Last month saw litecoin’s market cap of circulated coins top $1 billion for the first time (although it has since fallen from that mark). Today, litecoin got the honor of becoming the second digital currency to have a contract for difference (CFD) launched. Created by forex and CFD broker, Plus500, the CFD mimics prices of litecoin, allowing customers to both buy and short the currency. The product launch comes after Plus500 became the first firm to launch a bitcoin CFD back in May.
Unlike buying and selling actual litecoins, CFDs are synthetic trading products that track an underlying asset. CFDs exist for nearly all asset types, with the most widely traded following prices of commodity and equity index futures such as Crude Oil, Gold, the Dow Jones, and Nasdaq. Technically, the product is a contract between a broker and the client on the direction of prices of the underlying asset. However, in actuality, the product will appear in trading screens no different than any other asset, and is quotes with a bid and ask price, similar to any other tradable product. (CFDs became popular in the UK after taxes on stock trading led brokers to create non-taxed synthetic products that acted just like the real thing)
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In the case of Plus500, clients will be able to wager on whether prices will rise or fall from current levels. However, unlike regular CFDs, the current issue from Plus500 has a daily expiration, meaning open orders will be closed at market prices at the end of each day. The daily expiration is similar to what was enacted in the firm’s bitcoin CFD last mont (more on that change).
Overall, even with the daily expiration, and lack of delivery of actual litecoins, the product does relate the growing interest into alternative trading products and helps provide added exposure to litecoins as well as other non-bitcoin digital currencies.