how to trade cryptocurrencies without a wallet?

Please note that crypto trading is available only to UK Professional Traders

Table Of Contents

The Latest Developments with Cryptocurrency Trading and the FCA

The FCA (Financial Conduct Authority) of the UK implemented a ban on the sale of cryptocurrency derivatives products, and Exchange Traded Notes (ETNs) in October 2020, effective January 6, 2021. The UK regulator deemed the sale of cryptocurrencies derivatives such as Bitcoin, Bitcoin Cash, Ethereum, EOS, and Ripple to be unsafe for retail traders.

Given the implications of the FCA ruling, sweeping changes were made among brokerages, including AvaTrade UK. Foremost among the changes is the requirement that traders must demonstrate a degree of experience to qualify as a professional trader. At AvaTrade UK, all new registrants must indicate by way of prior experience (1-10) + the extent of their knowledge of cryptocurrency trading.

While retail investors are effectively locked out of derivatives and ETNs with crypto, the actual purchase and sale of digital assets through cryptocurrency exchanges remains open. Opponents of the FCA ban cite concerns relating to the curtailment of trading freedom, while proponents believe it is a responsible measure, particularly for retail investors with little prior knowledge of the derivatives trading market a.k.a. CFD cryptocurrency trading.

Our brokerage is fully compliant with the FCA, and offers professional traders access to derivatives trading instruments where you can buy and sell crypto CFDs around-the-clock. The rules published by the FCA pertain to derivatives and ETNs only for retail customers. The FCA deems cryptocurrencies extremely volatile assets with no reliable valuation test. 

The FCA ruling is substantial in that it applies to operators inside the United Kingdom, and outside the country’s borders. According to the UK regulatory authority, cryptocurrency is regarded as tokens and not investments. In the interest of public safety, the FCA undertook these measures to provide protections to retail clients who may otherwise subject themselves to outsized risk.

The cryptocurrency derivatives market has been booming in recent months, as Bitcoin surged above $58,000 per unit BTC. The futures market, and derivatives market, led by institutional traders, retail traders, and investors has been particularly robust of late. At the time of writing, BTC was priced at $48,595, with a market of $905.7 billion, rapidly approaching the trillion dollar mark.

Industry statistics indicate that the total circulating supply Bitcoin in February 2021 is currently 18.6 million BTC. As the world’s most traded and most held cryptocurrency, with a typical hold time of around two months, interest in crypto has never been as widespread. Cryptocurrencies like Bitcoin are closely correlated with others including Wrapped Bitcoin, Litecoin, and altcoin. Currently, professional traders are able to buy and sell Bitcoin CFDs at AvaTrade UK with ease.

With CFDs, traders can profit off BTC price movements to the upside, or the downside, provided pricing moves in your favour. As a responsible broker, AvaTrade facilitates secure trading, with full licensing and regulation, leverage, and auto trading functionality. A combination of world-class trading platforms in AvaSocial, ZuluTrade, DupliTrade, MT4, and MT5 are available to facilitate cryptocurrency CFD trading.

What is a Cryptocurrency

Cryptocurrencies are encrypted decentralised digital currencies that are transferred between individuals. These currencies are not tangible and exist only in an electronic form it is a digital asset that exists and remains as data. They allow a person to send money just like they would send an email, with much faster transaction times compared to using a bank, plus minimal fees, no credit cards necessary and no middleman adding on charges.

The joint bookkeeping process is called a “Blockchain”. It is public and is distributed across a huge network, and everybody that has Bitcoin has a copy of the ledger and its transactions, which creates a community of trust. Each cryptocurrency is individually identifiable and programmable based on a very complex digital code.

While Bitcoin is not the only digital currency on the market, it is indeed the first and most popular one and stands as the digital “gold standard” within the industry. The technology behind cryptocurrency holds a large part of its value -the secure way to identify a transaction and the way to transfer funds.

There is a range of altcoins, which are alternatives to Bitcoin and growing in market share and value, and therefore are worth taking note of too. Some of the top-ranking altcoins include Litecoin, Ethereum, Bitcoin Cash, Bitcoin Gold, NEO, IOTA, Stellar Lumens and EOS to name a few.

Trade Cryptocurrencies with AvaTrade

How to Trade Cryptocurrencies?

Ordinarily, if you are looking to buy, sell or exchange cryptocurrencies you need to set up a crypto wallet. You would then buy the cryptoassets with fiat currency, and then you can exchange these coins to the altcoins of your choice. If however, you are looking to trade cryptocurrencies you would need to sign up to a crypto exchange, where you can trade cryptos, one from another and profit from the difference in the exchange rates.

