Frequently asked questions about Cryptocurrency CFDs

Bitcoin is a digital currency that was created in 2009. Its creators are unknown, as they disguised themselves using the alias of Satoshi Nakamoto. When Bitcoins are bought or sold, every transaction is recorded on a public ledger called the blockchain.

What is Ethereum?

Ethereum is the second-largest cryptocurrency offered as a CFD to Pepperstone clients, with a market capitalization fast approaching $200b and is getting huge attention from crypto traders. The mechanics behind Ethereum are fascinating, but as an open-source blockchain, Ethereum has the major point of difference from its larger peer Bitcoin; flexibility. Unlike Bitcoin, Ethereum allows external access to its blockchain, allowing programmers to create smart contracts or DeFi dapps, which are all the rage in the crypto scene at present.

Why trade Ethereum?

The performance of Ethereum has been staggering, with price having gone exponential since building a base in November, where we have seen Ethereum explode 180%. While the moves have been dwarfed by that of various somewhat comical altcoins, as a more mainstream cryptocurrency Ethereum is getting the lion’s share of the attention and flow.

With price moving almost parabolically, there is also no doubt a wall of FOMO capital chasing ever higher levels, as there is nothing more emotive than any market at an all-time high. It seems that in the crypto space, Ethereum is making all the moves and where traders with the risk tolerance should be focused on.

Could Ethereum play a great role in the institutional portfolios?

It seems that could be the case with Greyscale Investment Trust, the creators of the Bitcoin Trust, one of the predominant vehicles for institutional players to gain access to Bitcoin, putting out a bullish report on the merits of valuing Ethereum as a form of money, as well as the ability for those involved to generate cash and yield. The market is also anticipating the roll out of Ethereum futures traded on the CME, and again, this just solidifies the adoption story and improved price discovery for those outside of the retail scene.

How do I buy Bitcoin?

There are many ways Bitcoin can be bought. Physical Bitcoins (whole or partial) are often bought and sold on an exchange with multiple currencies. When a Bitcoin has been bought, it’s then stored on a digital wallet. Buying Bitcoins can be considered risky, as it’s a deregulated product and susceptible to hacking. Bitcoins on the blockchain can be stolen and/or your digital wallet is susceptible to hacking (especially when stored on the cloud and it’s not secured).

How do I trade Bitcoin CFDs and Ethereum CFDs with Pepperstone?

You don't require a digital wallet to trade Bitcoin CFDs or Ethereum CFDs with Pepperstone. When trading Bitcoin or Ethereum with Pepperstone, you're not purchasing any portion of the physical coin itself. Rather, you’re trading on Bitcoin or Ethereum price movements. These financial instruments are derivative products known as CFDs, whereby you don't own the underlying asset and you’re trading on their individual price.

What are the risks involved involved in trading Bitcoin CFDs and Ethereum CFDs?

Trading Bitcoin CFDs and Ethereum CFDs are high risk products and your losses can exceed your initial investment. When you trade CFDs with Pepperstone, you won't own or have any rights in the underlying asset.

Cryptocurrencies, such as Bitcoin and Ethereum, are much more volatile than traditional currencies and carry significant risks. The cryptocurrency market is volatile, so sharp and sudden moves in price could see you lose significant amounts of money very quickly.

Source   Presented by PepperstoneForex Columns
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