Best Cryptocurrency Brokers and Dealers

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Who Is a Crypto Broker Dealer? 

The word "broker" is associated with a specialist who trades in various securities. In fact, a broker is a financial institution with a special license. Here are the types of brokers:

  • stock broker;
  • customs broker;
  • mortgage broker;
  • insurance broker;
  • freight broker;
  • air broker;
  • credit broker.

Here are the tasks that a broker usually performs (using an exchange as an example):

  • buys and sells batches of securities, foreign currency on special trading floors intended for this;
  • conducts an analysis of the securities market and, on its basis, makes a decision on their acquisition or sale;
  • establishes business contacts with other brokers, sellers of securities, foreign currency;
  • negotiates the purchase or sale of securities;
  • provides intermediary services in the sale of securities or foreign currency;
  • if necessary, opens a deposit account or safe deposit box in a bank in the name of the client to store money or securities on them;
  • advises clients on certain transactions, their prospects and expediency, possible consequences and risks.

Who Is a Crypto Broker?

Traditionally, a broker is a person who acts as an intermediary who can be trusted by both parties making a transaction.  Crypto brokers are intermediaries that provide access to financial markets and help to perform various operations with cryptocurrency, charging a certain commission from clients for this. 

They accompany traders at all stages of trading, helping to: develop a trading strategy; open an account; fill out an order for the purchase/sale of cryptocurrency, etc. Also, brokerage organizations provide charts and analytical tools that allow users to form an investment portfolio, make certain financial transactions.

A cryptocurrency broker is a financial intermediary and guarantor that helps to make transactions with virtual currency for a commission. But there are different directions: forex brokers, and brokers providing services for making transactions – selling or buying CFD contracts (the client opens CFDs without buying or selling Bitcoins). CDF contracts are like a bet that a trader makes with a crypto broker, trying to predict the rise or fall of prices, thereby earning money by predicting the course in the future.

Cryptocurrency exchange is a platform for trading virtual currency. In terms of functionality, modern exchanges resemble brokerage: verification and analysis of documents, provision of software for trading and technical support for clients, assistance in opening accounts. Binance, Bitmex, OKEx exchanges have some broker functions in their arsenal (opening an account, registering and confirming documents, providing technical support to users, and installing up-to-date software).

However, the phenomenon of a crypto exchange is relatively new, and unlike crypto brokers, it may not have the necessary terminal (a set of information scripts on the cryptocurrency market that allow the user to make transactions). Brokers, cooperating with banks, have more opportunities. Large-currency brokers provide clients with professional tools for market analytics and statistics.

Types and Features of Cryptocurrency Brokers

Brokers are a familiar concept for those who trade in forex or stock markets. And crypto trading is no less, in some cases an even more complex process due to the high volatility of cryptocurrencies and the novelty of this area in general. You can divide all crypto brokers into two broad categories:

Forex Brokers Supporting Cryptocurrencies

As a rule, they offer the opportunity to work only with some of the most popular crypto assets. Also the commissions are higher. Mandatory proof of identity is required. The price at which the asset is traded is taken by the broker from cryptocurrency exchanges.

Forex brokers provide services for making transactions – buying or selling contracts for difference (CFDs). The client does not buy or sell Bitcoins and altcoins, but only opens CFDs. CDF resembles a bet that a trader makes with a crypto broker in an attempt to predict whether the price will fall or rise. At the same time, he does not receive a physical right to own a cryptocurrency, but only earns on his forecast regarding how the course will behave in the future.

Companies that provide the opportunity to trade cryptocurrencies through contracts for CFDs have one goal: to capitalize on the desire of the trader to receive income as a result of speculation. They, unlike crypto exchanges, do not carry out a real exchange of cryptocurrencies.

CFDs allow you to open transactions for both buying and selling, which is especially important at the time of correction. The broker can give increased leverage. On the one hand, this increases the risk, and on the other hand, it makes it possible to earn many times more on short-term operations.

Leverage allows a trader to make trades worth more than his own equity in the account. The crypto broker takes a part of the trader's funds as collateral and provides him with a loan to open a position. That is, in fact, adds equity to transactions.This is the essence of margin trading, which allows you to carry out speculative operations with digital coins received on credit secured by a certain amount (margin).

A credit of 1:100 indicates that a trader can use in operations an amount 100 times higher than he has on his balance. However, due to the high volatility of digital money, many brokerage platforms began to reduce leverage. With successful trading, the trader's income grows in proportion to the leverage, with unsuccessful trading, the same scheme works, only for a decrease.

Crypto brokers are under the control of regulators and independent auditors. In addition, traders do not need to buy cryptocurrency to replenish the deposit. Money is placed on accounts in banks with a worldwide reputation. Among the shortcomings, the analyst highlights the limited supply of cryptocurrencies, the inability to exchange one coin for another, and the commissions that brokers charge for transferring transactions to the next day. Another disadvantage is the fixed and high spread (price difference between buying and selling). At the same time, the spread on the crypto exchange is always floating.

In addition to CFD contracts and leverage, brokerage services have other functionality that is more diverse than exchanges. Crypto brokers provide analytical tools and charts that help traders build investment portfolios and manage risk. Also, regulated brokers cooperate with payment systems and banks, therefore they offer more deposit/withdrawal tools than crypto exchanges.

In fact, there is no difference between classical centralized exchanges and platforms that brokers have access to, except for the main one. Exchange trading implies a set of orders for buying and selling, reflecting the real volume. Brokers, in turn, form one quote at the moment, the volume of the transaction is actually limited only by the ability of the broker to distribute the order among several sources or take the risk.

