Spreadex launches Bitcoin spread betting based on the CME futures price

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Spreadex, one of the oldest spread betting firms is to launch Bitcoin trading on the 15th January.

At present there are no plans to launch other cryptocurrencies like Ripple, Dash or Ethereum, probably because since the launch of Bitcoin futures on the CME, it is now much easier for brokers to hedge client positions.

In the past brokers such as IG, ETX Capital or Plus 500 would have had to rely on either a B-Book method of hedging or using an unregulated Bitcoin exchange.

Now that CFD and spread betting brokers can hedge exposure through the CME as a regulated exchange it should mean that more brokers can start to offer cryptocurrencies.

There is however a disadvantage to CME hedging though, primarily that the CME Bitcoin futures contract is not open on the weekends. Which means that like foreign exchange, commodity and equity markets if there is news over the weekend that could move the price significantly you won’d be able to get out until Monday morning when there could be a large price gap.

This is a particular risk for Bitcoin as the price is exceptionally volatile, because it’s such a relatively new concept.

However, spread betting traders can short Bitcoin through Spreadex and other Bitcoin brokers, which you can’t really do unless you are spread betting or CFD trading.

Shorting Bitcoin basically means betting that the price will go down. So if it crashes you as a client profit, rather than as a buy and hold investor who can only profit if the price goes up.

Having a short position on Bitcoin as a spread bet means betting a certain amount per point that it will go down and the mechanics mean that you are essentially selling Bitcoin before you buy it with a with that it will be worth less at a certain point in the future.

The advantage is you make money when it goes down, the disadvantage being of course that with any short position prices can go up forever so losses are potentially unlimited, especially when trading on margin.

 

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