Checking the best broker for cryptocurrency trading has become a popular topic among crypto investors. Cryptocurrencies stepped into the world of investment several years ago and crypto trading is now a leading investment destination with growing investment appeal every day. Led by the first cryptocurrency, Bitcoin, the crypto market now has over 5 thousand cryptocurrencies, each having its specifics and potential.
More investors are interested in cryptocurrency trading nowadays boosting the search for the best broker to trade with. To fulfill this developing need many brokers have emerged recently providing their services in the cryptocurrency market. Whether you are a newbie or a professional crypto trader, you may have heard of many cryptocurrency brokers in the market and wondered which is the best broker to choose.
But first, let’s elaborate on what is cryptocurrency and crypto trading.
What Is a Cryptocurrency?
Cryptocurrencies are digital assets that use cryptography, an encryption technique for security. Cryptocurrencies are primarily virtual currencies designed to buy and sell goods or services. They lack the intrinsic value as they are not redeemable for another commodity, like gold for example. Unlike traditional currencies, they are not issued by a central authority, which raises doubts about their legality and credibility among some investors. On the other hand, this defining feature of cryptocurrencies makes them theoretically immune to government interference or manipulation.
Cryptocurrencies are perceived as secure online payment gateways which are denominated in terms of virtual tokens. The term Crypto refers to the multiple encryption algorithms and cryptographic techniques that safeguard these virtual currencies. We can say that the increasing popularity of cryptocurrencies is derived from their groundbreaking technological innovation. Check the Top 10 Most Traded Cryptocurrencies In 2021.
What is Cryptocurrency Trading?
In recent years, crypto trading has been booming. Investors are speculating the future possibilities of this new technology, which has driven most of the current market capitalization and valuations so far. Many see cryptocurrencies as the money of the future. This is likely to remain the case until a certain measure of price stability and market acceptance is finally achieved. Aside from the declared price of the cryptocurrency, investors seem to be relying on a perceived inherent value including the technology and network itself, the security of the cryptographic code, and the decentralized network.
The crypto market is about 11 years old and exclusively deals with digital assets. It operates 24 hours a day, seven days a week.
Cryptocurrency trading began back in 2009 with the top cryptocurrency; Bitcoin (BTC). Though it would be a couple of years before the first exchanges would open, launching a digital exchange for bitcoin has resulted in the emerging of numerous cryptocurrencies. Today, the market has a daily volume of more than $100 billion, with most of that going through exchanges. Trading regulations on many of these platforms can vary wildly due to different parts of the world having different rules and regulations concerning cryptocurrency trading.
The crypto market is known to be highly volatile. However, the volatility is seen by many as an advantage. The Crypto market is less venerable to global events or financial markets such as traditional currencies. Traders are less likely to be scanning headlines and more likely to be paying attention to price charts and technical analysis.
What is a Cryptocurrency Broker?
The cryptocurrency broker is an entity that acts as an intermediate between the trader and cryptocurrency market to facilitate buying, selling, and trading of cryptocurrencies. A cryptocurrency broker trades your funds through a dealer network which is also known as over-the-counter (OTC) trading. Brokers can either be platform or individual-based, both play a role in finding and pairing buyers and sellers to complete crypto transactions. Usually, trading crypto with a broker is more flexible and convenient to most investors as it offers faster settlement than an exchange.
What’s the Difference Between Cryptocurrency Broker and Exchange?
A cryptocurrency exchange is an online platform for traders to exchange cryptocurrencies. An exchange serves as a middleman between buyers and sellers enabling trading with a fee. Cryptocurrency exchanges are either used for purchasing cryptocurrency for fiat money or exchanging cryptocurrencies. For example, exchanging bitcoin for another cryptocurrency.
Crypto exchanges are limited to digital currencies, allowing traders to own the cryptocurrencies directly Meanwhile, brokers offer the advantage of providing a wide selection of trading securities, though you don’t own the currency.
There are two types of crypto exchanges; centralized and decentralized. Centralized exchanges are private firms with online platforms to trade cryptocurrencies. This type requires registration and personal identification before a trader can buy or sell a cryptocurrency. Coinbase and Binance are among the popular crypto exchanges that fall into the category of centralized exchanges.
A decentralized exchange is rather a server that runs in different locations. This decentralization feature makes it difficult for these exchanges to be subjected to a specific regulatory entity, as no defined person or company runs the system.
How to Choose the Best Broker for Crypto Trading?
While searching for the best broker for cryptocurrency trading make sure to do some research and choose wisely. Your decision should be based on various factors including the security features, regulatory background, market accessibility, and trading platform.
Regulations: Checking the broker’s regulatory compliance is the first choice you should make. Make sure to choose a regulated broker, which keeps you safe from scams and frauds. The safety of your money and personal information is highly important when you open a trading account because brokers can get hacked or go bankrupt.
Market Accessibility: Choose a broker that offers a diversity of cryptocurrency and crypto pairs. Also, the crypto market is operating 24/7 which means that you should consider a broker that allows trading cryptocurrencies anytime in order not to miss out on any market movements.
Credibility: Compared to the traditional financial market, the crypto market is a new emerging one. Try finding an experienced broker with a high credibility background in the form of a good reputation with licensed and regulated activities.
Reliable Customer Support: Having reliable customer support is also another huge feature to consider while choosing your cryptocurrency broker. The crypto market is operating 24 hours a day, so a broker’s customer support should be available at any time to answer your questions and offer help whenever needed. You can contact the broker to get a better idea of their customer support tools and average wait times.
Commissions and Fees: Take a deep look at account features and advantages offered by the broker. Each forex broker has different account features. Four aspects to consider when comparing account features among brokers are commissions and spread, ease of deposits and withdrawal, leverage and margin, and initial deposit requirements.
Trading Platform: The trading platform is your portal and the main trading tool. So, you need to make sure a broker’s platform and software provide the essential trading tools you need, and trades can be executed smoothly. This one can easily be checked by opening a demo account. It is a trial account, with no deposit required, that will help you discover the broker’s platform and services before opening your real account.
Sign Up Process: The sign-up process actually tells a lot about a broker; you can differentiate a good broker from a bad one just by checking its sign-up process. The smoother the process, the better the broker is. Check if the process is secured so your personal data won’t be leaked. Another thing to consider is the start-up amount. Usually, fake brokers ask traders to deposit a large amount of money in order to sign up. That’s because they are likely to scam you. Instead, go for a broker with low minimum deposit requirements.
Pros and Cons of Cryptocurrencies Investments
Initially, Cryptocurrencies enjoy significant advantages for online traders. These advantages include transparency, 24/7 accessibility, decentralization, security, and its great potential for appreciation. On the other side, disadvantages of the market may include extreme market fluctuations and high uncertainty which makes it hard to predict future prices.
Some investors are attracted to the cryptocurrency market due to its high volatility. A cryptocurrency’s price may fluctuate over 10% in a single trading day. This would be great only if you’re looking for risky high returns, but if you’re a risk-averse investor then investing in cryptocurrency may not be for you.
How to open a Crypto Trading Account with a Broker?
A crypto trading account is used to trade cryptocurrencies and speculate on their prices. Typically, you open an account, deposit money and then buy and sell cryptocurrencies or crypto pairs. Opening a crypto trading account is a quite simple process these days given the growth of online trading. It requires some paperwork and a few security steps, such as identity verification, and all can be done online. But first, you’ll have to choose your broker, select an account type, register then activates your account.
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