The Austrian fintech Bitpanda is launching a new product. It is now possible for users of the platform to react to short-term developments on the market via CFDs (Contract for Difference) for cryptocurrencies such as Bitcoin, Ethereum or Solana. This emerges from a press release that was exclusively available to BTC-ECHO in advance.
“We introduced leverage as a new way for our investors to trade the crypto markets on a short-term basis,” Bitpanda CEO Eric Demuth told BTC-ECHO. “We are proud that Bitpanda Leverage is the first fully regulated crypto leverage product in Europe and that, in true Bitpanda fashion, we can now offer a complex product in a simple, regulated and smart way.”
The option of CFD trading via Bitpanda has been available to a limited number of investors since the end of last year, but is now open to all traders on the platform.
Bitpanda Leverage: How Does Cryptocurrency CFD Trading Work?
A CFD (contract for difference) on cryptocurrencies represents an agreement between the buyer and the seller. The latter must therefore pay the buyer the difference between the entry price and the exit price of the respective cryptocurrency. CFDs are used to speculate on future price movements of the respective crypto asset.
“We want to give investors the choice of how they want to invest,” says Demuth. “It is true that CFDs have a much higher risk/reward ratio, but they are a valuable tool for those individuals looking to profit from short-term market sentiment.”
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In order to be able to trade with contracts for difference, one must deposit a security (margin). A corresponding leverage effect arises from the fact that this margin only accounts for part of the total value. Investors can then decide whether to go “long” (price increases) or “short” (price falls).
However, the price of the respective asset can also develop contrary to the expectations of the investors. Since 2017, private investors have no longer been obliged to pay even more in the event of high losses.
Bitpanda leverage products come with a “margin close-out control”. This means: A position is automatically closed when you have lost 50 percent of the initial margin. This is to limit the risk of loss. Nevertheless, trading CFDs should be carefully considered.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money quickly due to leverage. The vast majority of retail accounts lose money on this trade.
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