What Is Bitcoin Spread Betting, And How Does It Work?

Last Updated January 12th 2023
5 Min Read

If you haven’t already, now may be the time to learn how to invest in cryptocurrencies and other digital assets. There are several ways to do so, but we will discuss Bitcoin spread betting, which is a tax-free way to gain from the financial market and a high-risk venture for those who love speculation.

So, let’s begin by defining what this strategy is all about.

Bitcoin Spread Betting – What It Entails

2009 brought Bitcoin to the financial market, even though it is not treated like mainstream fiat currencies. The cryptocurrency quickly rose to prominence, hitting price ranges hitherto thought impossible. Although the coin was not regarded as a financial instrument and a store of value for a long time, many jumped on the hype and began trading it.  

Bitcoin spread betting is essentially betting on Bitcoin’s price movement for a specific period. The bettor sets this period and places a bet against the betting service. Then, there will be gains or losses depending on the price swings.

Apart from going through the hassles of purchasing financial instruments like forex, shares, or CFDs, you can bet on the price movements of Bitcoin. It is a simple process similar to playing online games on this site - but with better leverage. Bitcoin spread betting provides more benefits and leeway than gambling or the conventional cryptocurrency buying and trading.

With that said, in the US, you will have dollars per point, while in the UK, you will have pounds per point. Notwithstanding, you can use one account and one currency to set your bets.

The spread is the difference between an asset's offer and sale price, in this case, bitcoin. Also, you do not own any assets, as the wager is primarily speculative.

How Bitcoin Spread Betting Works

Speculation is the driving force behind bitcoin spread betting. The bettor attempts to guess Bitcoin price movements between the open and close periods. Moreover, the value can only go in two directions: up or down.

The following steps explain how Bitcoin spread betting works:

  • Pick an account

The first thing about this market strategy is picking a spread betting service that features Bitcoin. Once an account is opened, you will fund it with the required currency, which could be US dollars, pounds, euros, etc. You don’t have to use Bitcoin.

  • Pick an entry point

The entry point refers to Bitcoin’s price. For example, you can pick an entry point when the cryptocurrency is valued at 18,000. Note that it is always the current price of the cryptocurrency.

The difference between the entry and exit points will determine your profit or loss.

  • Place a long or short bet

A long bet involves betting on a price increase. That means you expect Bitcoin’s price to rise for the duration of your deal. On the other hand, a short bet refers to betting on a decrease in value.

You will profit from a long bet if Bitcoin’s price rises and lose if it falls. The same approach applies to a short bet, albeit in reverse.

A Bitcoin Spread Bet Illustration

Deals are made in dollars per point, pounds per point, or whichever currency you use. Let us explain with an illustration.

If Bitcoin’s price is 18,000, a long bet will start at 18,001 for one dollar per point. You can increase your bet to as much as is allowed on the platform, for example, $10 per point. On the other hand, a short bet will come in at 17,999.

Let’s assume you placed a $1 per point long bet, and the market rises to 18,100:

Profit   = $1 * (18,100 – 18,001)

           = $99.

If the market drops to 17980, then you will lose:

Loss  = $1 * (18001 – 17980)

           = $21.

Let’s assume you placed a $1 per point short bet, and the market falls to 17900

Profit   = $1 * (17999 – 17900)

      = $99

If the market went up to 18020

Loss  = $1 * (18020-17999)

           = $21

Things To Note About Bitcoin Spread Betting

Here are a few things you should know about this staking on price movement:

  • It is tax-free. Any gains you make from Bitcoin spread betting are tax-free, unlike traditional trades that incur taxes.
  • You do not own any assets. The deal is against the price movement and not on the instrument itself.
  • It is flexible. You can bet with any currency, provided the spread betting service supports it.
  • The trade is open-ended. That means you will continue making money on a long bet as long as the price goes up. On the other hand, the profit on a short bet will continue increasing, provided the price keeps going down.

Conclusion

Bitcoin spread betting is an effective way to speculate on and make money off the cryptocurrency market. You can place a long bet if you think the price will increase and a short bet if you think the price will decrease. However, you must monitor the market and close the trade if the market goes against you.

A declining market does not mean it will not increase, and a bullish market does not mean it will not decline. Spread betting on Bitcoin is flexible enough that people can open and close deals whenever they want.

Read More:

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Owning Bitcoin Versus Trading It

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