- 1. What is Bitcoin?
- 2. Who invented Bitcoin?
- 3. How does Bitcoin Mining Work?
- 4. What is a Bitcoin Wallet?
- 5. Do I need a Bitcoin wallet to trade?
- 6. How can I trade Bitcoin?
- 7. Bitcoin trading and taxes - what do I have to pay?
- 8. How much is Bitcoin worth?
- 9. How does City Index price Bitcoin?
- 10. Is there an overnight financing charge for holding Bitcoin?
- 11. Does City Index offer a Bitcoin trading platform?
- 12. What is the City Index policy on Bitcoin forking?
- 13. What are the margin rates to trade Bitcoin?
- 14. What is the difference between Bitcoin CFD and Mini CFD?
Q1) What is Bitcoin?
Bitcoin is a cryptographically protected digital currency, or peer-to-peer electronic cash system, founded using blockchain technology. Bitcoin has eliminated the need for governments and central banks to manage and regulate a currency, instead trust is now placed in corporations with secure blockchain verification for all transactions.
Q2) Who invented Bitcoin?
The inventor, or founder of Bitcoin, is widely believed to be a person or persons named Satoshi Nakamoto. The identity of Satoshi Nakamoto has never been revealed and little is known about the anonymous computer programmer.
Q3) How does Bitcoin Mining work?
Because Bitcoin is not regulated in the traditional sense by a central bank or government, it requires a system of distribution. “Bitcoin mining” describes the process of miners who use time, powerful central processing units (CPUs) and large amounts of electricity to solve complex equations which add transaction records to Bitcoin’s public, digital ledger or blockchain.
Q4) What is a Bitcoin wallet?
A Bitcoin wallet is essentially a bank account or digital wallet designed to hold Bitcoin.
Q5) Do I need a Bitcoin wallet to trade?
Q6) How can I trade Bitcoin?
Q7) Bitcoin trading and taxes – what do I have to pay?
When you trade Bitcoin as a CFD or as a Spread Bet you are not buying or selling the underlying asset i.e Bitcoin but rather speculating on price movements in Bitcoin. Spread Betting and CFD Trading are exempt from UK stamp duty. Spread betting is also exempt from UK Capital Gains Tax.
Q8) How much is Bitcoin worth?
Like any asset the price of Bitcoin may rise and fall and due to higher volatility in the Bitcoin market prices may surge or drop at greater rates than for more traditional assets. On November 1, 2017 the price of Bitcoin was $6,500.
Q9) How does City Index price Bitcoin?
Bitcoin is traded on multiple independent digital asset exchanges around the world and the diversity of these exchanges can mean that there are different prices for Bitcoin at different times and in different regions.
City Index offers competitive Bitcoin pricing based on prices models provided by multiple digital asset exchanges. We use industry leading digital asset exchanges to produce a volume weighted average price that is representative of the underlying market. You can view our pricing information on our Bitcoin page or in the Market Information sheet in platform.
Q10) Is there an overnight financing charge for holding Bitcoin?
Yes. Overnight financing is charged at 0.08219% per day (May change due to market conditions. For a full list of charges, see our Bitcoin page).
An illustrative example is highlighted below (based on our standard Bitcoin market):
Let's say you hold a long position of £5 per point on Bitcoin, at the market close of 22:00 Bitcoin is trading at 9400/9420.
As you have a long position, we will calculate the notional value of the trade as £5 x 9400 = £47000. This is then multiplied by our financing charge of 0.08219% for a total of £38.63.
Size of position (£5) x Bitcoin closing price (9400) x overnight financing charge (0.08219%) = Total cost of overnight financing (£38.63)
Let's look at the same example if your position had been short:
We would calculate the notional value of your trade as £5 x 9420 = £47100. This is then multiplied by our financing charge of 0.08219% for a total of £38.71
The overnight financing charge would be processed if you hold a position overnight i.e after market close at 22:00.
Due to the higher than normal levels of volatility in the Bitcoin market we strongly advise against holding positions overnight.
Please note: Bitcoin financing charges are only applied to live trading accounts at City Index. Should you wish to calculate what financing charges would be on a relevant demo account position, you can do so using the formula:
Size of position x Bitcoin closing price x financing charge (0.08219%) = Cost of Bitcoin financing
Q11) Does City Index offer a Bitcoin trading platform?
Q12) What is the City Index policy on Bitcoin forking?
In the event that the current bitcoin splits into two, new bitcoins– known as a hard fork – we will generally follow the bitcoin that has the majority consensus of cryptocurrency users and will therefore use this as the basis for our prices. In addition we will also consider the approach adopted by the exchanges we deal with, which will help determine the action we take.
We reserve the right to determine which cryptocurrency unit has the majority consensus behind them.
As the hard fork results in a second cryptocurrency, we reserve the right to create an equivalent position on client accounts to reflect this. However, this action is taken at our absolute discretion, and we have no obligation to do so.
If the second cryptocurrency is tradeable on major exchanges, which may or may not include the exchanges we deal with, we may choose to represent that value, but have no obligation to do so. We may do this by making the product available to close based on the valuation, or by booking a cash adjustment on client accounts.
If, within a reasonable timeframe, the second cryptocurrency does not become tradeable, then we may void positions that had previously been created at no value on client accounts.
Over periods of substantial price volatility around fork events, and we may take any action as we consider necessary in accordance with our terms and conditions including suspending trading throughout if we deem not to have reliable prices from the underlying market. For more information, please contact our Client Support team.
Q13) What are the margin rates to trade Bitcoin?
The margin rates are the following. Tier 1 (25%), Tier 2 (50%) and Tier 3 (100%).
Q14) What is the difference between Bitcoin CFD and Mini CFD?
With our Bitcoin Mini CFD you can trade positions that represent a tenth of a full Bitcoin, reducing the margin amount required to trade. This means:
- As your position value is 10 times smaller, your required margin is 10 times less.
- You trade every $10 price move rather than every $1 price move, reducing your exposure to price volatility.
For example you can trade Bitcoin CFDs as shown below:Bitcoin ($) Mini (per 10) CFD
|Example Buy Price||Mini CFD Trade Size||Value of Position||Margin Requirement (25%)|
|$11,100||1 CFD per $10 move||$1,100||$277.50|
|Example Buy Price||Standard CFD Trade Size||Value of Position||Margin Requirement (25%)|
|$11,100||1 CFD per $1 move||$11,100||$2,775.00|
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