CFDs, short for contract for differences, are financial instruments that allow traders to profit from the price movement of an asset without owning it.
As its name suggests, CFDs are contracts made between traders and brokers that pay the difference between the prices of an asset at the start and close of the contract. The asset could be stocks, commodities, or cryptocurrencies.
The price difference is paid by the party on the losing end of the price action. For example, when a trader opens a Bitcoin CFD position, they are either long or short. Longing means betting that the Bitcoin’s price will increase while shorting is betting that the price will fall. If the trader longs and Bitcoin rises, they are on the winning end of price action and receive the difference in Bitcoin’s price between the start and close of the contract.
On the other hand, if the trader shorts and Bitcoin falls, they are on the losing end and pay the difference in Bitcoin’s price between the start and close of the contract.
If you wish to profit from crypto price movements without the cost of owning them, you'll need a broker. Here are some of the best crypto CFD brokers we've come across in 2023.
Below are the crypto CFD brokers we chose from a wide selection that we tried and tested. We consider these to be the best crypto CFD brokers on the market today.
eToro is a social trading platform that connects 25 million users to global stocks, indices, commodities, and cryptocurrency markets. Its social feature allows you to connect with other users and even copy their trades.
Also, eToro allows users to invest thematically. For example, you can invest in a food-themed portfolio composed of stocks in the food and drink industry. You can also invest in portfolios composed of people and their positions.
eToro maintains a global presence with subsidiaries in the UK, Australia, and Europe. It is regulated by the Financial Conduct Authority (FCA) in the UK, the Cyprus Securities & Exchange Commission (CySEC) in Europe, and the Australian Financial Services Licence (AFSL) in Australia.
eToro has proven itself a strong CFD broker over its 15-year lifespan. Its vast user base creates an environment that supports new users while its intuitive platform automates trades via Copy Trade and Smart Portfolio.
Capital.com is a fintech and broker with access to over 3,000 financial markets across the globe. It aims to create an environment where anyone can learn to trade and take charge of their financial future.
The fintech firm was founded in 2016 and has grown to become a one-stop-shop for traders and investors in the indices, stocks, forex, commodities, and Cryptocurrency markets.
Its trading terminal boasts a simple, intuitive UI that simplifies order placement, is equipped with over 75 indicators and advanced research tools and is accessible to traders at all levels. Newbie traders also have access to educational materials and trading guides to help them get started.
What’s more, Capital.com is a global brand licensed in multiple operating regions. Its subsidiaries are regulated by the UK Financial Conduct Authority (FCA) and the Financial Services Authority of Seychelles (FSA), licensed by the Australian Securities and Exchange Commission (ASIC), and authorised by the Cyprus Security Exchange Commission (CySEC).
Capital.com also subjects itself to the highest auditing standards through its partnership with Deloitte and maintains physical offices in the UK, Seychelles, Australia, Lithuania, Ukraine, Cyprus, Bulgaria, Poland, and Gibraltar. Their trading terminal is open to clients from 183 jurisdictions they operate in.
As for Crypto CFDs, Capital.com offers about 476 cryptocurrency contracts, although availability depends on geographical location.
Capital.com provides an all-inclusive platform for people from all walks of life to access the global financial markets. It has over 360,000 traders, 78,000 monthly active clients, and 24/7 support via live chat, phone, and email.
It also leverages AI technology to track your trading habits and provide suggestions that improve your odds of success.
Pepperstone is a global reach broker that offers powerful trading platforms, access to raw spreads, zero commissions, and low deposit minimums. It also provides access to crypto CFDs.
Pepperstone grants the most generous leverage facility at a maximum of 400:1 for live accounts, more than enough for capital-conservative traders. It also allows new users to get their feet wet with demo accounts of up to $100,000 in virtual cash, valid for 30 days. New entrants also get access to educational materials, trading journals, and fundamental research.
To maintain the highest levels of compliance, Pepperstone operates under the regulation of more than five financial institutions: the Australian Securities and Investment Commission (ASIC), the Financial Conduct Authority (FCA), the Cyprus Security Exchange Commission (CySEC), the Securities Commission of the Bahamas (SCB), the Dubai Financial Services Authority, and the CMA Kenya.
