Cryptocurrency
Instruments
A cryptocurrency is a digital asset secured by cryptography, such as Bitcoin or Ethereum, traded for its price movement often via CFDs at brokers.
What is a cryptocurrency?
A cryptocurrency is a digital asset that uses cryptography to secure transactions and control the creation of new units, typically recorded on a decentralized public ledger called a blockchain. Unlike traditional currencies issued and controlled by a central bank, most cryptocurrencies operate on a distributed network of computers with no single controlling authority. Bitcoin, launched in 2009, was the first and remains the largest by market value; Ethereum and thousands of other coins and tokens have followed, many with different technical designs and use cases.
How traders access cryptocurrency
There are two broad ways to gain exposure to a cryptocurrency’s price:
- Buying the actual coin on a crypto exchange or wallet, taking direct ownership and custody of the asset.
- Trading a crypto CFD through a broker, which tracks the coin’s price with leverage but involves no ownership, wallet, or custody.
Each route carries different risks: direct ownership exposes the holder to exchange or wallet security risk, while CFD trading exposes the trader to leverage and financing costs on top of the underlying price risk.
Why cryptocurrency is considered high-risk
Cryptocurrencies are known for extreme volatility — double-digit percentage price swings within a single day are far more common than in traditional forex or major stock indices. Prices can be driven by factors ranging from regulatory announcements and network upgrades to broad shifts in investor risk appetite, and the market operates 24/7 with no single central authority smoothing prices. Regulatory treatment of crypto trading, including which coins can be traded and under what conditions, also varies significantly by country and continues to evolve.
Quick recap
- A cryptocurrency is a cryptographically secured digital asset, typically running on a blockchain.
- Bitcoin was the first cryptocurrency; Ethereum and many others have followed.
- Traders can own coins directly or trade a leveraged crypto CFD without owning the asset.
- Extreme volatility and evolving regulation make cryptocurrency a high-risk instrument.