In the main, you will find these wallets are not regulated, as they don’t need to be and often you will not know too much about the people behind these products. Plus, there is also the risk of cyberhacking, which happens on exchanges more often than you might think. Trading cryptocoins with AvaTrade has many benefits. The first is safety. We are regulated across 7 jurisdictions, this means real protection for your data and accounts and resolution in case of a dispute. Secondly, since the trades are performed though our SSL secured online trading platform, this proves to be a big deterrent in avoiding potential hackers and theft.

Here at AvaTrade, you can trade cryptocurrencies via CFD’s (read more on CFD trading advantages). This means you won’t actually be buying and holding the coins, rather you will be on the price movements. 

Factors to Watch While Trading Cryptocurrencies

The cryptocurrency market changes very fast, new cryptocurrencies are born, and others disappear. What draws people to the world of cryptocurrencies is the idea of protecting themselves against the devaluation of their own national currency. More retail stores have started accepting Bitcoin and other digital currency as a form of payment, and in countries like Japan, people have started using it more frequently thanks to the government officially approving the currency.

Initially, bitcoin was accepted mostly by the darknet marketplace, but gradually it has gained acceptance and has now been adopted by legitimate brick and mortar and online businesses. With more businesses accepting it as a form of payment, banks are starting to realise that this new product has the potential to change the financial world and draw away partial financial control from governments and banks.

There are different factors that push the price of cryptocurrencies up or down. To start with, just like with Forex, the higher the demand, the higher the price will be. Also, the purchase of the coin by traders purchasing on speculation can affect the demand and therefore the price.

Media reports and news headlines discussing the growing currency can have an effect on the price of digital currency and Bitcoin in particular. For example, there have been a variety of negative remarks from national regulators in China over the years. In 2013 China announced that financial institutions should stay away from the famous Bitcoin, this resulted in a major drop of the coin by as much as $300. Their initial concern was that it could interfere with normal currency policy information. In 2014 the Bitcoin price dropped once again as Bitcoin exchanges stopped receiving deposits from Banks, and in 2017 China’s central bank was rumoured to implement regulatory action regarding the digital coin exchanges which would have accounted for most of the Bitcoin trading volume.

In 2014 there was a major hack attack rumoured to wipe the screens and put the entire Bitcoin exchange offline. During this time and until things returned to normal there was a 23% drop in Bitcoin price. Various influencers over time have and can dramatically influence the price of digital currency swiftly. Its volatility is what makes it attractive as a trading instrument, rather than an asset to buy and own. Overnight you can find the value of your Bitcoin plummet. However, when trading this asset, these big spikes cause opportunity to make more pips.

Bitcoin alone at the time of writing in October 2020, is valued at over $201 Billion, this is partially due to people learning what cryptocurrencies are and considering them as an investment vehicle to add to their investment portfolio.

General Tips For Cryptocurrency Trading

The rule of “buy low, sell high” is the basic formula in trading, it applies to a pattern of cryptocurrencies price that shifts between certain price points.

Whatever the size of your capital, you can find a digital currency that matches your needs to trade. Following news on digital currency is very important, and can help direct you to choosing the best cryptocurrency for you.

There are two major factors to consider before trading your crypto currency of choice.  The first is, fundamental analysis and the second is technical analysis.  Technical analysis includes the same research that is done with any and all other financial assets.

Fundamental analysis should take into account the susceptibility of the cryptocurrency markets, and the fact they can be manipulated by thought leaders of the industry for their own advantage.

Start Trading Crypto with AvaTrade

Cryptocurrencies are a form of money for the future and have the potential to transform the global financial system. Regardless of the negative issues surrounding cryptocurrency trading, more people are using it, increasing the demand, and for this reason, the price is rising. Its volatility makes for an excellent addition to any financial trading portfolio.

If you are looking to trade, remember that in addition to the Bitcoin, there are several other altcoins also reaching a high-level market share such as Ether, Bitcoin Cash and Litecoin. But it should be noted that cryptocurrencies have crashed before, and like other investment vehicles, this could happen once again. Moving forward, there are discussions on how to manage the currencies and maintain more stable prices. The long-term ramifications are still unknown, but cryptocurrency is not going anywhere, anytime soon.

Why Trade Cryptocurrencies With AvaTrade?

To start with, we offer trading benefits that regular cryptocurrency exchanges’ platforms don’t.

  • Short Selling, which is the process of being able to continue trading during falling markets and being able to profit from the price decrease.
  • Leveraged trading, which refers to the process of borrowing funds from the broker in order to trade a much larger position with minimal investment.
  • Finally, the availability of auto trading – either algorithmic via using pre-programmed trading bots, social trading via AvaSocial or copying  the positions of experienced traders with a proven success record (Zulutrade).

We recommend you to visit our trading for beginners section for more articles on how to trade Forex and CFDs.
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Please note that crypto trading is available only to UK Professional Traders