Crypto CFDs: bitcoin without a wallet
What you learn in 3 minutesThis lesson shows what a crypto contract for difference costs in naira, using bitcoin as the example. You trade the price of bitcoin, not the coin itself, so there is no wallet and no transfer. The costs that matter are the spread, the funding charge for holding overnight, and the margin you must set aside. All figures are schematic and vary between brokers.
BTCUSD at 0.01 lots: margin, funding and a weekend move
| Step | Amount | Note |
|---|---|---|
| Contract size | 0.01 lot | One lot is a fixed number of bitcoin set by the broker. For this example, one lot is 1 BTC, so 0.01 lot is 0.01 BTC. This varies between brokers. |
| Bitcoin price | ₦60,000,000 per BTC | A round figure used only for arithmetic. The live price changes constantly. |
| Notional value | ₦600,000 | 0.01 BTC x ₦60,000,000 = ₦600,000. |
| Margin at 20 percent | ₦120,000 | ₦600,000 x 0.20 = ₦120,000. Margin rates vary between brokers and can be higher at weekends. |
| Spread cost | ₦3,000 | If the spread is 0.5 percent of price, 0.005 x ₦600,000 = ₦3,000. Crypto spreads are often wider than those on EUR/USD. |
| Funding charge for one night | ₦1,200 | If the daily funding rate is 0.2 percent of notional, 0.002 x ₦600,000 = ₦1,200. The rate varies and can be charged or paid. |
| Weekend price move | ₦9,000 | A 1.5 percent move against you on ₦600,000 is 0.015 x ₦600,000 = ₦9,000. Crypto trades at weekends, but spreads and funding often change. |
Your broker may round the funding charge, apply a wider spread at weekends, or add a separate commission. Check the contract specifications before you trade.
The mistake people make here
The common mistake is to treat a crypto CFD like buying bitcoin, and to ignore the funding charge that is taken every day the position stays open. People also forget that a small lot size can still carry a large notional value, because bitcoin is priced high. Instead, work out the notional value first, then the margin, then the daily funding, and only then decide whether the trade is worth the cost. If you would not pay that funding charge in naira for several days, the position is probably too big or too long.Check yourself
If one lot of BTCUSD is 1 BTC and bitcoin is ₦60,000,000, what is the notional value of 0.01 lots?
0.01 x 1 BTC = 0.01 BTC. 0.01 x ₦60,000,000 = ₦600,000.
At a funding rate of 0.2 percent per day on a ₦600,000 notional, what is the charge for three nights?
One night: 0.002 x ₦600,000 = ₦1,200. Three nights: 3 x ₦1,200 = ₦3,600.