London-based brokerage firm Admiral Markets UK today enhanced its cryptocurrency CFDs offering by enabling the short selling of this type of derivative instrument on both Bitcoin and Ether products.
The company now offers its clients to easily access the price movement of the world’s two most popular cryptocurrencies, whilst limiting the potential losses associated with directing their investment funds in volatile market conditions.
Short selling means selling cryptocurrency that you don’t own when you expect its price to fall in the future. When it does, you buy back the digital currency at the lower price and make a profit. It is the opposite of buying the instrument (going long), when you profit when the price goes up and lose when it goes down.
Potential CFD investors, however, need to be aware of the dangers involved with the extremely risky financial product.
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In its statement, Admiral Markets was keen to spell out to investors the risks as well as the rewards of these complex products. Concerning the trading costs, the broker warned that short selling on margin “involves the interest payments on the funds we borrow from the cryptocurrency exchange,” so the resulting position financing rates will be as follows:
|Instrument||Swap rate (long)|
|Swap rate (short)|
|BTCUSD||-10% yearly||-22% yearly||Friday|
|ETHUSD||-10% yearly||-44% yearly||Friday|
Admiral Markets also said that due to the extreme volatility of the cryptocurrency markets, the borrow rates across the exchanges are often considerably high.