All clients wishing to invest in Cryptocurrency CFDs should carefully read this document. Trading in cryptocurrency CFDs involves significant risks, in addition to the general risks associated with transactions in CFDs. Please note this product is available to HYCM Capital Markets (UK) and HYCM Ltd (Cayman Islands) clients only.
What are cryptocurrency CFDs?
CFDs are complex financial instruments which allow you to speculate on the price of an asset. They are often offered through online platforms.
CFDs are typically offered with leverage which means you only need to put down a portion of the investment’s total value. However, leverage also multiplies the impact of price changes on both profits and losses. This means you can lose money very rapidly.
Cryptocurrency CFDs allow investors to speculate on a change in the price of a cryptocurrency such as Bitcoin or Ethereum.
A cryptocurrency is a virtual currency that is not issued or backed by a central bank or government. They have experienced significant price volatility in the past year which, in combination with leverage, places you at risk of suffering significant losses and potentially losing more than you have invested.
Cryptocurrency CFDs are an extremely high-risk, speculative investment. You should be aware of the risks involved and fully consider whether investing in cryptocurrency CFDs is appropriate for you.
What are the risks?
- Price volatility: The value of cryptocurrencies, and therefore the value of CFDs linked to them, is extremely volatile. They are vulnerable to sharp changes in price due to unexpected events or changes in market sentiment. The value of some cryptocurrencies recently fell by more than 30% in a single day.
- Leverage: Some firms are offering leverage of up to 50:1. Leverage multiplies your losses and potential profits and can have a significant impact on fees. It also places you at risk of losing more than your initial investment, meaning you could end up owing money to the firm.
- Charges and funding costs: Charges tend to be significantly higher than for other CFD products. Fees can include the spread (the difference between the prices at which a firm offers to buy or sell a CFD position), funding charges, and commissions. You should consider the impact of these fees, which may vary significantly between firms, on your likelihood of making a profit.
- Price transparency: When compared with currencies, there can be more significant variations in the pricing of cryptocurrencies used to determine the value of your CFD position. There is a greater risk you will not receive a fair and accurate price for the underlying cryptocurrency when trading.
Cryptocurrency CFDs are not suitable and/or appropriate for all clients. You should only invest if you are an experienced investor with sophisticated knowledge of financial markets and you fully understand the risks associated with CFDs and cryptocurrencies.
Are cryptocurrency CFDs regulated by the FCA?
The FCA regulates CFDs which means that when you trade cryptocurrency CFDs you have the protections offered by the UK’s financial services regulatory framework. This means that:
- firms offering CFDs must be authorised and supervised by us
- individual complaints can be referred to The Financial Ombudsman Service (FOS)(link is external)
- consumers have access to the Financial Services Compensation Scheme (FSCS)(link is external)
However, these protections will not compensate you for any losses from trading. You should still be careful and consider whether these products are right for you.
Are cryptocurrency CFDs regulated by CIMA?
CIMA regulates CFDs which means that when you trade cryptocurrency CFDs, these products are under the Cayman Island’s financial services regulatory framework.
It is noted that the information in this page cannot and does not disclose or explain all of the risks and other significant aspects involved in dealing in Cryptocurrency CFDs. The Client should be aware of all the risks associated with trading on such products, and seek advice and consultation from an independent financial advisor if he/she has any doubts. HYCM does not provide such advice. If the Client does not understand the risks involved in trading in cryptocurrency CFDs, he/she should not trade at all.