Crypto CFDs: bitcoin without a wallet
What you learn in 3 minutesA crypto CFD is a contract for difference on the price of a coin. The word 'contract' is the important part: there is no coin, no wallet and no transfer. The reader learns what that changes in money terms, using a small bitcoin position as the worked example.
Bitcoin CFD: margin and swap on 0.01 lots
| Step | Amount | Note |
|---|---|---|
| Lot size | 0.01 lots | the smallest position size the platform quotes for this instrument |
| Contract value | A$1,000 | 0.01 lots x A$100,000 per lot, the platform's stated contract size |
| Margin at 20 per cent | A$200 | A$1,000 x 0.20, the margin rate the broker sets for this instrument |
| Spread cost | A$5 | a 0.50 per cent spread on A$1,000, charged once on entry |
| Swap per night | A$0.30 | an illustrative funding charge; the actual rate varies between brokers and changes daily |
| Swap over a weekend | A$0.90 | three nights of funding, because many brokers apply a triple charge on one weekend day |
The broker may round the swap, add a commission, and quote a wider spread outside its main hours. Margin rates and funding rates are set by the broker and vary between brokers.
The mistake people make here
The common mistake is to treat a crypto CFD as if it were the coin itself, and to leave a small position open over the weekend without checking the funding charge. The position can move while the reader is asleep, and the swap is added whether the price moved up or down. The fix is to read the funding line before entering, and to work out the weekend cost in A$ first. If the expected move is smaller than the swap plus the spread, the trade starts behind.Check yourself
A position of 0.02 lots has a contract value of A$2,000. At a margin rate of 20 per cent, what margin is required?
A$2,000 x 0.20 = A$400.
The same position pays A$0.30 per night in swap. What is the funding cost for three nights?
A$0.30 x 3 = A$0.90.
On AUD/USD, one pip on one standard lot is 10 units of the quote currency. At a rate of 0.6640, what is that in A$?
10 x 0.6640 = A$6.64. The figure varies with the exchange rate.