An in-depth look at the rise of crypto CFDs
Although Contracts for Difference (CFDs) have been around since the early 1990s, the derivative instrument saw a huge surge in popularity in 2020. The pandemic-induced market volatility is possibly the key reason for this rise in popularity. Prolonged stay-at-home restrictions also offered the perfect opportunity for people to explore cryptocurrencies and enter the world of trading.
Cryptocurrencies Rising
If 2017 was a record year for cryptocurrencies, 2020 was a record-breaking year. The most popular cryptos, especially Bitcoin, touched new highs through the latter part of the year. Although not without volatility, even Ethereum rose from its low of $91, witnessed in December 2018, to crossing the $450 mark by the end of 2020.
The global pandemic left economies across the world battered, delivering a big blow to traditional assets. The market sentiment of fear that surrounded mainstream assets offered a conducive environment for cryptocurrencies to thrive. Not just individual traders, but companies and institutional traders turned to the digital asset class. This further fuelled the rise of cryptos, on hopes of digital currencies becoming mainstream.
From JPMorgan to Visa and PayPal, some of the largest names in the financial sector announced their adoption of cryptocurrencies for transactions. This proved to be a big confidence booster for individual investors.
However, nowhere has cryptocurrency adoption been as pronounced as in the African continent. The continent has witnessed increasing crypto ownership, trade volumes, and, consequently, regulation. According to a report by Chainalysis, Africa ranks second in terms of peer-to-peer crypto trading. As of September 2020, Nigeria leads in terms of growing P2P volumes, which were recorded between $5 million to $10 million weekly. Kenya and South Africa come in at a close tied second place, averaging weekly trade volumes of $1 million to $2 million.
Another report by Arcane Research, in partnership with Luno, revealed that Nigeria, Uganda, South Africa, Kenya and Ghana are among the top 10 nations on Google in term of search related to Bitcoin. Africa is shaping up to be one of the most promising regions for the adoption of cryptocurrencies.
Along with the rising interest in cryptos among retail traders, CFDs have emerged as a viable means to trade this digital asset class. Traders do not need to own the underlying asset to be able to speculate on its price, which means that they can trade digital currencies with much smaller capital than trading directly on exchanges. This is only one of the reasons for the growing popularity of crypto CFDs. The derivative instrument is likely to continue to grow in popularity among crypto traders in 2021. Here are some of the key reasons why. (more…)
