Crypto CFDs: bitcoin without a wallet
Contract specification for a crypto CFD
A crypto CFD is a contract between you and a broker. It tracks the price of a cryptocurrency such as bitcoin. You never own the coin. The contract states the size of one lot, the minimum price movement, the margin rate, the funding rate and the trading hours. These terms differ between brokers. You must read them before you trade.
The lot size for BTCUSD is often 1 bitcoin, but some brokers use 0.1 or 0.01 bitcoin. The price is quoted in US dollars. Your account is in rupees. The broker converts the profit or loss using a USD/INR rate. That rate changes, so your rupee result can differ from the dollar move. The conversion adds another layer of risk.
Margin is a deposit, not a fee. If the margin rate is 20 per cent, you put up 20 per cent of the notional value. The notional value is the full size of the position in rupees. For 0.01 lots at a bitcoin price of 83,250 dollars, the notional is 0.01 x 83,250 x 83.2500, which is ₹69,306. The margin is 20 per cent of that, or ₹13,861.20. The broker may round this figure. If the market moves against you, you may need to add more margin.
Funding charges over a weekend
Funding is a charge for holding a position overnight. It is not a commission. It is a separate cost that the broker debits from your account. The rate is usually a percentage of the notional value per night. The rate can change daily. It can be positive or negative, but for a long position it is often a cost. The charge applies for each night the position remains open.
Weekends have extra funding. The crypto market trades on Saturday and Sunday, but the funding schedule may charge three nights on Friday to cover the weekend. That means a position opened on Friday morning and closed on Monday morning can incur four nights of funding. The exact number of nights depends on the broker. You must check the contract specification for the funding times.
The funding charge is calculated on the notional value, not on the margin. If the notional is ₹69,306 and the funding rate is 0.03 per cent per night, the charge is ₹20.79 per night. For four nights, the total is ₹83.16. That cost is deducted from your account balance. It reduces your profit or increases your loss. The price must move enough to cover this cost before you break even.
Spreads when the market is quiet
The spread is the difference between the buy price and the sell price. It is a cost because you enter at the less favourable price and exit at the less favourable price. The spread is quoted in points. One point is the smallest price movement. For BTCUSD, one point is often 0.01 dollars. The spread cost in rupees is the number of points times the lot size times the USD/INR rate.
Spreads widen when trading is thin. That often happens at weekends and during holidays. A spread that is 3 points on a busy weekday can become 10 points or more on a Sunday. The wider spread means a higher cost to enter and exit. If you trade a small position, the spread may still be a large percentage of your expected profit. You must check the spread before you place an order.
For 0.01 lots, a 10-point spread costs 10 x 0.01 x 83.2500, which is ₹8.33. A 3-point spread costs ₹2.50. The difference is ₹5.83. That difference is small in rupees, but it is large compared with the funding charge of ₹20.79 per night. If you hold for four nights, the total cost is the spread plus the funding. The price must move by more than that total for you to make a profit.
One weekend on 0.01 lots of BTCUSD
| Step | Amount | Note |
|---|---|---|
| Position size | 0.01 lots | A crypto CFD size, not a number of coins. The broker quotes the contract size, and it varies between brokers. |
| Notional value at entry | ₹41,625 | 0.01 lots at a BTCUSD price of 50,000, converted at USD/INR 83.2500: 0.01 x 50,000 x 83.2500. |
| Margin required at 20 per cent | ₹8,325 | 20 per cent of ₹41,625. Leverage and margin rules vary between brokers and can change. |
| Spread cost on entry | ₹83.25 | A 2-point spread on a 0.01 lot: 2 x 0.01 x 83.2500. Crypto spreads widen outside main hours. |
| Funding charge for two nights | ₹24.98 | A funding rate of 0.03 per cent per night on ₹41,625, charged twice: 41,625 x 0.0003 x 2. Rates vary between brokers and can be positive or negative. |
| Total holding cost | ₹108.23 | Spread plus funding: 83.25 + 24.98. This is paid before any price movement is counted. |
The broker may round the funding charge, apply a wider spread at weekends, or add a separate commission. Always check the contract specification, because these figures differ between brokers.
Doing it once, step by step
These steps show you how to estimate the cost of a crypto CFD trade before you place it. The order matters because each cost builds on the one before.
- 01
Check the contract specification
Open the broker's contract specification for the crypto CFD you plan to trade. Find the lot size, margin rate, funding rate and trading hours. Write them down. These figures differ between brokers, so you cannot rely on memory or on another broker's numbers.
- 02
Calculate the notional value in rupees
Multiply the lot size by the current price in dollars. Then multiply by the USD/INR rate. For example, 0.01 lots at 83,250 dollars with a rate of 83.2500 gives 0.01 x 83,250 x 83.2500, which equals ₹69,306. This is the full value of the position, not the money you deposit.
- 03
Work out the margin needed
Multiply the notional value by the margin rate. If the margin rate is 20 per cent, the margin is 69,306 x 0.20, which equals ₹13,861.20. Check that your account has at least this amount. The broker may require more if the market moves against you.
