With the ever growing popularity of cryptocurrencies, more people have become more interested in this new asset class and began looking for ways to profit from it. Cryptocurrency brokers provide easy access to users looking to trade many crypto products under a single platform. With so many platforms available, finding the best cryptocurrency broker is tough for anyone but especially beginners. Users should evaluate platforms on various parameters such as security, ease of use, customer service, and crypto products offered. This guide will discuss some of the best cryptocurrency brokers in 2022 and what to consider before opening an account.
Compare the Best Cryptocurrency Brokers
Considering there are numerous crypto brokers that promise high-end services to traders, it can be tough choosing one. Here is our selection of the best cryptocurrency brokers with adequate details about their features and advantages.
Understanding Cryptocurrency Brokers
Cryptocurrency brokers are platforms that grant users access to a wide range of cryptocurrencies. However, unlike cryptocurrency exchanges, you don't usually buy/sell the physical coins. A cryptocurrency broker is a firm that acts as the intermediary between the crypto markets to help facilitate the buying/selling of crypto derivatives products.
Cryptocurrency brokers offer contracts for differences (CFDs) to their traders. When the CFD trade is closed, the two parties exchange the difference between the specified cryptocurrency's opening and closing prices.
With CFD trading, traders and investors get the opportunity to profit from the price movement of a cryptocurrency without owning the underlying coin. This means that the trader or investor can make money from the upward or downward movement in the price of a cryptocurrency, depending on the trader's prediction.
Usually, CFDs are advanced trading strategy reserved for the experienced traders. Unlike cryptocurrency exchanges, you don't get to store the cryptocurrencies in your wallet or transfer them to other platforms. You are merely speculating on the upward or downward price movement of the cryptocurrency.
To use a cryptocurrency broker, you have to open a trading account and complete the verification steps. Most crypto brokers are highly regulated, which means they need to authenticate your identity. In some instances, an email confirmation is enough to verify your ID. Simultaneously, some brokers will ask you to complete KYC (Know Your Customer) checks such as photo, address, and identity verification. This is in line with the Anti-Money Laundering (AML) and Anti-Terrorism Financing (ATF) measures put in place by the brokerage platforms.
There are some cryptocurrency brokers that don't have KYC policies in place. Although you can trade with them, be careful as you might be at risk of fraud.
After account verification, the broker will open your account. You can deposit funds using a wide range of payment methods offered by the broker including credit cards, debit cards, bank transfers, bank drafts, bank wires, PayPal, and some e-wallets.
How to Choose a Cryptocurrency Broker
Choosing the right cryptocurrency broker is perhaps the most critical step you can take when investing or trading cryptocurrency derivatives. There are numerous scam crypto brokers out there and choosing the wrong one can affect your financial journey. There are certain features to look out for in a cryptocurrency broker that will help you to pick a top broker to trade with. Some of these criteria include:
- Solid financial backing – The cryptocurrency broker you choose must have solid financial backing. This assures you that your cryptocurrency is safe and the broker wouldn't go bankrupt overnight.
- Excellent trading platform – The crypto broker's trading platform has to be easy to use and must contain numerous advanced features for the traders. It should be easy to manage the account, perform technical analysis and execute trades.
- Reputation – You must use a cryptocurrency broker that is credible, reliable and has experience in the CFD brokerage industry. If the broker has an operating license from reputable regulatory agencies, that is a plus.
- Customer service – The broker needs to have 24/7 customer service since the crypto market is always open.
- Security – The broker's platform needs to be very secure. They should implement security features such as 2FA and more.
- Commissions and fees – The broker must charge reasonable commissions and fees for the services it offers. The fee structure has to be transparent.
- Technical Support – Dealing with CFDs is more complicated than ordinary trades. Hence, the ideal broker should have a technical support team to help you with problems that require help from professionals.
- Demo Trading – The presence of a demo trading account helps you learn how the platform works and improve your trading strategy. You can learn how the market works without risking your funds.
Advantages and Disadvantages of using a Cryptocurrency Broker
Should I Buy or Trade Cryptocurrency?
Trading or buying cryptocurrency is the trader or investor's decision, depending on what he/she wants. If you want to hold the actual cryptocurrency, then you should be an investor. You can buy it from cryptocurrency exchanges and other trading platforms and hold it in your wallet.
However, you can also trade cryptocurrencies on exchanges and brokerage platforms. Trading on exchanges means you are trading the actual cryptocurrencies. However, on brokerage platforms, you bet on the cryptocurrency's price performance, allowing you to make a profit depending on your prediction. Trading allows a user to benefit quickly from the volatility offered by crypto. A trader does not have to worry about the security of cryptocurrency assets and doesn’t need to invest in wallets.
Brokers offer different crypto derivatives products for trading. They include:
- Contract for differences (CFDs)
They are usually found on cryptocurrency brokers. These cryptocurrency derivatives allow you to speculate on the crypto price movement and take either short or long positions in the market. You get to trade the cryptocurrencies without owning the underlying coins. You can make money by leveraging the market volatility, but you can also record losses.
These are sophisticated financial instruments where a cryptocurrency trade is executed at a predetermined price and date. The massive volatility of the crypto market makes them both highly risky and rewarding.
The crypto options work similarly to futures. However, in this case, the trader has the right but not the obligation, hence, an ‘option’ to buy or sell the underlying cryptocurrency at a predetermined value and date.
3 Steps to Using a Cryptocurrency Broker
Step 1: Choose a Cryptocurrency Broker
You should begin by taking the time to research and find the cryptocurrency broker you intend to trade with depending on your requirements. Brokers must be shortlisted based on various features such as ease of use, customer support, response time, and the security offered by the platform.
Step 2: Signing up with a Cryptocurrency Broker
After finding the right cryptocurrency broker, you need to register a trading account with the platform. The broker will require you to provide some private information such as name, email address, and then you can verify your trading account afterwards.
Step 3: Deposit the initial amount and start using the cryptocurrency broker
The final step is to start using the broker's services. You will need to fund your trading account and use the funds to trade on the platform. Most brokers support multiple payment methods such as bank transfer and credit/debit cards but check with your selected platform to identify the best payment method for your needs.
Trading cryptocurrencies via brokerage platforms is becoming popular among users. Crypto brokers provide a way for people to access cryptocurrencies without owning them. In this article, we discussed the basics of cryptocurrency brokers, the best cryptocurrency brokers in 2022, the platforms' features, and their pros and cons.
Frequently Asked Questions
Trading with cryptocurrency brokers gives you access to cryptocurrencies without holding the underlying coins. You don't have to worry about storing them.
By following our guide on finding the best cryptocurrency brokers in 2022, you will avoid scammers.
The brokers make money via commissions and fees.
Most cryptocurrency brokers are reportedly regulated by financial regulatory agencies.
CFDs are complicated financial instruments, and they are mostly suited for expert traders. New users should practise on a demo platform before starting with live trading.
Most brokers implement various security features such as site encryption, 2FA and KYC measures.
The crypto market never sleeps. Most brokers allow round the clock trading and some even offer automated services.
Account verification is usually done through email but some platforms may also insist on verification through phone/video.