Opening an account is straightforward. You receive login details within 24 hours of submitting a valid form of ID after which you can choose between a Standard account or a Razor account. Standard account users enjoy low spreads (usually 1 pip markup to raw spread), commission-free trading, free deposits within Australia, and flexible deposit methods. Razor account holders enjoy tighter spreads, but also pay commission fees. All other benefits are the same.
Pepperstone stands out in its integration with major copy trading services, advanced charting software, and trading platforms. Pepperstone trading accounts are integrated with TradingView charting software, MetaTrader4, MetaTrader5, and cTrader, all of which are powerful charting and trading software. Users can also connect their accounts to copy trading services like myfxbook, algorithmic trading marketplaces like Mirror Trader, and trading signal markets like MetaTrader Signals.
Pepperstone has stood the test of time, proving itself as a reliable broker throughout its 12-year history. Its low-fee, beginner-friendly environment helps new users navigate the financial markets. And after some familiarity has been built, its integrations push trading ahead.
Pacific Union, founded in 2015, is known for its support for international clients. It provides multilingual services to 120 countries and jurisdictions, processes $12 billion in daily trades, and runs 14 global offices.
The online broker offers four trading platforms: a web trader, MetaTrader4, MetaTrader 5, and a mobile trading app. Its trading terminals offer advanced charting tools, access to about 40 major crypto CFDs, a 50:1 leverage ratio for crypto CFDs, and weekday support.
To maintain compliance, Pacific Union is regulated by the Financial Services Authority of Seychelles. It segregates client funds from operational funds and stores them in AA-level banks like the Commonwealth Bank of Australia and the Westpac Banking Corporation.
Opening accounts is straightforward. Choose your country from their drop-down list, fill in your name, email, and phone number, and click Open live account. Once you submit valid documentation (identification and proof of address), you will receive login details for the trading terminal within 24 hours. Pacific Union offers two trading accounts. Standard accounts offer commission-free trading and low spreads (typically a 1.3 pip markup), and Prime accounts offer raw spreads (no markup) but charge a $7 commission per lot ($100,000).
Clients can also open up to 8 trading accounts under one client account. These trading accounts can be denominated in any of the major supported currencies. And if clients need to test the waters before jumping in, demo accounts last for 60 days and provide up to $100,000 in virtual cash to practice with.
Pacific Union makes it easy for anyone to open an account, fund it, and trade. They also create a smooth onboarding experience for international clients outside western nations.
A CFD broker is a financial institution that offers contracts for differences to clients. They are sometimes the counterparty on the other end of a CFD trade. If the trade is favourable for the trader, the broker pays the price difference of the underlying asset. If not, the client pays the difference.
To fully run CFD services, brokers extend leverage to clients. Leverage is borrowed money that clients can use to increase the size of their positions without extra capital on their end. The broker essentially borrows them money to open trades of large sizes on the condition that they deposit a certain percentage of the total size of their position, called a margin. This percentage varies with brokers.
There are two major types of CFD brokers, dealing desk brokers and no-dealing desk brokers.
Dealing desk brokers are also called market makers because they create the market for their clients. They set the prices for the bid and ask sides of all instruments and serve as the counterparty to the client's trade. This means that if the client makes money, the profit comes from the broker.
No Dealing desks (NDD) are brokers that do not act as counterparties to their clients' trades. Instead, they act as way-stations that route clients’ trades to the interbank market. An NDD broker can either be an STP or an ECN broker. Electronic Communication Network (ECN) brokers connect several liquidity providers together while Straight-through-processing (STP) brokers send clients’ trades through to external liquidity providers.
All good CFD brokers possess the same fundamental qualities. When choosing a broker:
Ensure they are properly regulated. The best brokers are regulated by major regulatory institutions. The more the merrier, however, they must be regulated by at least one. Brokers regulated in the UK, US, and Australia are usually among the best. Also, ensure they segregate client funds. Most brokers already do this, but they need to state it in their documentation or website. The bank they place client funds in should also be reputable.
Ensure their deposit and withdrawal methods are favourable. You should be able to easily deposit and withdraw funds. Take note of how easy withdrawals are compared to deposits because good brokers keep them equal while bad brokers make withdrawals harder than deposits. Also pay attention to customer support. Good brokers provide customer service throughout the weekday and some go further to provide round-the-clock service. However, the minimum service level is 24 hours five days a week.
