Bitcoin FAQs

Bitcoin FAQ’s

Q1) What is Bitcoin?

Bitcoin is a cryptographically protected digital currency, or peer-to-peer electronic cash system, founded using blockchain technology. Bitcoin has eliminated the need for governments and central banks to manage and regulate a currency, instead trust is now placed in corporations with secure blockchain verification for all transactions. For more information regarding digital currencies, please refer to the official MoneySense page.

Important Notice: Cryptocurrencies are not legal tender currency and trading of derivatives on cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.

Q2) Who invented Bitcoin?

The inventor, or founder of Bitcoin, is widely believed to be a person or persons named Satoshi Nakamoto. The identity of Satoshi Nakamoto has never been revealed and little is known about the anonymous computer programmer.

Q3) How does Bitcoin Mining work?

Because Bitcoin is not regulated in the traditional sense by a central bank or government, it requires a system of distribution. “Bitcoin mining” describes the process of miners who use time, powerful central processing units (CPUs) and large amounts of electricity to solve complex equations which add transaction records to Bitcoin’s public, digital ledger or blockchain.

Q4) What is a Bitcoin wallet?

A Bitcoin wallet is essentially a bank account or digital wallet designed to hold Bitcoin.

Q5) Do I need a Bitcoin wallet to trade?

No – When you trade CFDs on Bitcoin you are speculating on price movements in the Bitcoin market rather than owning the underlying asset.

Q6) How can I trade Bitcoin?

At City Index you can trade Bitcoin as a CFD. For more information, including pricing details, on these please view our Bitcoin CFD Trading page.

Q7) How much is Bitcoin worth?

Like any asset the price of Bitcoin may rise and fall and due to higher volatility in the Bitcoin market prices may surge or drop at greater rates than for more traditional assets. 

Q8) How does City Index price Bitcoin?

Bitcoin is traded on multiple independent digital asset exchanges around the world and the diversity of these exchanges can mean that there are different prices for Bitcoin at different times and in different regions.

City Index offers competitive Bitcoin pricing based on prices models provided by multiple digital asset exchanges. We use industry leading digital asset exchanges to produce a volume weighted average price that is representative of the underlying market. You can view our pricing information on our Bitcoin page or in the Market Information sheet in platform.

Q9) Is there an overnight financing charge for holding Bitcoin?

Yes. Overnight financing is charged at 0.08219% per day (May change due to market conditions. For a full list of charges, see our Bitcoin page). 

An illustrative example is highlighted below:

Let's say you hold $5 worth of CFDs on Bitcoin and your position is long. At the market close at 21:00, Bitcoin is trading at 9400/9420. 

As you have a long position, we will calculate the notional value of the trade as $5 x 9400 = $47000. This is then multiplied by our financing charge of 0.08219% for a total of $38.63.

Size of position ($5) x Bitcoin closing price (9400) x overnight financing charge (0.08219%) = Total cost of overnight financing ($38.63)

Let's look at the same example if your position had been short:

We would calculate the notional value of your trade as $5 x 9420 = $47100. This is then multiplied by our financing charge of 0.08219% for a total of $38.71

The overnight financing charge would be processed if you hold a position overnight i.e after market close at 21:00.

Due to the higher than normal levels of volatility in the Bitcoin market we strongly advise against holding positions overnight.

Please note: Bitcoin financing charges are only applied to live trading accounts at City Index. Should you wish to calculate what financing charges would be on a relevant demo account position, you can do so using the formula: 

Size of position x Bitcoin closing price x financing charge (0.08219%) = Cost of Bitcoin financing  

Q10) Does City Index offer a Bitcoin trading platform?

Yes – you can trade Bitcoin on our Advantage Web and AT Pro platforms as well as on our iOS and Android apps.

Q11) What is the City Index policy on Bitcoin forking?

In the event that the current bitcoin splits into two, new bitcoins– known as a hard fork – we will generally follow the bitcoin that has the majority consensus of cryptocurrency users and will therefore use this as the basis for our prices. In addition we will also consider the approach adopted by the exchanges we deal with, which will help determine the action we take.