Cryptobrokers work with trading terminals – this is a set of scripts that display complete information on the cryptocurrency market. Similar functionality is available on every exchange, but it is limited in comparison with what brokers use. When choosing an intermediary, it is important to consider which terminal it works with. The most popular programs for crypto brokers are MetaTrader 4 and MetaTrader 5.

OTC Brokers

OTC is an over-the-counter market where trading takes place according to non-standard rules. The first OTC brokers appeared in 2013, they acted as OTC intermediaries between buyers and sellers of large amounts of cryptocurrency. In fact, it is possible to purchase a large amount of digital money on a traditional centralized exchange, but the entire amount may not be on a particular platform. In addition, as the order is completed, the prices for the purchased coins begin to rise, so there is no fixed rate for such transactions.

If you have a desire to buy or sell a significant amount of cryptocurrency, then, entering the exchange, you will inevitably encounter liquidity problems. The crypto market is far inferior to the market of traditional financial assets. With experience and extensive connections in the crypto industry, OTC provides liquidity and order execution for large clients and companies. This happens both due to the splitting of one order between many exchanges, and due to insurance positions with their subsequent sale in shares

Benefits of Working Through a Crypto Broker

The services of intermediary organizations are actively used by both beginners and experienced traders, as they have a lot of advantages, including:

  • more options for depositing and withdrawing funds (unlike exchanges);
  • trade via professional terminals;
  • the ability to set a risk limit on your accounts, protecting yourself from losses;
  • advanced tools (for example, algorithmic trading using MQL5);
  • the ability to trade crypto assets using short and long positions, earn on the fall in the price of cryptocurrency.

Are There Risks?

Trading on any site is always associated with certain risks, which must be taken into account before making a deposit. We are talking about:

  • The high volatility of cryptocurrencies. It is important to follow all the changes in the financial market, conduct an analysis, take into account analytical data when making transactions, and be aware of the latest news; 
  • Fraudulent brokerage companies. When choosing a crypto-broker, it is important to study all the information about it, study its website, and traders' reviews. You should make sure that it works legally and provides services for a long time, and there are no “pitfalls” in its internal documentation; 
  • Leverage. Using leverage is always risky, since any unfavorable outcome of a transaction can not only deprive you of your available funds, but also drive you into a debt hole. Therefore, you need to set certain limits for yourself and not borrow an unbearable amount.

Disadvantages of Crypto Brokers

Of course, cryptocurrency brokers have not only advantages, but also disadvantages. To form an objective point of view, it is necessary to remember: trading in crypto currencies is very risky, because this market is still young and very volatile. 

In the case of using CFD contracts and a large leverage, the risk increases significantly. Novice traders can quickly drain the deposit. 

On the wave of hype, a lot of fake cryptocurrency brokers have appeared that work without any control and tritely deceive customers. To avoid scammers, you need to conduct a detailed analysis of all information about the crypto broker; intermediaries usually have less choice of digital currencies to trade than exchanges.

How to Choose the Right Crypto Broker?

Among cryptocurrency brokers, there are both honest companies and those that only use the popularity of Bitcoin to swindle money from inexperienced clients. Of course, in order to avoid mistakes, you need to know the basic rules for choosing a reliable intermediary. The principles for finding a reliable organization do not differ from the rules for finding a broker in Forex or the stock market:

  • Reputation, duration of work, reviews. The best option is to choose companies that have been on the market for at least five years.
  • Commission structure. What fees are charged for transactions, deposits/withdrawals of funds, is it possible to reduce them in any way?
  • Schedule. Exchanges are mostly round-the-clock, but you can’t say the same about brokers.
  • Insurance fund. It is created by responsible companies in case of a hacker attack or other situations where users suffer losses through no fault of their own.
  • Technical support. It is good if it works around the clock and responds quickly, as well as competently. If you are interested in specific crypto assets or trading pairs, you need to make sure that the broker supports them. Convenience also plays a significant role – the interface, methods of replenishing an account, converting and withdrawing funds.

You can check this information on thematic forums (see how long reviews about the broker have been written) and through specialized resources: 

  • the amount of commission fees (many companies do not charge a commission for depositing / withdrawing funds); 
  • trading conditions and instruments; 
  • support work (check that there are as many channels available for communication with managers as possible); 
  • absence of delays and any obstacles for the withdrawal of funds; having a demo account. 

Thanks to this, you will be able to test the developed trading strategies and minimize possible losses in the future.

Trade only with regulated companies from crypto brokers list. It is desirable that their work be supervised in one of the countries of the European Union, Great Britain, or Switzerland. Offshore companies are less credible, since in such jurisdictions control is often simply absent; give preference to companies with a good history of work. The longer a company has been on the market, the more information you can learn about it; be skeptical. It is important to independently check all the information provided on the site. Be sure to check the license number on the website of the relevant regulator, as well as read reviews and reviews about brokers.

Conclusion

The volatility of the crypto market is high, the rates of even top coins can collapse or soar at any moment. A crypto broker is not a magic wand for quickly earning digital coins, but an additional tool for those who are not only not afraid to take risks, but are also ready to understand the complex rules of exchange trading.

It is profitable and convenient to use the services of crypto brokers, however, in order to secure your funds and start cooperating with a reliable intermediary, it is important to take a comprehensive approach to its choice. Remember that you cannot rely only on intuition and advertising. Analyze the market, determine all the strengths and weaknesses of the company, the existing risks – and only then make a decision and choose the best crypto broker.