All trading involves risk. Losses can exceed deposits.

Cryptocurrencies: buying vs trading

Explore the differences between buying cryptocurrencies and trading them, and discover which is right for you.

All trading involves risk. Losses can exceed deposits.

Buying

Trading

Take ownership of the cryptocurrency. Speculate on the price of a cryptocurrency without ever taking ownership.
Put up the full value of the purchase. Use leverage, so that you only have to put up a fraction of your total position size up front.
Pay capital gains tax on any profits. When you spread bet, you won’t owe capital gains tax.
Gain direct exposure to one underlying exchange per account.

Gain indirect exposure to multiple underlying exchanges with one account.

Wait for an exchange account before you buy or sell. Start trading straight away, with no need for an exchange account.

Introductory limits on maximum deposits.

No maximum deposit limit.
Pay deposit and/or withdrawal fees. No deposit or withdrawal fees.

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  • The factors that drive cryptocurrency prices

  • The differences between trading physically and on leverage

  • How to get started with IG

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The differences in detail

Buying

When you buy or sell cryptocurrencies, you purchase the asset itself. As with any investment, you’ll need to buy and sell via an exchange, which requires you to create an exchange account and store the cryptocurrency in your own wallet. You’ll also need to put up the full value of the asset to open a position.

Cryptocurrency exchanges

To buy and sell cryptocurrencies, you'll need direct access to an exchange. If you're unfamiliar with how they work, this brings its own steep learning curve: you’ll need to get to grips with the technology involved, as well as learn how to make sense of the data.

You’ll also need your own account to trade on an exchange. These exchange accounts can be:

  • Slow to acquire: getting an account generally takes a few days, as you’ll join a queue of people waiting for manual approval
  • Restrictive to use: as a new account-holder, you’ll likely be limited to a deposit of a few hundred pounds a week
  • Expensive to maintain: funding and withdrawals generally incur fees, while some large exchanges also only accept bank transfers – which can take days to go through

Plus, without the infrastructure built up over years of business, these young companies can be slow to resolve even straightforward customer service issues.

Trading

When you spread bet or trade CFDs, you speculate on whether your chosen market will rise or fall in value. Prices are quoted in traditional currencies, and you never take ownership of the cryptocurrency itself. 

CFD trading and spread betting are leveraged products, enabling you to open a position with a fraction of the full value of the trade. In other words you could gain a large exposure to a financial market while only tying up a relatively small amount of your capital. Just remember that while this can magnify your profits, it can have the same effect on your losses.

Also, because there's no need to deal with an exchange, you could be set up and ready to trade much more quickly.

In fact, with IG, you could be trading in less than five minutes, with our simple application form and instant online verification.

Do I need an exchange account to trade cryptocurrencies?

No, you don't. With cryptocurrency trading, you won’t access the underlying exchange directly: we’re exposed to the underlying market on your behalf. This means you won’t need to set up and manage an exchange account. 

Open an account now

It's free to open an account, takes less than five minutes, and there's no obligation to fund or trade.

FAQs

What is a wallet?

A wallet is a virtual depository for your bitcoins, ether and other cryptocurrencies. There are multiple wallets on offer from different companies, but they all function in a similar way, and include a code identifying you as the wallet owner. Keep in mind that when you trade, you never actually own the cryptocurrency. As such, you don’t need a wallet.

How many cryptocurrencies are there?

As of July 2017, there were over 900 cryptocurrencies available to buy and sell, though most have little value. Of these, bitcoin, ether (the token of the ethereum network), ripple, bitcoin cash (an offshoot of bitcoin) and litecoin have the biggest market capitalisation.

IG offers trading on the six most valuable cryptocurrencies: bitcoin, bitcoin cash, bitcoin gold, ether, ripple and litecoin. 

Find out more about  trading bitcointrading ethereum, trading ripple and trading litecoin.

What are the trading hours for cryptocurrencies?

All of our cryptocurrency markets close at 10pm on Friday, and reopen at 4am on Saturday.

(London time) (market holidays permitting).

How does IG make money from cryptocurrency trading?

Our pricing algorithm looks across multiple exchanges and derives a fair mid-price, adding a number of points either side – known as the spread – to produce the price we publish on our platform.

Due to the spread, your position needs to move a certain distance before you’re in profit, and this represents our fee for the trade. You also need to pay to keep your position open overnight.

Are cryptocurrency ETFs available?

No. There have already been multiple applications for cryptocurrency-backed exchange traded funds (ETFs), but these have been rejected on the grounds of inadequate regulation. And given the continued regulatory questions over cryptocurrencies, a revision of this judgment – at least in the short term – seems unlikely.

There are, however, a few exchange-traded bitcoin products already in circulation, with more in the pipeline. Keep in mind that these are exchange-traded notes as opposed to funds, and carry with them their own unique risks. 

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