Header help text

Start trading with a free $30

There is no better time than now
Your first deposit is on us


Grab your $30 from XM

Header help text

Start trading with a free $30

There is no better time than now
Your first deposit is on us


Grab your $30 from XM

Selecting the best cryptocurrency broker: Do’s and Don’ts

Cryptocurrency is a virtual currency, and just like a regular one, it is designed to work as a medium of exchange. This type of a currency uses cryptography to create and also control any additional units (coins or tokens). The currency also uses cryptography to verify the transfer of assets. Unlike fiat currency which is controlled by the central banks, cryptocurrency is decentralized and works through a blockchain, a public transaction database which functions as a distributed ledger. Every other cryptocurrency is based on the absolute consensus of all the participants with regard to the legitimacy of the transactions and balances.

Cryptocurrency gained extraordinary popularity in 2017. At the start of 2017, the market cap of all the cryptos stood at $18 billion. In December the same year, the crypto had surged by over 250,000% to surpass a market capitalization of $520 billion. Bitcoin accounted for more than half of this growth. It is with this growth that top cryptocurrency brokers started entering the market.

The growth of cryptocurrency has attracted many institutional and individual traders and investors. Indeed, JP Morgan & Chase bank which is considered to be among the largest financial players announced in late 2017 that it would start accepting Bitcoin. Cryptocurrency has reached a growth stage where traders are actively looking for the best cryptocurrency brokers who will help them make a profit just like it is the case in FX and stocks trading.

Trading cryptocurrency

best cryptocurrency broker

Like in Forex or stock trading, cryptocurrency traders are looking for price changes which might benefit them. Well, the digital currency is one of the most volatile and presents the perfect opportunity for traders who are not risk-averse. In early 2013, Bitcoin price dropped from a high of $260 to $130 in a matter of six hours. The same scenario was repeated in December the same year when the price fell from a quoted price of $1,200 to a $600 within hours. Bitcoin cryptocurrency has continued to rise over the years and so have the other altcoins. In December 2017, Bitcoin hit an all-time high of $20,000 before steadily falling to touch a low of $6,000 in just six weeks. A majority of altcoins follow the trend of Bitcoin. It is this high volatility of cryptocurrency which is dominated by Bitcoin that is attracting traders by the minute.

When it comes to cryptocurrency trading, here some of the things that one should at least be conversant with;

  • Cryptocurrency exchange – This is very similar to a stock exchange. It is a place where traders can trade a cryptocurrency for other cryptocurrencies or fiat currencies. An example of an exchange is BitStamp where you are trading directly with other traders and not with the company. In a crypto exchange such as BitStamp, you will pay fees starting from as high as 0.5% down to 0.2% if you happen to trade at least $150,000 in the past 30 days.
  • Crypto wallet – A cryptocurrency wallet is a place where you get to store passwords that represent the crypto coins that you own. It is like keeping money in a bank account.
  • Crypto broker – A cryptocurrency broker is a party that seeks to provide convenient access of cryptocurrencies to traders. A broker will sell or buy a digital currency at a fixed price. However, a broker will charge a commission of between 5-10%. Seeking a top cryptocurrency broker is a convenient idea especially for a novice trader or a trader who wants to buy a small amount of a digital currency.

Other ways to trade cryptocurrency

You can trade in cryptocurrency without going to a broker or an exchange. A trader can opt to buy or sell their crypto coins or tokens offline. They will, however, need to have access to a website which facilitates offline trading. On such a website, potential buyers and sellers are paired. Normally, the crypto coins one trader is selling are locked in an escrow and are only released to the buyer when both parties are satisfied with the transaction. It is a bit tedious because you will need to meet physically with the buyer or seller in most cases. Like with every other physical transaction, you will be required to do due diligence like meet in a public place or bring a friend along. It is, for this reason, many traders are opting to find the best cryptocurrency broker online.

Reasons why people trade in cryptocurrency

  1. You can trade cryptocurrency from anywhere in the world. A person in South Korea can trade their crypto coins with a person in Brazil. Trading in crypto does not depend on the strength of a country’s economy hence any person from any country can trade.
  2. It is volatile. Even though forex is considered a volatile, it is not as volatile as the cryptocurrency. The sharp changes to the price of Bitcoin and other altcoins because of sublime economic shifts means that traders are able to make substantial profits.
  3. It can be traded 24/7. Trading cryptocurrency wholly depends on an individual trader and not on time. This is unlike stocks which can only be traded during normal business hours.
  4. The market is easily accessible. Trading in cryptocurrency only requires that you identify a seller or a buyer. This is unlike stock and other markets which come with numerous obstacles for the trader.
  5. Cryptocurrency attracts low cost, unlike stock trading where you get to pay as high as 3% the value of a transaction. In cryptocurrency trading, you will pay a fee of around 0.2% of the value of the transaction.

Why do people invest in cryptocurrency?

It is quite easy when it comes to investing in cryptocurrency because there are very few regulatory bodies in crypto trading. It is easy for an investor to enter and exit and this makes transactions fast and headache free.

Instability has been shown to be a good thing for the cryptocurrency. When Asia witnessed unrest in 2017, the price of Bitcoin surged. Unlike with stocks which plummet when there is government or market instability, you should consider investing in crypto when the future beckons instability.

What are the things to look for in a cryptocurrency broker?