Lastly, try to avoid market makers. They may be incentivized to trade on the opposite side of their clients’ positions to maximise profits. While not all market makers do this, it is safer to use brokers who do not have this incentive.
CFDs allow you to benefit from the price movement of assets without bearing the cost of purchasing them. This is most obvious in the case of cryptos. Traders don’t need to buy a whole BTC before profiting from its price.
CFDs grant access to financial markets that may have otherwise been unavailable due to geographic boundaries. For example, certain governments do not allow their citizens to hold cryptos, but they allow them to trade crypto CFDs.
Lastly, CFDs allow investors to long and short assets. Without CFDs, retail investors can only benefit from crypto prices when they go up. But with CFDs, you can benefit from price movement in both directions. You can long to benefit from upward movement and short to benefit from downward movement.
All good CFD brokers possess the same fundamental qualities. When choosing a broker ensure that:
How to sign up to/use a CFD broker in 3 simple steps
Your choice of CFD broker depends on your needs and location. Some brokers work better in certain regions than others when it comes to deposits and withdrawals, offering certain instruments, and providing certain guarantees like deposit insurance. You’ll need a valid form of ID (driver’s licence, national ID) and proof of address (bank statement, utility bill). Some brokers may require more information like the source of funds and banking details for deposits, withdrawals, and other payments.
After signing up, you’ll need to deposit funds to start trading. Take note of the minimum deposit limit for your chosen broker and the specific deposit method you intend to use before signing up.
Once your account is funded, you can start trading. Crypto CFDs are traded using lot sizes despite being cryptocurrencies. Each lot size is 100,000 units of currency (100,000 USD) but you can choose mini lots (10,000 units) and micro-lots (1,000 units). Some brokers even provide nano lot accounts (100 units).
Our criteria for assessment include;
In addition, the brokers chosen have experience in the industry plus a track record of providing good services. Brokers were also scored on the variety of assets offered, the ease of depositing and withdrawing funds, and affordability.
Regulation is another key metric we use. Our choices are well regulated, many by several institutions around the world. All brokers on our list also segregate client funds in top-tier banks, and some provide deposit insurance.
Finally, we consider customer service. Our choices have above-average customer support, some round the clock, others on weekdays.
Crypto CFDs are contracts that allow investors to profit from crypto price movements without the cost of owning the underlying assets. And because the focus is on price movements, traders can benefit from upward and downward trends.
Capital.com is great for newcomers because they leverage AI technology to analyse your trading patterns and give suggestions for improvement. They also offer over 470 cryptocurrency contracts.
eToro allows traders to copy the trades of more experienced people. They are regulated by multiple major regulatory agencies and provide deposit insurance of up to $85,000 for UK residents.
Pepperstone offers a generous 400:1 leverage for crypto CFDs and supports powerful integrations with advanced charting software like TradingView, copy trading platforms like myfxbook, algorithmic trading marketplaces like Mirror Trader, and trading signal markets like MetaTrader Signals.
Pacific union offers support for international clients, multi-currency trading accounts, low spreads, and free domestic deposits and withdrawals.
While both CFDs and investing achieve the same goal, they are quite different. Investing involves owning the underlying asset while CFDs profit from price changes. If the intention is to profit from volatility, then CFDs are the better choice. If it is ownership, investing is the better choice.
The minimum amount depends on your broker. If your broker allows you to open trades with $20, then that is the minimum you need to start trading CFDs. Note that this is not the minimum deposit amount. Your broker may allow you to deposit $20 but not allow you to open positions with it.
CFDs are highly leveraged instruments that magnify gains and losses. Your funds could be completely wiped out if your trade goes awry and you don’t implement proper risk management. CFDs can also sink your balance below zero so that you not only lose your money, you owe. However, most brokers do not allow client accounts to fall below $0.
Yes, you can, provided you maintain a healthy margin. Margin is required to ensure your position has enough liquidity to be kept open. Margin is effectively borrowing money from your broker to trade the underlying asset and should be known before you open the trade. Holding trades also incurs carry-over costs known as the overnight swap rate and this is something to think about when keeping positions open for extended periods.
CFDs are illegal in the US because they do not fall under the same regulation as other market securities while crypto CFDs are banned for retail investors in the UK.