or trading it through spread betting. The difference is similar to that of holding a stock or betting on the price with a spread betting broker. When buying a cryptocurrency, it is stored in a digital wallet or on the exchange. But investors also need to understand the use of blockchain keys if they want to move it to other brokers or make withdrawals and that can be time-consuming. With spread betting, the process is easier as deposits are made in British Pounds or US Dollars and can be withdrawn to your bank account when trades are settled. Newbie traders to cryptocurrency can risk losing their coins if they do not understand the blockchain. You are also more liquid when you spread bet as you are not tied to the asset, you are merely speculating on the contract which tracks the underlying asset. Spread betting is also a tax-free endeavour and regulators are now hovering around Bitcoin as they seek to clamp down on speculation.
Other Benefits of Spread Betting
The benefit of using a spread betting account for Bitcoin is that it will also allow access to trade a host of other coins and that is important when assets go through a quiet period. Although Bitcoin is the leader in the crypto market, other coins can see increased price action when they announce a new development.
A spread betting account will also allow access to stocks, commodities, and forex pairs. This is another way to always be seeing profit opportunities in the market. The other benefit of this is that it is all done in the same platform. Signing up to a cryptocurrency broker would mean learning another new trading interface.
Spread betting providers are also fully regulated by the FCA in the UK which is another risk with cryptocurrencies. The Binance exchange is one of the world’s largest exchanges for crypto and recently ran into problems with regulators in the UK and Japan. Spread betting providers have to segregate client money from the business, but this is not required of crypto exchanges and some have lost money in hacks.