What is a Cryptocurrency Broker?
Cryptocurrencies are all the rage these days with them emerging as a medium of exchange in the digital economy and in some cases rivaling traditional currencies in terms of efficiency. Cryptocurrencies are designed to exchange information digitally through a distribution system called a blockchain.
A blockchain is simply a decentralized ledger of all cryptocurrency transactions across a peer-to-peer network through which cryptocurrency holders can buy and sell goods and services, transfer funds, buy digital items such as NFTS, donate to charities, and more. There are quite a number of cryptocurrencies to choose from which can be traded through some of the best crypto exchanges, payment services, or crypto brokers. In this article, we will discuss cryptocurrency brokers.
What Does a Cryptocurrency Broker do?
Cryptocurrency brokers are similar to traditional brokers that can be a platform, firm, or individual that acts as an intermediary between the cryptocurrency markets and you and facilitates the buying and selling of cryptocurrencies. In some cases, a crypto broker may offer derivatives products to traders, where traders can enter contracts to speculate on the price of cryptocurrencies.
Cryptocurrency derivatives may include crypto options, trading CFDs, crypto futures, and crypto Contract for Differences (CFD) which are financial contracts that pay the differences in the settlement price between the open and closing trade. For the services rendered brokers charge users premiums for using the platform.
Crypto Exchange Vs. Cryptocurrency Broker
One of the most frequently asked questions when it comes to trading in crypto is, should I trade on cryptocurrency exchanges or should I trade with the crypto broker? Simply put if you want to keep your coins for a longer time, you need to go for the exchange Coinbase, Binance, or any other crypto exchange. If you want to speculate and buy and sell quickly, then you need to go to a crypto broker who offers advisory or brokerage services.
A cryptocurrency exchange compared to a crypto broker, provides an online platform for buyers and sellers who trade cryptocurrencies for other digital currencies or fiat currencies. Crypto exchanges charge fees mainly in the form of a conversion fee. Novice users can use a cryptocurrency exchange to trade crypto and can be especially useful when it involves lower amounts of money. However, when trading crypto make sure you abide by state and federal tax regulations for additional insights check out our article on do you have to pay taxes on cryptocurrency.
When an investor uses a broker for trading, he may deposit money or crypto to the broker’s account, and then has the opportunity to use the various products that the broker offers. Here the investor doesn’t need to trade his own deposited crypto or fiat currency but can use a different trading pair. The broker will find a substitute for the transaction, in some cases, the broker can serve as the one that executes the trade. Furthermore, crypto brokers offer good CFD trading platforms that allow you to trade digital coins like Bitcoin, Ripple, Dash, and EOS along with regular CFDs like forex, indices, and shares.
Why You Should Consider a Cryptocurrency Broker
Cryptocurrency brokers come with various benefits and include:
Ability to diversify your portfolio: The crypto market continues to generate several types of cryptocurrencies in the form of tokens, altcoins, and more. Cryptocurrency traders might find it difficult to stay up to speed with the trends. Brokers can help to diversify portfolios by offering to help you identify and buy low-cost crypto coins which have the potential for growth in the future and sell digital currencies when their prices go up. In addition, brokers provide additional trading tools for margin trading such as Contract for Difference trading (CFD), derivatives, and more. For additional insight check out our article on how to accept crypto payments.
Security: In terms of security brokers are regulated brokers and offer clients some degree of protection for their funds. Because brokerage firms are by law regulated by multiple financial bodies including the SEC, ASIC, CySEC, and the FCA they offer investors some ease of mind compared to cryptocurrency exchanges that might not necessarily be regulated. For more insights please read our article 8 best cryptocurrency apps.
Easy Conversion to Fiat currency: many exchanges allow only Bitcoin cash or Ethereum transactions where crypto traders might find it difficult to convert their cryptocurrencies back to fiat money. Crypto Broker on the other hand can offer instant conversions of your cryptocurrency assets and receive the equivalent amount in dollars or any other currency.
Full service: Compared to Crypto exchanges, crypto brokers offer customized services to clients and are backed up with a relatively strong customer service program. They run the full gamut of cryptocurrency services starting from converting your fiat currency into crypto to making trades, offering derivatives, and even offering advice on your investments. With most exchanges, you sometimes will need to wait for days before your account is confirmed while with most brokers, the account confirmation can be quicker.
Best Cryptocurrency Broker Options
There are several online brokers in the crypto market that facilitate several thousands of crypto trades. Some offer robust services, others offer advisory or brokerage services, while still others offer user-friendly features and investment advice for financial decisions, below are our top picks :
Robinhood is a popular cryptocurrency broker which comes with a fast-onboarding process. With it, investors do not need to buy a whole coin and can start with as little as $1 to buy and trade in their favorite crypto coins including bitcoin which has the highest trading volume, Ethereum, Dogecoin, Litecoin, and others. It offers users crime insurance against theft and cybersecurity breaches while charging 0 % commission fees.
Binance’s trading platform allows investors to trade in around 60 cryptocurrencies that including Bitcoin and Ethereum. With this platform, you get low trading fees starting at 0.1 percent of your trade value. Binance’s broker program helps investors build their business with Binance technology while earning commission and comes with lots of tools under its hood that include API Broker, Exchange Broker, Portal broker, and Widget Broker.
eToro is another cryptocurrency trading platform and is regulated by multiple financial bodies including the SEC, ASIC, CySEC, and the FCA. It is compatible with both iOS and Android devices while offering access to over 43 crypto assets that include Litecoin, Cardano, Bitcoin, and XRP where users can deposit through bank transfer, debit/credit card, and Paypal.
easyMarkets offers investors tight fixed spreads with a social network for traders, advanced charting, and analytics. Additional benefits on offer include negative balance protection; no hidden fees or commissions; a trading app for Android and iOS device; and supports transactions through bank transfers and credit cards,
Coinbase charges a spread markup of about 0.5 percent and adds a transaction fee depending on the size of the transaction and the funding source while letting users buy and sell Bitcoin, Ethereum, and other altcoins. It also offers attractive security features including covered by FDIC insurance, a low minimum deposit to fund accounts, apps for Android or iOS devices, and users can earn some free cryptocurrencies if they are willing to take some educational courses. This broker has all the tools for both beginners and advanced traders.
Webull lets users buy and sell cryptocurrencies at 0% commission but the mark-up on spreads can be costly. Users can hold a portfolio of stocks and popular cryptocurrencies like Dogecoin, Bitcoin, Ethereum, and others making it easy to diversify portfolios. It also offers charting tools and a mobile app for easy trading.
What is the best broker for cryptocurrency trading?
Robinhood is considered the best option for beginning traders and comes with a simple and intuitive platform. It supports crypto purchases, stock, Exchange Traded Fund (ETF), and other options.
Which crypto brokerage has the lowest fees?
Coinbase offers the lowest fees ranging from 0% to 0.60%. It comes with a large number of cryptocurrencies and trading pairs offer options for both beginner-friendly and advanced trading platforms.
Can you buy crypto through a broker?
Cryptocurrency brokers can help investors buy and sell cryptocurrencies at prices set by the broker. . For additional resources on cryptocurrencies checkout or articles on how to buy cryptocurrency, and 8 Best Cryptocurrency Wallet Options.