Jiří Filip An absolutely fundamental event has hit the cryptocurrency market. The second largest crypto exchange FTX became insolvent. This exchange was very popular not only among hodlers (long-term investors), but especially among traders. It even had the slogan "Created by traders for traders". Thanks to favorable conditions, it attracted many retail traders and even crypto funds. But now the question is whether all these traders, hodlers and funds will ever see their capital again.
It is therefore crucial to ask yourself the question of how to solve such a situation from the position of an active trader, because hodlers can, after all, send the given cryptocurrency from the exchange to a hardware wallet and keep it safe. But if you are actively trading crypto, what are your options?
The answer may be trading account with a broker, which provides cryptocurrency trading using CFDs. Why could this option be better for the trader? Let's briefly introduce some of the main reasons:
- Czech banks they don't know how to access cryptocurrencies yet. You can often read in the media that the given bank does not allow sending a deposit to the crypto exchange or there are problems with withdrawals from the given crypto exchange. With a regulated broker, there is no problem with deposits and withdrawals, because the bank receives the funds from/from the regulated entity.
- Crypto exchange hack protection – if your cryptocurrencies were hacked and sent over the blockchain, you have very little chance of getting them back. In this, CFD contracts are much safer, as it is directly an instrument of a regulated entity.
- Accounting – a trader who chooses to trade cryptocurrencies through CFDs will certainly appreciate the support from the broker in the context of the tax return. Providing a fiscal report and profit calculation can certainly come in handy if you make hundreds of trades. Crypto exchanges usually provide a list of transactions, but you have to calculate everything yourself.
- Regulation and supervision – crypto exchanges are not subject to very strict regulations, therefore any trader who puts any capital into a crypto exchange risks losing all capital. If the exchange goes bankrupt, there is no guarantee fund like with a regulated broker. This disadvantage of crypto exchanges has not been addressed much so far, and especially with FTX, which was viewed as "Too big too fail", few people expected this. Trading with a broker that is regulated and publicly traded on the stock exchange allows you to monitor its financial health and overall condition.
- Support and communication - every trader will certainly appreciate good support and communication from the broker. At the same time, there is also the advantage of a physical branch. You know that the company is located somewhere and can be visited if necessary. You have direct contact with your brokers by phone or e-mail. In the case of crypto-exchanges, it is usually different – they often change their company headquarters and possibly do not even have an official headquarters. The connection of the client (trader or investor) with the exchanges is not very efficient and the given requests take days to weeks, if it is for example a withdrawal or a complaint of an order, etc.
- Hedging with the help of CFD contracts – if you are a hodler and want to hedge your positions, for example during a bear market, you can short using CFD contracts and you do not have to risk the given trade on the crypto exchange.
Every trader should ask himself whether it makes sense to take the risk of holding capital on a crypto exchange if there is an opportunity to trade CFDs with a regulated broker that copy the price of the given cryptocurrency. If your goal is to trade and not to target a given cryptocurrency, CFDs may be a suitable choice for you.
