Trading Ethereum CFDs: What You Should Know
Ethereum is currently the second-largest digital currency by market capitalisation after Bitcoin. There are several things to keep in mind before diving into the ETH derivative market. Once you know them, you can decide whether this is for you and what’s the time to go. We will cover the basics of expanding your trading portfolio with Ethereum by first going through some background and then focusing on one of the most traded digital currencies today.
Everyone reading this has most likely heard of Bitcoin. Ethereum is often compared to it, due to its arrival and consequent spread on the crypto market, starting from 2015. In itself, Ethereum is a platform and a programming language that is open for developers to build their own decentralised applications, or dApps. The dApps participants run these apps in blockchains, which are called smart contracts. In this case, ‘smart’ stands for the high level of polish of the contracts’ security systems and digital history, which makes them auditable for financial inspection. As a result, more people are prone to trusting smart contracts without worrying about fraud.
The origin of smart contracts is quite simply the result of the aim to digitalise legal contracts. They can store the same variables that would be used in real-world contracts, transmit assets in the forms of tokens, and much more. Essentially, developers can create digital organisations without anyone in the middle to maintain immutability.
Ether vs Ethereum
As for the cryptocurrency Ethereum – it is often misplaced with the platform name. In actuality, ETH stands for Ether. Ethereum is often called a utility token. This means that, in addition to the cryptocurrency itself, owners get access to the services available on the platform. The most notable one is its decentralised operating system. These project-specific perks are available for other cryptos as well. The best part is that those currencies do not necessarily have to be linked to a single project in order to be utilised by them.
Historically, Ethereum began in 2013 when a programmer outlined the goal of building dApps on a blockchain network for people to use instead of creating their own blockchains. In 2017, many start-ups and research groups, as well as Fortune 500 companies, announced the establishment of the Enterprise Ethereum Alliance (EEA). By way of this organisation, fintech industries could fasten the pace of adoption of Enterprise Ethereum.
How to start trading ETH CFDs?
As with any contract for difference, traders get to speculate on the future price difference of Ethereum when they begin trading.
However, it is important to note that Ethereum functions differently to Bitcoin. Both currencies are developed in alternative ways. This leads to the way supply is handled being vastly different as well. Bitcoin’s software allows only a limited supply to be mined or created. This alters its price per token in order to correlate with the demand at the time. Ethereum, on the other hand, is unrestricted in this regard and ETH coins can be created indefinitely.
In this sense, for traders, it would be unnecessary to go the mining route and potentially even the creation of their own altcoin within the network of Ethereum. The only thing needed for traders is to choose their cryptocurrency trading platform and sign up for an account.
Start trading ETH derivatives with Eightcap
Once you have opened an account, you can begin trading ETH CFDs 24/7 throughout the year. Cryptocurrency traders should keep in mind that digital currencies are extremely volatile. Remember, CFD trading allows trading on leverage. This means that traders can place larger trades with a smaller deposit (but with an increased risk of loss). From there, what form of cryptocurrency they wish to trade is the choice of every trader.
Trading on margin is high risk.