A cryptocurrency broker is a market place that allows investors to trade in Bitcoin and other crypto products. These brokers have played a central role in the digital assets revolution that is now underway. The problem is that finding the best platform is not easy.
We know that not all of the brokers offer the services you desire and that it could be unthinkable to test all of them. That is why we set out to make the work easier for you. This article will discuss the best cryptocurrency brokers in 2021 and their characteristic features.
Our Top Picks of The Best Cryptocurrency Broker
While selecting a suitable cryptocurrency broker, a user must carefully consider the safety and regulatory status of each broker. In the list of our top picks, we include brokers that satisfied many criteria including the availability of licensing information, active and responsive customer service, low transaction fees, and a trading platform that is easy to use.
What Is the Purpose of a Cryptocurrency Broker?
A cryptocurrency broker is a platform that provides users access to the derivative products of cryptocurrencies. There are certain benefits that only they can provide, including security and reliability.
You need cryptocurrency brokers to access a greater liquidity pool. The platforms bring together many crypto traders from different markets, which increases overall liquidity. Also, these brokers can provide clients with the best market rates. They identify markets where users can find the highest liquidity for a particular crypto asset and take their orders there. Lastly, cryptocurrency brokers offer many crypto pairs for trading. The users can trade many crypto products on a broker platform including crypto derivatives and CFDs.
A cryptocurrency broker enables users to buy and sell the crypto contract for differences (CFDs) at selected margins. Users place orders to trade a CFD for Bitcoin or other digital currencies with the broker. The broker then passes this order on to the most appropriate cryptocurrency market for trade.
CFDs are a type of derivative trading. Traders use the system to speculate on cryptocurrency price movements without owning the actual digital currency. Here is how it works. You open a broker’s trading platform and place an order to buy a BTC/USD pair. Essentially, this is you entering a contract to receive the difference between the buying price and the price at which you will sell the pair. If the pair’s price falls after you place the order, and you decide to settle the contract, then you will be required to pay the difference and vice-versa.
Some brokers keep their own reserves that enable them to handle orders from customers instead of passing them on to other crypto markets. Such entities have access to liquidity and they often keep their spreads tight. On the contrary, spreads for brokers who simply coordinate trading are wider because some of their income comes from the spreads. As such, it is important to check a broker’s spreads before signing up.
To trade with a cryptocurrency broker, users will need to register for an account. A typical broker will ask for your full name, mobile number and active email address. Additional details such as proof of residence might be required for Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. Nonetheless, some brokers do not insist on this procedure when customers prefer anonymity. The problem is that such platforms could be less secure and prone to scams.
After registering an account, you need to deposit funds (some allow crypto and fiat while others only accept fiat).
Typically, brokers provide users with demo accounts to practise trading before committing their funds.
Brokers that allow cryptocurrency CFDs trading also provide a variety of margins to users. You should sign up for CFDs trading after practising with a demo account and gaining some knowledge about how the market works since they are a high-risk investment instrument.
Benefits of Trading With a Broker
A broker offers you convenience because you simply place an order to buy or sell derivatives or CFDs and wait for the broker to do the leg work. Some brokers leverage the numbers by facilitating social trading. Social trading is a system where traders copy each other’s trading strategies. Brokers also bring together a large pool of traders hence making liquidity easily available.
The cryptocurrency market is still nascent and hence a fertile ground for fraudsters. Some bad actors know that some sections of the public are not sufficiently informed about crypto. They, therefore, exploit the ignorance to fleece unsuspecting people of funds while purporting to offer cryptocurrency trading services.
Licensed cryptocurrency brokers operate under laws and guidelines from relevant government agencies. As such, you are likely to get justice in case of a dispute because there is a right of recourse. Some brokers offer insurance for their customers. The insurance cover protects the users’ account.
How To Find The Best Cryptocurrency Broker
Check Regulations and Security of Cryptocurrency Broker
A regulated broker is one that has complied with all the required laws. Such a trading platform can keep your funds and your details safe. The broker should also ensure platform security by using services such as encryptions.
Check Fees of Cryptocurrency Broker
Brokers maintain different fee structures to attract more customers. Some brokers charge a percentage of the transaction amount as fees while others charge separately. Nevertheless, brokers with lower fees are the best since they let you have as much of your winnings as possible. Always ensure a broker’s fees are reasonably low.
Additional Features of Cryptocurrency Broker
Cryptocurrency trading is a new concept and many users need some education before diving into the market. Some brokers offer unique features such as educational resources for guidance. The best brokers offer plenty of such resources because they know that an educated customer has better odds for profit-making.
Is a Cryptocurrency Broker Trustworthy?
Cryptocurrency brokers are financial institutions, meaning they are subject to financial regulations in their operational jurisdiction. Additionally, the platforms are subject to AML and KYC regulations to keep criminals off their platforms. You can trust any broker that ticks all of these boxes.
For the safety of your funds, brokers have security measures in place including usage of two-factor authentication (2FA) mechanisms. The trading platforms are also secured via encryption algorithms from security companies. To assure users of funds security, brokers keep reserves–just as any deposit-taking institution should do–in case of an emergency. There is a regular proof of reserve audit–after which audit reports are released–to keep the broker secure.
Furthermore, a cryptocurrency broker is trustworthy if you can access and receive feedback from the customer support representatives. In fact, this is one of the most effective tricks you can use to determine the legitimacy of a broker. Some unscrupulous players create fraudulent websites and attach non-existent contact details as customer support channels.
The cryptocurrency market is expanding as demand grows. Now more than ever, crypto traders need to make use of cryptocurrency brokers because they provide greater liquidity pools, access to a wide variety of trading assets and greater convenience.
Cryptocurrency brokers are financial institutions under obligation to play with the rules of the game. This means your activities on their trading platforms are protected by financial laws and regulations, which implies security not only for your funds but also for your personal information.
Frequently Asked Questions
A cryptocurrency broker is a platform that enables traders to access the cryptocurrency market. A typical crypto broker offers access to crypto CFDs and derivatives.
A cryptocurrency broker allows transactions in derived products where you don’t need to own the cryptocurrency. A crypto exchange is a market where buyers and sellers trade actual cryptocurrencies which can be saved in wallets.
A broker exposes your orders to a greater pool of traders, hence exposing you to greater liquidity.
Yes. Brokers offer access to the crypto CFDs market where traders can access over 500 markets.
You start using a cryptocurrency broker after opening an account. After registration, you need to fund the account after which you can begin trading.
A typical cryptocurrency broker usually offers two types of accounts, an individual and a corporate/institutional account. You can open both accounts with a single broker.
Check the regulatory status of the cryptocurrency broker. Also, make sure that the broker’s platform has the necessary security mechanisms in place, including platform encryption.
Brokers usually charge a flat commission or a percentage on transactions made by users on their platforms.