Brokers In the Crypto Market
The cryptocurrency market is growing rapidly though brokers In the crypto market. Although the price of Bitcoin may not always reflect the news surrounding market growth, there are always movements being made.
Specifically, there has been a surge of brokers that offer cryptocurrency services. These services range from investing to day trading, and even to large over the counter (OTC) orders. Before we get into what is happening with Brokers in the cryptocurrency market, let’s cover what a broker actually is.
What is a Broker
A Broker is a person or institute that sells or buys securities and has licenses to do so. Investors will hire a broker as a trusted agent or middle man in commercial negotiations and transitions. Typically, brokers will buy and sell securities on the behalf of the clients with their best interest in mind. This is refereed to as a fiduciary.
Brokers will typically collect a commission, which is a usually a flat fee or percentage of each investment at the time the order is made. This commission or spread is how brokers make their money and profit regardless how how the asset, option or portfolio preforms.
Brokers invest in all sorts of financial instruments. You can hire your own investor through a firm like Fidelity to purchase stocks, bonds, mutual funds, options, derivatives, or create a portfolio all of you own.
How to Know if you Need a Broker
If you are thinking about purchasing stocks or selling stocks, it is probably a good idea to get a broker. This is due to the fact that brokers have licenses to preform trades on the securities exchange. There are two distinct types of brokers to choose from, full-service brokers, and discount brokers. The main difference between the two is the service provided. A full-service broker will review the transactions, create a financial plan, setup your portfolio and things like this. A discount broker will simply execute trades for you that you request.
The amazing thing is that for trading cryptocurrency, you do not need a broker. Anyone can trade crypto on any exchange at any time of the day including in the middle of the night. Although this is the case, unless you have experience trading and know what you are doing you may want to still consider a broker.
Why Do crypto traders use brokers
A Majority of crypto traders use crypto exchanges to preform trades on a daily basis. Crypto exchanges are very convenient, but across a spread of different assets, it can become quite difficult to always get the trade you want. Therefore, you will need to open multiple accounts and make unnecessary transfers to preform all of the trades you want.
Secondly, there are not many exchanges that allow for fiat to crypto deposits. Even more, those exchanges that do allow such deposits, do not have crypto to fiat trading pairs. To resemble these trading pairs, investors will utilize stable coins when can be limited in liquidity, not have access to all the trading pairs you desire, and sometimes be untrustworthy.
Should You Use a Broker or an Exchange?
As an investor, you need to figure out what suits your needs most. Indications that you should use a broker or dealer over an exchange are:
- Using multiple accounts on different exchanges
- Need for increased liquidity
- Micro Profit focused trading
- High trading frequency
- Use for spreads, options, or margin accounts across multiple trading pairs
If you are a high frequency trader there are good chances you will need to increase your liquidity on multiple exchanges. When you open multiple accounts on multiple exchanges, you will incurred different fees on each. Sending assets between exchanges will also incur additional fees. When you try to margin trade on multiple exchanges, you will have different leverage limits.
Additionally, being on multiple exchanges means you will have multiple logins, passwords and potentially problems. There have been several exchange hacks, closures, and frozen assets. Finally, the more exchanges you trade on, the more risk you are also assuming for your portfolio.
Finally, traders can save time, set flat fees, reduce risk and focus more on each trade by utilizing a broker or dealer. This is incredibly important for your portfolio and success as a trader.
Trading Solutions For Crypto Traders
As an alternative to all of these issues, crypto traders are using brokers to combat all of the issues the exchanges present to traders. With the bull run in 2017, the broker market exploded and now there are over 100 crypto brokers to choose from across the market. Let’s take a peak at 10 of them.
Nadex
One of the only legally operating CFTC binary options exchanges in the US. This brokerage is retail tailored and offers options, call spreads and Touch Brackets.
eToro
eToro is a FX and CFD broker that has been providing its services mainly to traditional investors since 2006. The British FCA is based out of London and regulates this broker as well.
Olymp Trade
Certified by FinaCom, Olymp Trade is a platform that offers currency trading pairs, stocks, indicies, commodities, and cryptocurrency.
City Index
Established in the UK in 1983, this CFD brokerage is based out of the UK. Additionally, this company is regulated by the British FCA which makes it very reliable.
Eight Cap
As an Australian FX and CFD broker, Eight Cap offers trades on Forex, crypto pairs, Indices and commodities.
PrimeXBT
Bitcoin-based brokerage designed to offer leverage and cryptocurrency trading pairs. Create leverage up to 100x your original investment.
SFOX
Interactive crypto platform with a focus on liquidity over 20 exchanges, enhanced security though internal operations, and unique proprietary backed solutions.
Brokers In Crypto
Clearly, the brokers are moving into the crypto space at full speed as the market recovers and heads into the next halfening of 2020. Brokers In the crypto market are strong savvy people that can have huge influence as they open the doors to increased exposure, liquidity, and traditional investors. This movement is a clear sign that the crypto market is not going anywhere anytime soon.
