Cryptocurrency took the world by storm in 2009. First out was Bitcoin, but this is…
All about Bitcoin gearing
Bitcoin gearing is a term you may have come across if you are investing in cryptocurrency . Leverage is something many people may primarily associate with stocks, but it is also possible to leverage cryptocurrency.
In this guide, you will learn more about what bitcoin gearing is all about and what you should be aware of before you get started.
What is the leverage of cryptocurrency?
Gearing or “leverage” means that you invest money you have borrowed. This can, for example, be about an investor borrowing money from a brokerage house, and then investing an even larger amount than what is available. The concept is also called marginal trading.
You simply take out credit for investment. This means that even with low equity you can invest a large amount. You can then get a potentially greater return if you have invested smart.
Transmission is usually stated through a ratio. This could be 1:10, for example. If you have NOK 1,000 in your own money and then invest these in cryptocurrencies with a value of NOK 100, you will invest NOK 10,000 in total with 1:10 in leverage.
Why use Bitcoin gearing?
Bitcoin gearing can be tempting. Most do not have large amounts of equity that are suitable for investments. For many, therefore, gearing is the easiest way to invest and get a great return.
In some cases, it is possible to use as much as 1: 400 or 1: 500 in gearing, which can potentially increase an investment enormously. For example, if you only had NOK 100 in equity, you could invest as much as NOK 40,000 with 1: 400 in gearing.
Gearing with cryptocurrency is risky
Bitcoin shifting and shifting to another cryptocurrency may be tempting, but is not necessarily particularly wise. Remember that risk and return are closely linked.
You can make a huge profit if you are lucky, but you can also lose a lot if the market goes in the wrong direction. Let us start from the example we mentioned above.
If you invest in a cryptocurrency that is worth 100 NOK with 1:10 in gearing, a decrease in the cryptocurrency price can be very significant. Should the price fall by 10%, the investor has suddenly lost his entire investment.
And even worse – if the price drops by more than 10%, one will suddenly owe more money than what the original investment was equivalent to. Fortunately, the crypto exchange will sell your investment as soon as you approach zero in equity. The higher the leverage of Bitcoin or another cryptocurrency, the more risk there is.
CFDs and Bitcoin gearing
A CFD ( Contract for Difference ) can be described as a difference contract of a financial nature. A CFD allows the user to speculate in, for example, price changes, without necessarily owning the underlying investment.
According to eToro, one of the largest crypto-platforms, all transactions are of the “Sale” type of so-called “short” cryptocurrency CFDs. If it is a non-geared transaction when buying long-term cryptocurrencies, you own the underlying assets.
Who is Bitcoin gearing for?
Since Bitcoin gearing can be quite risky, it is not necessarily something beginners need to embark on. Bitcoin gearing is probably best suited for you who have some experience with investments from before, and who know what you are doing.
If you lack experience, you can possibly use copy trading with services such as eToro . You can then more easily succeed with Bitcoin gearing, since you can copy more experienced users’ actions.
Note: Past results are not indicative of future results. Presented trading history is less than 5 full years and may not be sufficient as a basis for investment decision.
Bitcoin gearing is generally suitable for users who are willing to take high risk. Remember that the funds you invest can be lost, and you should have the finances to deal with any losses.
What is the chance of losing gear?
When you visit the eToro website , you will immediately get a warning about gearing. It is then stated that CFDs are relatively complex tools, and that shifting entails a high risk of loss for you as a user.
It is mentioned that as many as 68% of those who engage in gearing and CFDs lose financial funds during the process. Furthermore, it is encouraged that you familiarize yourself well with what CFDs are, before you possibly consider starting with gearing yourself. You must endure any loss.
How to get started with Bitcoin gearing
As mentioned, Bitcoin gearing can involve a high risk of loss if you gear high. If you want to try yourself – preferably with low gearing – you can do this at eToro. Marginal trading at eToro means that you borrow funds from eToro.[trading]
You can then invest more in the cryptocurrency market. Your cryptocurrencies act as collateral for the loan. To get started, you must first register a user account with eToro, which takes a few minutes.
How much should I gear up?
It is up to you to figure out how much risk you are willing to take with Bitcoin gearing. However, it can be recommended to avoid very high gearing, such as 1: 400. The potential risk will then increase enormously.
Some people think that 1: 5 gearing is a decent maximum limit, while others prefer lower or higher gearing than this.
Is Bitcoin gearing for you?
We have now explained to you a little more closely what cryptocurrency leverage is all about. As you may realize, Bitcoin gearing is not for everyone. You can potentially make a lot of money on it, but the drop is all the greater.
Bitcoin gearing can still be interesting and fun to test, if you know what you’re doing. You can learn more about cryptocurrency and securities leverage on the eToro website , among others.
Hvilken plattform er best for Bitcoin giring?
Det finnes en rekke gode plattformer for Bitcoin giring. Vi kan anbefale å ta i bruk en plattform som er registrert hos Finanstilsynet, som for eksempel eToro.
Er Bitcoin giring lurt?
Ikke nødvendigvis! I mange tilfeller vil det lønne seg å ikke drive med Bitcoin giring. Siden rundt 67 % taper på giring, betyr det også at kun 33 % tjener på det.
Hva er poenget med kryptovaluta giring?
Kryptovaluta og Bitcoin giring er noe som potensielt kan gi en enorm avkastning, og dette er den viktigste drivfaktoren for at noen er villige til å ta risikoen.