If you are interested in trading with cryptocurrencies, two options are available. You can join a cryptocurrency exchange and trade with actual cryptocurrencies or use a broker that allows you to trade with crypto CFDs, which are different from actual cryptocurrencies. In this context, we will examine the differences between these two options and determine which is the best for trading.

Trading actual crypto

One of the most popular ways to trade cryptocurrencies is to purchase them and hold onto them until their value increases, much like stocks. When you trade on an exchange, you typically trade with regular cryptocurrencies. This means you are buying tokens that are yours to transfer and use as you please. This is the most common trading method and works well with crypto investing, allowing you to maintain control over the assets you purchase.

The spot market is a platform where you can trade cryptocurrencies with actual assets. When you visit this market, you will be presented with a list of two tokens paired together. To trade with them, you must possess the quota currency, the second currency in the pair, to purchase the base currency, the first crypto in the pair.

Trading with Crypto CFD

CFD stands for Contract For Difference. When you trade with CFDs, you bet on the price movement of an asset rather than buying or selling the actual asset. In the case of crypto CFDs, you are trading with cryptocurrency prices and speculating whether the price will increase or decrease. When you open a crypto CFD order, you are not buying the actual tokens and do not have possession of them. Instead, you own contracts associated with their prices.

When you participate in the futures market to trade with Crypto CFDs, you are speculating on price changes with regular money, and there is no need to own any cryptocurrency. However, there are some CFD markets, mostly on crypto exchanges, where you can open futures contracts using certain cryptocurrencies. If you anticipate that the price will increase, you should open a long contract, and if the price goes up, you will earn profits. Alternatively, if you believe that the price will decrease, you should open a short position, and you will win if the price falls.

Should I trade with actual crypto or crypto CFD?

At first glance, trading with different assets is similar, but significant differences determine which one to trade. It would be incorrect to say that one asset is better than the other as each has advantages and is suitable for different traders.

If you are deeply involved in cryptocurrencies and trade them regularly, then trading on the spot market might be the most suitable option for you. This involves buying a cryptocurrency and holding it until it is the right time to sell it and buy a different one. This method will give you valuable hands-on experience with cryptocurrencies, which will help you learn more about them and discover useful information that might benefit you on your crypto journey.

As a trader, you can interact with blockchain technologies such as crypto wallets, miners, protocols, and projects. However, this also means that you need to have a certain level of knowledge about these things to have a successful trading journey. The more you know about cryptocurrencies, the better your trading profits will be.

On the other hand, if you need to become more familiar with cryptocurrencies and consider them a good asset to trade with, then trading CFDs (Contracts for Difference) might be a better option. CFDs are contracts, not tokens. You can trade without blockchain knowledge or products. They are a good choice for many traders because of their ability to use leverage. When trading with leverage, the broker lends you large sums of money to trade with. Since cryptocurrencies have high volatility, you can make significant profits based on the money you spend to open the trade.

What are some of the most popular Crypto CFD pairs?

While trading with Crypto CFDs, you will encounter trading pairs commonly used on most exchanges or brokers. These trading pairs are the ones that most people use, while less commonly traded pairs might vary depending on the exchange you are using. In this context, we will examine some of the most popular pairs you will encounter.

ETH/BTC

The most frequently traded crypto CFD pair can be found on every broker or exchange. Two of the largest cryptocurrencies in the world are involved, and therefore, there is a significant amount of interest in both of these tokens. If we exclude pairs that include fiat currency, this specific pair has the highest daily trading volume.

BTC/USD

The trading pair with the highest volume on every broker’s website is BTC/USD. Most brokerage sites do not deal in actual cryptocurrencies, and traders open and close Bitcoin trades using USD. Given that USD is the most widely accepted and convenient currency, it is not surprising that it is the most commonly used trading pair on crypto brokers’ sites.

ETH/USD

Another cryptocurrency frequently traded with USD is the Ethereum token, ETH. Ethereum is the second-largest cryptocurrency in the world, with the largest blockchain network. ETH is the most commonly used cryptocurrency on the market and has consistently high daily transaction volumes, excluding stablecoins such as USDT and USDC. As a result, ETH/USD is a popular cryptocurrency CFD with which to trade.

FAQs on differences between trading actual crypto and CFD crypto 

Is actual crypto better than CFD crypto?

Using crypto CFDs would be better if your interest in cryptocurrencies is purely for trading. This is because you will have access to better trading tools and benefits. However, if you are interested in cryptocurrencies beyond trading and wish to use them for their intended purpose, trading and using actual cryptocurrencies will be a more beneficial option. Dealing with different parts of a blockchain may be required in this case.

Are crypto CFDs legal?

In the United States, trading crypto CFDs is considered illegal in most states. However, outside the U.S., most countries allow trading of crypto CFDs, but with strict regulations to ensure that everything is done legally and legitimately.