We reserve the right to determine which cryptocurrency unit has the majority consensus behind them.

As the hard fork results in a second cryptocurrency, we reserve the right to create an equivalent position on client accounts to reflect this. However, this action is taken at our absolute discretion, and we have no obligation to do so.

If the second cryptocurrency is tradeable on major exchanges, which may or may not include the exchanges we deal with, we may choose to represent that value, but have no obligation to do so. We may do this by making the product available to close based on the valuation, or by booking a cash adjustment on client accounts.

If, within a reasonable timeframe, the second cryptocurrency does not become tradeable, then we may void positions that had previously been created at no value on client accounts.

Over periods of substantial price volatility around fork events, and we may take any action as we consider necessary in accordance with our terms and conditions including suspending trading throughout if we deem not to have reliable prices from the underlying market. For more information, please contact our Client Support team.

Q12) What are the margin rates to trade Bitcoin?

The margin rates are the following. Tier 1 (25%), Tier 2 (50%) and Tier 3 (100%).

You can work out the margin requirements for a position using the representative example below:

Example 1: Margin for 1 CFD = Amount of CFDs (1) x Bitcoin Price (18,000) x 25% margin rate on Tier 1 = Total margin (USD 4,500)

Example 2: Margin for 12 CFDs = Amount of CFDs (10) x Bitcoin Price (18,000) x 25% margin rate on Tier 1 [USD 45,000] + Amount of CFDs (2) x Bitcoin Price (18,000) x 50% margin rate on Tier 2 [USD 18,000] = Total margin (USD 63,000)

Q13) Can you show me profit and loss examples on a Bitcoin CFD trade?

Set out below are some simple examples to illustrate how Bitcoin CFD trading strategies may give rise to profits and losses. For simplicity the following examples do not include Financing Fees. Please refer to the website for the current Financing Fees and for an example of how it is applied.

"Going long" and making a profit or loss

Bitcoin CFDs are trading at 9400/9420 (bid/offer). You decide to buy USD $5 worth of CFDs on Bitcoin at 9420, giving you a notional value of $47,100 ($5 x 9420).

Profit Scenario:

Closing Sell:
You sell USD $5 worth of Bitcoin CFDs at 9440.

Profit/loss Calculation:
[(Sell Price - Purchase Price) x Quantity]=Profit / Loss

[(9440 – 9420) x 5] = USD $100 Profit

Loss Scenario:

The Bitcoin price falls to 9350. You decide to close your position by entering an equal but opposite trade. Bitcoin CFDs are now trading at 9340/9360.

Closing Sell:
You sell USD $5 worth of Bitcoin CFDs at 9340.

Profit/loss Calculation:
[(Sell Price - Purchase Price) x Quantity] = Profit / Loss

[(9340 – 9420) x 5] = USD $400 Loss

“Going short” and making a profit or loss

Bitcoin CFDs are trading at  9400/9420 (bid/offer). You want to sell USD $5 worth of CFDs on Bitcoin.

Opening Sell: You sell USD $5 worth of Bitcoin CFDs at 9400, to have a notional value of $47,000 ($5 x 9400).

Profit Scenario:

The Bitcoin price falls to 9350. You decide to close your position by entering an equal but opposite trade, Bitcoin CFDs are trading at 9340/9360.

Closing Sell: You buy USD $5 worth of Bitcoin CFDs at 9360.

Profit/loss Calculation:
[(Sell Price - Purchase Price) x Quantity]=Profit / Loss

[(9400 – 9360) x 5] = USD $200 Profit

Loss Scenario:

The Bitcoin price rises to 9450. You decide to close your position by entering an equal but opposite trade. Bitcoin CFDs are trading at 9440/9460.

Closing Sell:
You buy USD $5 worth of Bitcoin CFDs at 9460.

Profit / Loss Calculation: [(Sell Price - Purchase Price) x Quantity]=Profit / Loss

[(9400 – 9460) x 5] = USD $300 Loss.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.

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