Brokers play a vital role in the buying and selling of cryptocurrency. Not only are these platforms more convenient than direct exchanges, but they also provide the most secure method of trading large amounts of digital currency. In this guide, we’ll discuss the benefits of using a cryptocurrency brokerage and what you should be looking for in a good trading platform. We’ll also review the top-rated brokers offering cryptocurrency CFDs.
Why Use a Cryptocurrency Broker?
When buying and selling digital currency, traders have three basic options: direct exchanges, cryptocurrency hedge funds, and cryptocurrency brokers. With a direct exchange, the buyer and seller negotiate their own prices and terms. No trading fees are involved; the online platform is simply there to facilitate the exchange. Since there is no middleman involved such a transaction, direct exchanges tend to be the riskiest method of trading cryptocurrency. At the other end of the spectrum are cryptocurrency-hedge funds, which consist of professionally-managed crypto assets. While these exchanges offer one of the safest methods of investing in cryptocurrency, they typically have a high minimum investment threshold.
Cryptocurrency brokers offer the best of both worlds: the convenience of direct trading with low trading costs. Brokers also add an extra layer of security to the transaction. Of course, this isn’t to say that there are no risks involved when using a cryptocurrency broker. It’s important to keep in mind that anytime you use an intermediary, there is a chance your personal information will be exposed or your funds lost. In the following section, we’ll discuss what you should be looking for when choosing the best broker for your needs.
What to Look for When Choosing a Cryptocurrency Broker
Below are the basic services and features you should expect from a reputable cryptocurrency broker.
Ease of Use
It should go without saying, but one of the most important features that an online trading platform should have is a clean, simple interface. Menus should be easy to navigate, and you shouldn’t have any difficulty locating the information you need. Remember, when it comes to buying and selling cryptocurrency, mistakes can be costly. Before signing up for an account, read customer reviews to ensure the site is user friendly.
When it comes to broker fees, the old adage is usually true: you get what you pay for. In general, the platforms charging the lowest fees are the least convenient to use. Fees may also vary based on the type of trade being performed and how much cryptocurrency is being traded. Most brokers have trading fees between 0.1 and 1.5 percent.
In addition to verifying the broker’s trading fees, you’ll also want to take the platform’s trading limits into consideration. Depending on how much cryptocurrency you’re trading, these limits can literally make or break the transaction.
Unless you plan to keep your cryptocurrency stored with the broker for the long haul, you’ll need an easy way to access it. Make sure the withdrawal limits set by the broker are high enough for your needs. Another important consideration is the frequency of withdrawals permitted. Some brokers have a per transaction limit, while others impose a daily, weekly, or even monthly limit.
Nearly all cryptocurrency brokerages have a verification process whereby you’ll need to provide personal information like copies of government-issued identification and documents that confirm your primary residence. While this verification process is put in place for your protection, it can make opening a brokerage account especially frustrating. At the same time, submitting this information may provide you with higher trading and withdrawal limits-if not eliminate them altogether.
The untraceable nature of cryptocurrency means that funds lost through security breaches and information theft are virtually impossible to recover. Before signing up with an online broker, do some research to find out if the site offers extra security features like two-factor authentication (2FA) and encrypted web forms.
Finally, do a little digging around online to find out more about the broker’s reputation. A few things to look for are positive Google reviews, active social media pages, and listings on trusted websites like the Better Business Bureau.