Most new investors tend to invest in bitcoin, especially when buying cryptocurrency for the first time. Today, buying from a crypto broker is as easy as opening an account at any brokerage platform, even outside of the crypto industry. Is the best bitcoin broker what you’re looking for? Then you’re right here! This article will tell you everything you need to know to find the right one.
Bitcoin brokers: the best crypto broker of 2023
We made a list of candidates for the best cryptocurrency broker based on a number of things. These include bitcoin availability, fees, and liquidity (solvency). Below is the current list.
What is a bitcoin broker?
A bitcoin broker is a brokerage platform for cryptocurrencies such as bitcoin (BTC) that acts as your trading partner when you want to buy or sell bitcoin. This makes cryptocurrency trading easy. The broker stands between you and the crypto exchange. Sometimes the broker even buys a large number of cryptocurrencies themselves and offers them on their platform.
How do bitcoin brokers work?
A cryptocurrency broker acts as an intermediary in the trading process. This allows it to be much more flexible in its asset calculations. This allows traders to schedule a trade at a certain price, even if they can’t pay for the assets at the time. This can be useful for traders who want to trade an asset immediately.
Liquidity is determined by the brokerage platform, not the traders in the market. As long as the broker platform accepts the trader’s order, the trader can make the deal. The crypto broker then sets its price for the asset, which is affected by the price of the asset in other markets.
A bitcoin broker makes money by charging a spread. The spread means that the price at which you can buy bitcoin from the broker is higher than the price at which he buys bitcoin.
Advantages and disadvantages of bitcoin brokers
There are some advantages to why some traders start trading cryptocurrency on a brokerage platform. But there are also a few disadvantages. Let’s look at both sides.
Advantages of bitcoin brokers
- Easy setup and clear user interface
- High level of technical support in case something goes wrong
- Better regulation when it comes to who can create an account and use the broker’s platform.
- Fast cryptocurrency trading
Disadvantages of bitcoin brokers
- In most cases, you will need to go through an identity check and provide the necessary paperwork.
- Bitcoin broker commissions are higher than on cryptocurrency exchanges where you trade directly with other traders.
What is a bitcoin CFD broker?
Many bitcoin brokers do not offer cryptocurrencies for sale directly, but indirectly through derivatives called bitcoin CFDs. The trader and the broker agree on how they think the market will move, and then they work out the difference between them.
In CFD (Contract for Difference) trading, we want to take advantage of the difference in the exchange rate of the cryptocurrency. This occurs between the time we open a position and the time we close it.
We speculate on the price of the market instead of owning the cryptocurrency ourselves. We can trade bitcoin CFDs and other cryptocurrencies as derivative financial products through a bitcoin CFD broker. They let traders bet on whether the price of a digital currency will go up or down without actually owning it.
How do we bet on falling prices?
Before the price of a cryptocurrency goes up, most traders buy cheap and then resell them at a high price. When shorting BTC CFDs, on the other hand, this rule is turned around to make money from a price drop. So, traders open a short or sell position.
How can we bet on an increase in prices?
When we buy an asset with the hope that its price will go up, this is called a “long position.” It is often opened by bullish traders who are optimistic about the market outlook. So, as traders, we buy bitcoin CFD after the price has fallen and when we expect the price to rise again soon.
Should we use a bitcoin CFD broker for long-term investments (HODL)?
Since we are optimistic about the future of BTC, we can HODL with CFDs—all you have to do is take a long position in the bitcoin price.
HODL (Hold On for Dear Life) simply means that the investor holds his bitcoins for a long time. However, unlike holding BTC, with CFD HODLing, there is no risk of losing coins to hackers. Robust investor protections also apply.
Other bitcoin derivatives found at brokers
In addition to CFDs, there are other derivative products we can use to invest in bitcoin without buying the coins themselves. Below, we explain some of the options available.
A Bitcoin ETP (Exchange Traded Product) is an investment instrument that trades on an exchange like a stock. It works similarly to a mutual fund but offers more flexibility. This type of investment is good for people who don’t want to put their money directly into the crypto market but would rather do it indirectly. There are the following types of ETPs:
- ETFs (exchange-traded funds)
- ETN (exchange traded bonds)
- ETC (Exchange Traded Commodities)
The advantage of all these financial products is that investors can use them to diversify their portfolios. You don’t create one product, you create an entire catalog. We think this is a sound investment strategy. You may have also heard the saying of successful investors: never put all your eggs in one basket!
Bitcoin ETNs are the most common in the EU.
What is a Bitcoin ETN?
ETNs (Exchange Traded Notes) are a type of unsecured debt securities, mostly issued by banks and traded like stocks. Because they are unsecured, they have a higher risk. A Bitcoin ETN is a debt instrument that tracks the price of bitcoin.
How to choose the best crypto-broker for bitcoin trading?
With a bitcoin broker, we can buy bitcoin directly or as a CFD. Because of the wide variety of bitcoin broker platforms in the EU, it can be difficult to choose the right one. The following aspects should be considered when making our decision:
- offer (whether Bitcoin is available directly or only as a CFD/ETN)
- customer service
- Is there an app?
Conclusion about bitcoin brokers
When it comes to finding the best bitcoin broker, it all comes down to our personality and what our expectations are of the broker. Those who are unfamiliar with all of this should look for a broker that provides simple tools and even educational materials. Being able to emulate the professions of others is also very practical. That way, we can at least see what other users are doing to get a better understanding of how it works.