Investing in Dogecoin
Investing in Dogecoin means buying a certain amount of the cryptocurrency to own it. As with any investment, you will realize a gain only if the price of Dogecoin appreciates. You can then resell your tokens at a higher price.
This corresponds to a “buy and hold” strategy, or “buy and hold”: you will be committed to the Dogecoin for the long term.
To invest in Dogecoin, you will need to open an account with an online broker that offers the direct purchase of cryptocurrencies. All your Dogecoin tokens will be kept in a cryptocurrency wallet until you decide to sell them. We do not offer this type of investment.
Trade Dogecoin on CFDs
To take a position on Dogecoin without holding the crypto, you will not invest in the virtual currency but you will choose to trade (or trade) it. You will thus have the possibility of positioning yourself for the purchase or the sale according to the evolution of the markets.
With us, you will trade Dogecoin through CFDs. Short for contracts for difference, CFDs are derivative products. When you trade via CFDs, you trade on the price of Dogecoin and make a gain or loss depending on the accuracy of your prediction. The difference in price between the opening of your position and its closing represents your gain or loss.
CFDs offer a number of tax advantages which may however vary according to the regulations in force in your country. For example, while capital gains tax applies in some countries, it is sometimes possible to deduct capital losses from capital gains when trading CFDs1.
CFDs are leveraged products. This means that you can go long if you think the price of Dogecoin will go up or go down if you think it will go down. Whichever direction you choose, you will make a profit if your prediction turns out to be correct. This gives you more flexibility than if you bought Dogecoin. Indeed, when you buy the cryptocurrency, you realize a gain only if its value increases.
When you trade with leverage, you only lock in a small portion of your total position value, called hedging. This hedge allows you to open your position by “borrowing” the rest of the money needed from your broker. However, the gains and losses you make are calculated based on the total value of your position, not the hedge amount.
Suppose you open a CFD position on Dogecoin worth 100 EUR. The coverage required is 50%. So you pay 50 EUR for a position of 100 EUR. Your winnings and losses will be calculated on the total amount of 100 EUR, not on your 50 EUR.
It is for this reason that trading with leverage is often riskier than traditional investing. Indeed, you can win and lose an amount considerably higher than what you paid to open your position. You should therefore always ensure that you have risk management measures in place.