- 04
Estimate the funding charge
Multiply the notional value by the funding rate. If the rate is 0.03 per cent per night, the charge is 69,306 x 0.0003, which equals ₹20.79 per night. Count the number of nights you plan to hold, including weekend nights. Multiply the nightly charge by that number. For four nights, the total is ₹83.16.
- 05
Add the spread cost
Find the current spread in points. Multiply the points by the lot size, then by the USD/INR rate. For a 3-point spread on 0.01 lots, the cost is 3 x 0.01 x 83.2500, which equals ₹2.50. Add this to the funding charge to get the total cost before any commission.
- 06
Compare cost with expected move
Add the funding and spread costs. For four nights and a 3-point spread, the total is ₹83.16 plus ₹2.50, which equals ₹85.66. Decide whether the price is likely to move by more than this amount in your favour. If it is not, the trade is a cost, not an opportunity. Do not trade if the expected move does not cover the cost.
The mistake most people make here
The common mistake is to treat a crypto CFD like a coin in a wallet. People buy a small position on a Friday, assume the weekend is free, and are surprised when the balance is lower on Monday. There is no wallet and no transfer, but there is a funding charge for every night the position stays open, and spreads are often wider when the main markets are quiet. Instead, work out the holding cost first, in rupees, and decide whether the expected move is large enough to cover it. If it is not, the trade is a cost, not an opportunity.Check yourself
A 0.02 lot BTCUSD position is held for three nights. The funding rate is 0.03 per cent per night and the notional value is ₹83,250. What is the funding charge?
83,250 x 0.0003 x 3 = ₹74.93, before any spread or commission.
The spread on a 0.01 lot BTCUSD position is 3 points. At USD/INR 83.2500, what does the spread cost in rupees?
3 x 0.01 x 83.2500 = ₹2.50, rounded to two decimal places.
If the margin rate is 20 per cent and the notional value is ₹41,625, how much margin is needed?
41,625 x 0.20 = ₹8,325.
Questions that come up next
Why does the rupee amount of my profit or loss change even when the bitcoin price in dollars does not?
Your account is in rupees, but BTCUSD is quoted in US dollars. The broker converts the dollar result into rupees at a USD/INR rate that moves through the day. A flat dollar price can still produce a different rupee figure in the morning than it did the night before. The conversion is a second source of risk on top of the coin price itself.
Is the funding charge taken from the margin I deposited or from my free balance?
It is charged on the notional value of the position, not on the margin. The broker debits the amount from your account balance. If your free balance is small, the debit can push you closer to a margin shortfall. That is why the holding cost matters even when the price has not moved.
How many nights of funding does a Friday-to-Monday position attract?
It varies by broker. Some charge three nights on Friday to cover Saturday and Sunday, so a position opened on Friday morning and closed on Monday morning can incur four nights in total. Others apply a different schedule around public holidays. The funding times are stated in the contract specification, so read that page before you hold over a weekend.
Why is the spread wider at weekends?
Liquidity is thinner when the main markets are quiet, so the gap between the buy and sell price widens. A wider spread raises your cost the moment you open and again when you close. On a small position the rupee amount looks minor, but it adds to the funding charge. Both costs are paid before the price has to move anywhere.
Can I take delivery of the bitcoin and move it to a wallet?
No. A crypto CFD is a contract between you and the broker that tracks the price. There is no coin and no wallet, so nothing can be transferred out. You settle the difference in cash when you close the position. That also means you cannot use the position to pay anyone in bitcoin.
Does SEBI regulate the crypto CFD I am trading?
SEBI regulates the securities markets in India, and the rules that apply to crypto products can change. The permissions and disclosures a broker must show also differ between firms. Check the current position with the broker and with the regulator before you commit money. Do not rely on a general statement from a course page.
The words used on this page
- Crypto CFD
- A contract with a broker that follows the price of a cryptocurrency without giving you the coin. You settle the difference in cash when you close. The terms sit in the contract specification, not in a wallet.
- Notional value
- The full size of the position in rupees, before margin is applied. Funding and some other charges are calculated on this figure. It is larger than the money you deposit.
- Margin rate
- The percentage of the notional value you must deposit to open the position. It is a deposit, not a fee. If the market moves against you, you may be asked to add more.
- Funding charge
- A cost for holding a position overnight, charged as a percentage of the notional value. It is separate from commission and is debited from your balance. The rate can change daily.
- Spread
- The gap between the price at which you can buy and the price at which you can sell. You pay it when you open and when you close. It often widens when trading is quiet.
- Lot size
- The amount of the underlying asset one contract represents. For BTCUSD it is often 1 bitcoin, but some brokers use 0.1 or 0.01. The size sets the notional value of your position.
What to take away
- A crypto CFD tracks the price of a coin; you never hold the coin and nothing moves to a wallet.
- Funding is charged each night on the notional value, and a weekend can add several nights at once.
- Spreads often widen when markets are quiet, so the cost of opening and closing rises with them.
- Work out the holding cost in rupees first, and treat a trade that cannot cover it as a cost rather than an opportunity.