Crypto CFDs: bitcoin without a wallet
Compare owning the coin with holding the contract
Owning bitcoin means you hold a private key. You move the coin to a wallet, and you pay a network fee when you send it. If you lose the key, the coin is gone. A broker cannot restore it. A crypto CFD is different. You never touch a wallet or a key. You open a position with the broker, and the broker tracks the price of bitcoin. The broker settles your profit or loss in shillings.
The two cases behave differently when you want to act quickly. Selling the coin means sending it to an exchange, waiting for a confirmation, and paying a fee. Closing a CFD means pressing a button in the platform. The position closes at the price on screen. That speed has a cost. The broker earns from the spread and from funding. You pay those charges whether the price rises or falls.
A common mistake is to treat the CFD as if it were the coin. The coin has no funding charge. The CFD does. The coin trades on a network that never closes. The CFD trades on the broker's hours, which often include weekends but with a wider spread. Write down both costs before you choose. The right case is the one where the total cost is smaller than the move you expect.
Calculate the weekend spread and funding in shillings
The spread is the gap between the buy price and the sell price. On EUR/USD, a major pair, the spread is often around one pip. On a bitcoin CFD, the spread is usually much wider. If the broker quotes 50,000 and 50,300, the spread is 300 shillings on that size. You start each position down by that amount. The price must move in your favour by more than the spread before you are level.
Funding is a charge for holding the position overnight. The broker states it as a percentage per night, and that percentage varies between brokers. Suppose the position size is KSh 50,000 and the funding rate is 0.15 per cent per night. One night costs 50,000 times 0.0015, which is KSh 75. Three nights cost KSh 225. If the position rises by 3 per cent over the weekend, the gain before costs is KSh 1,500. After funding, KSh 1,275 remains.
Weekend spreads are often wider because fewer people trade and the broker takes more risk. Some brokers also add a commission on crypto CFDs. Others round the funding charge up. All of these details sit in the contract specifications, not in the advert. Read them before you calculate. If you cannot find the funding rate, ask the broker in writing. A figure you cannot find is a figure you cannot plan around.
Compare a crypto CFD with a major currency pair
A major pair like EUR/USD trades when banks are open. Around 1.0850, one pip on one standard lot is 10 units of the quote currency. If the quote currency is converted at 130 KES per unit, one pip is worth KSh 1,300. The spread is usually one pip, so the cost to open and close is about KSh 1,300. That is the comparison point. A bitcoin CFD often costs more than that in spread alone.
Crypto CFDs trade at weekends. Banks are closed, but the crypto market does not stop. A position left open on Saturday can move against you while you sleep. You cannot call the broker to close it. The platform may be the only way out, and the spread at that hour may be wide. Decide before the weekend whether the position is worth holding. If the answer is no, close it on Friday and pay the spread once.
The regulator for these products in Kenya is the CMA. Rules on leverage, margin and client money vary, and they change. Do not assume that a broker is regulated because it says so. Check the register. Payment methods such as M-Pesa and bank transfer are common, but the broker's terms decide how long a deposit or withdrawal takes. None of this tells you which way the price will go. It only tells you what the trade costs.
One weekend on 0.01 lots of BTCUSD
| Step | Amount | Note |
|---|---|---|
| Position size | 0.01 lots | The smallest size many brokers quote on BTCUSD, equal to a fraction of one bitcoin. |
| Margin required | KSh 13,000 | If the broker asks for 20 per cent margin on a KSh 65,000 position, the deposit is KSh 65,000 x 0.20 = KSh 13,000. |
| Weekend price move | KSh 2,600 gain | A rise of 4 per cent on a KSh 65,000 position is KSh 65,000 x 0.04 = KSh 2,600, before costs. |
| Funding charge for two nights | KSh 260 | If the broker charges 0.2 per cent of the position per night, two nights cost KSh 65,000 x 0.002 x 2 = KSh 260. |
| Net result | KSh 2,340 | KSh 2,600 minus KSh 260. The spread is charged separately when the position is opened and closed. |
Brokers set their own margin percentages, funding rates and spreads, and these vary. Some round the funding charge, some apply a wider spread at weekends, and some add a commission. Check the contract specifications before you calculate anything.
Doing it once, step by step
You will compare the total cost of a bitcoin CFD with the cost of a major pair, then decide whether to hold over a weekend. Do the steps in order, once, before you open any position.
- 01
Write down the spread
Find the buy price and the sell price on the platform. Subtract the sell price from the buy price. That difference is the spread. Write it in shillings for the size you plan to trade.
- 02
Find the funding rate
Open the contract specifications for the bitcoin CFD. Look for the funding rate per night. If it is a percentage, convert it to shillings using your position size. Multiply by the number of nights you expect to hold.
- 03
Add any commission
Some brokers charge a commission on top of the spread. Check the specifications. Add that figure to the spread and the funding. The total is your cost before the price moves at all.
- 04
Compare with EUR/USD
Calculate the cost of the same shilling amount on EUR/USD. One pip on one standard lot is 10 units of the quote currency. At 130 KES per unit, that is KSh 1,300. Compare the two totals. The smaller total is the cheaper way to express the same view.
