Crypto CFDs: bitcoin without a wallet
What you learn in 3 minutesThis lesson compares two ways to act on a view that bitcoin will rise. In the first, you buy the coin itself and hold it in a wallet. In the second, you trade a bitcoin CFD, so you take a position on the price without owning or transferring anything. You will learn what that difference costs in shillings, why crypto CFDs trade at weekends, and why spreads and funding charges are wider than on EUR/USD.
One weekend on 0.01 lots of BTCUSD
| Step | Amount | Note |
|---|---|---|
| Position size | 0.01 lots | The smallest size many brokers quote on BTCUSD, equal to a fraction of one bitcoin. |
| Margin required | KSh 13,000 | If the broker asks for 20 per cent margin on a KSh 65,000 position, the deposit is KSh 65,000 x 0.20 = KSh 13,000. |
| Weekend price move | KSh 2,600 gain | A rise of 4 per cent on a KSh 65,000 position is KSh 65,000 x 0.04 = KSh 2,600, before costs. |
| Funding charge for two nights | KSh 260 | If the broker charges 0.2 per cent of the position per night, two nights cost KSh 65,000 x 0.002 x 2 = KSh 260. |
| Net result | KSh 2,340 | KSh 2,600 minus KSh 260. The spread is charged separately when the position is opened and closed. |
Brokers set their own margin percentages, funding rates and spreads, and these vary. Some round the funding charge, some apply a wider spread at weekends, and some add a commission. Check the contract specifications before you calculate anything.
The mistake people make here
People often treat a crypto CFD as if it were the coin itself. They forget that funding is charged for every night the position is held, and that weekend spreads are usually wider than on a major currency pair like EUR/USD. They also assume the price cannot move when banks are closed, but crypto markets trade around the clock, so a position left open on Saturday can lose money while you sleep. The fix is to write down the funding charge and the spread before you open, and to decide in advance whether the position is worth holding over a weekend.Check yourself
A BTCUSD position is worth KSh 50,000. The broker charges 0.15 per cent funding per night. What is the funding cost for three nights?
KSh 50,000 x 0.0015 x 3 = KSh 225.
The position rises by 3 per cent over the weekend. What is the gain before costs, and what is left after the KSh 225 funding?
Gain before costs: KSh 50,000 x 0.03 = KSh 1,500. After funding: KSh 1,500 - KSh 225 = KSh 1,275.
On EUR/USD, one pip on one standard lot is 10 units of the quote currency. If the quote currency is converted at 130 KES per unit, what is one pip worth in KSh?
10 x 130 = KSh 1,300.