Not all investors are told at the time of purchase that the instrument they are buying… is not in fact the real instrument.

In plan terms, you might think that you are buying bitcoin, but actually you are not.  Many companies offer CFDs on crypto. So when you buy your bitcoin, you just placing a contract on the price.  You will still make money if the value of the instrument goes up and you will still lose money if the price of the instrument goes down.  But you never actually own the instrument.

That is – in very layman terms – the CFD.  Investors in forex and stock instruments are very used to the CFD concept, and are familiar with the process of speculating – or guessing – if the value of a specific forex pair or stock, will increase. These investors aren’t necessarily interested in actually owing Japanese Yen or Russian Ruble. They have no use for these currencies. However they do want to potentially make a profit of any pricing changes. 

With the forex market being one of the largest financial markets in the world, traders and investors all around the world are buying, selling and holding contracts on cfds, day in and day up, come rain or shine.  The crypto world, however is rather new to the world of CFDs.

The vast majority of trading with online brokers is done on a CFD (Contract for Difference) basis. Put simply, this avoids the complications associated with physical delivery of the asset being traded. The average retail investor does not have the capability to take delivery of different currencies, cryptocurrencies or commodities, so CFDs allow speculative trading of those assets without the drawback of having to settle a trade and either make or take delivery of the underlying asset. 

Spot BTC trading requires an investor to have their own wallet and be able to send or receive BTC. There are several drawbacks and concerns with such a process. First there is always the risk of a wallet address being incorrectly entered when settling a BTC trade, leading to a permanent loss of coins. Second, security is always a concern with an abundance of instances of wallets being hacked, and coins lost forever. CFD trading of BTC allows clients to trade the underlying coin without the concerns of security or delivery. A client is simply credited or debited for the amount made or lost on a trade in the funding currency of their account. 

It is possible to purchase a contract on Bitcoin or Ethereum with TIOmarkets.  You can have exposure to the value of a crypto instrument by placing a buy or sell order on one of the crypto cfds offered by the company.  With growing popularity of crypto in recent months, we see trading on the crypto CFDs also increasing in popularity.  Unique to TIOmarkets however, is that real crypto instruments are also offered.  The TIOx – the Ethereum based native token to the TIOmarkets group of companies – can be used to access to the global financial markets, but is not available to trade. In this scenario, the TIOx acts as a key to unlock the financial markets, and is not used to speculate with. The TIOx also unlocks access to the TIOmarkets pool, also known as the crypto interest account.  By locking TIOx into your TIOmarkets account, daily interest payments will be made according to the performance of TIOmarkets in any given day.  As one of the longest standing crypto interest accounts available, TIOmarkets has never missed a payment and offers one of the highest rates of return at up to 14% per annum.

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TIO Staff

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