- 05
Decide on the weekend
Check whether the broker trades the CFD at weekends. If it does, note the wider spread. Decide now whether you will close before Friday or hold through. Write the decision down. Do not change it while the market is moving.
- 06
Check the regulator
Look up the broker on the CMA register. Confirm the name matches the one on your statement. Check how deposits and withdrawals work through M-Pesa or bank transfer. Do this before you send any money.
The mistake most people make here
People often treat a crypto CFD as if it were the coin itself. They forget that funding is charged for every night the position is held, and that weekend spreads are usually wider than on a major currency pair like EUR/USD. They also assume the price cannot move when banks are closed, but crypto markets trade around the clock, so a position left open on Saturday can lose money while you sleep. The fix is to write down the funding charge and the spread before you open, and to decide in advance whether the position is worth holding over a weekend.Check yourself
A BTCUSD position is worth KSh 50,000. The broker charges 0.15 per cent funding per night. What is the funding cost for three nights?
KSh 50,000 x 0.0015 x 3 = KSh 225.
The position rises by 3 per cent over the weekend. What is the gain before costs, and what is left after the KSh 225 funding?
Gain before costs: KSh 50,000 x 0.03 = KSh 1,500. After funding: KSh 1,500 - KSh 225 = KSh 1,275.
On EUR/USD, one pip on one standard lot is 10 units of the quote currency. If the quote currency is converted at 130 KES per unit, what is one pip worth in KSh?
10 x 130 = KSh 1,300.
Questions that come up next
What happens if the broker closes or goes bust while I hold a bitcoin CFD?
A CFD is a contract with the broker, not an asset you own. If the broker fails, you become a creditor and you wait in line with other creditors. The coin in your own wallet is not affected by a broker failure, because no broker holds it. This is one reason the two cases are not the same. Check how the broker is regulated before you rely on it.
Can I lose more than the money I put into the position?
On many crypto CFDs, yes, losses can exceed your deposit if the price moves sharply against you. Some brokers offer negative balance protection, but the terms vary and you must check them. A stop-loss order can limit the loss, but it may not fill at the price you set if the market gaps. Never assume the most you can lose is the amount you paid in.
Why is the funding charge different from one broker to the next?
Each broker sets its own funding rate, and the rate can change with market conditions. Some charge a fixed percentage per night, some charge more at weekends, and some round the figure up. There is no single rate for bitcoin CFDs. The only figure that matters is the one in your broker's contract specifications, so read that page before you calculate.
Do I pay tax on a bitcoin CFD gain in Kenya?
Tax rules depend on your personal situation and can change, so this page cannot give you a rate. CFD gains are treated differently from gains on the coin itself in some countries, and Kenya is no exception. Keep a record of every closing trade and every fee. Ask a tax professional who knows Kenyan law before you file.
How do I fund a CFD account from Kenya?
Many brokers accept M-Pesa or a bank transfer, but the methods vary between brokers. M-Pesa is usually faster and a bank transfer can take a day or more. Check the deposit and withdrawal fees before you send money, because some brokers charge for each movement. Also confirm the minimum deposit, which is often stated in dollars rather than shillings.
If the spread is 300 shillings, how far must the price move before I break even?
The price must move in your favour by more than the spread before you are level on the trade. On a position of KSh 50,000, a 300 shilling spread means you are down by that amount the moment you open. A 0.6 per cent move is needed just to cover it. Funding charges then add to the amount you must recover.
The words used on this page
- spread
- The gap between the price at which you can buy and the price at which you can sell. You start each position down by that gap, so the price must move past it before you are level. On a bitcoin CFD the spread is usually wider than on a major pair such as EUR/USD.
- funding
- A charge for holding a CFD position overnight. The broker states it as a percentage per night, and that percentage varies between brokers. It is charged whether the price rises or falls, so it adds to your cost even on a winning trade.
- contract specifications
- The document that lists the exact terms of a CFD: the funding rate, the spread, the margin percentage and any commission. These details are not in the advert. Read them before you calculate anything, because the figures change from broker to broker.
- margin
- The deposit the broker requires to open and keep a position open. It is a fraction of the position size, and the percentage varies between brokers. If the market moves against you, you may need to add more margin or the broker may close the position.
- leverage
- The ability to control a position larger than your deposit. It magnifies both gains and losses, so a small price move can wipe out your margin. The amount of leverage on crypto CFDs varies between brokers and is often capped.
- liquidation
- When the broker closes your position because the margin is no longer enough to cover the loss. It can happen quickly if the price gaps over a weekend. You do not choose the moment, and you may lose the whole deposit.
What to take away
- A bitcoin CFD gives you the price, not the coin: no wallet, no key, and no network fee, but funding and a wider spread instead.
- Funding is charged for every night you hold, and weekend spreads are often wider than on EUR/USD, so write both figures down before you open.
- Crypto markets trade around the clock, so a position left open on Saturday can move while you sleep and while banks are closed.
- Margin, funding rates and spreads vary between brokers, so read the contract specifications and check the CMA register before you deposit.