Knowing what to expect from a crypto broker will definitely help you know which direction to look. Such a broker should prove to be both effective and efficient. Below we are showcasing trusted crypto CFD brokers for your convenience:

XM

XM Forex Broker Review

Minimum deposit

5$

Regulation

CySEC, FCA

Bonus

30$, 50%+20%

Maximum leverage

1:888

Year founded

2009

Trading platform

MT4, WebTrader

Markets.com

Markets.com Review

Minimum deposit

100$

Regulation

CySEC, FSB

Bonus

N/A

Maximum leverage

1:300

Year founded

2008

Trading platform

Custom

Plus500

Plus500 Review

Minimum deposit

100$

Regulation

FCA

Bonus

N/A

Maximum leverage

1:300

Year founded

2008

Trading platform

Custom

EasyMarkets

EasyMarkets Review

Minimum deposit

25$

Regulation

CySEC, ASiC

Bonus

N/A

Maximum leverage

1:200

Year founded

2003

Trading platform

MT4, WebTrader

Z.Com Trade

Z.Com Trade Review

Minimum deposit

5$

Regulation

FCA

Bonus

N/A

Maximum leverage

1:200

Year founded

2005

Trading platform

MT4

Forex.com

Forex.com Broker Review

Minimum deposit

Regulation

FCA, NFA

Bonus

N/A

Maximum leverage

1:200

Year founded

2009

Trading platform

MT4

The good thing about online trading whether it is in crypto, equities or forex today is that you don’t have to pick a broker who is in your geographical address. Here is what to look for when you want to pick the best cryptocurrency broker:

Good financial backing

As a trader, you don’t want to end up picking a broker whose asset base is as large as your total investment. A good broker should have a good financial backing or a large capital base of its own. This will serve as an assurance that your crypto coins are secure and that the broker will not go insolvent soon after you sign up with them.

A trading platform that is efficient

Just as it is in FX trading, cryptocurrency trading demands that a broker’s platform be efficient and easy to use. Such a platform should allow a trader to manage their accounts, carry out technical analysis, trade in the market and get the latest news about all crypto coins. Cryptocurrency is definitely more volatile than forex and this would demand that the platform be superbly responsive.

Credibility, experience and reliability matter

Even though the crypto market is relatively new, it doesn’t mean that every player in the market is new or inexperienced. There are credible and experienced cryptocurrency forex brokers that one can use. Such brokers have the right credentials such as licenses from renowned regulatory bodies and employ qualified personnel.

Customer service

Cryptocurrency exchanges are opened 24/7. This being the case, an investor should ideally look for a broker who doesn’t sleep. Such a broker should have a competent support team which answers all questions and queries professionally irrespective of what timezone a trader is in.

A user-friendly platform

Cryptocurrency trading can be confusing especially if a technical language is used. A broker is presumed to understand cryptography and blockchain terms and should make every effort to make their platform easy to understand and navigate by a layman. Top cryptocurrency brokers will include clear notifications such as leverage available, spreads offered, deposit methods, minimum crypto coin deposit required and the minimum amount that one can place in a trade. It is important that you establish all these things before signing up with the broker.

Commissions and fees charged

All cryptocurrency brokers charge commissions and also offer margin accounts. A broker should make it clear to the trader the type of commissions and fees they charge and what are the risks involved. Some of the fees and charges include;

  • The fees for a transaction
  • Fees for trading in exchanges
  • Wallet fees

Scams in cryptocurrency and how you can avoid them

There are a lot of opportunities that come with investing in cryptocurrency. If you had invested in 3 Bitcoins in January 2017, for example, you would have paid around $3,000. Currently, your crypto wallet would be having $33,000. You would have reaped $60,000 had you decided to sell the crypto in mid-December 2017. Just as the crypto market is attractive, there are hackers, thieves, and scammers lurking behind the scenes. Indeed, many people have lost millions of dollars. Here are a few of the scams that you should take note of before you decide to enter into this lucrative market.

Pyramid and Ponzi schemes

It is hard for a layman to fully grasp blockchain technology, smart contracts and everything about cryptocurrency. Some crypto founders sell Ponzi schemes as genuine cryptos. This is why you should invest enough time in understanding what a particular altcoin stands for. In the earlier months of 2017, eighteen OneCoin representatives were arrested in India for operating a cryptocurrency Ponzi scheme. Unfortunately, by the time the arrests were being made, OneCoin had already moved more than $350 million through a payment processor.

Pump and dump

There are thousands of altcoins which are prone to the ‘pump and dump’ financial scheme. Larger cryptos such as Bitcoin, Ethereum, and Ripple might be hard to manipulate using this trick but the smaller altcoins which have taken the place of penny stocks are an easy target. There are known groups of unscrupulous investors who come together and choose a crypto with a small market capitalization to descend upon.

ICOs

Initial Coin Offering (ICOs) are another ripe place where scams happen. Like in the case of OneCoin, there are many people who have lost their hard-earned cash in illegitimate ICOs. ICO related scams have reduced drastically after the authorities such as the American Securities Exchanges Commission, the South Korean and the Chinese governments took tough measures on ICOs.

Non existing coins

There have been cases of persons cold-calling unsuspecting investors and trying to sell to them nonexistent cryptocurrency. In August 2017 for example, a ‘cryptocurrency business’ was shut down by London police. The business was persuading people to buy into the fake cryptos. More than $150,000 was stolen through this particular scam.

Hacking and outright theft

Bitcoin investors lost a whopping $460 million in 2014 in one of the largest and messiest disasters in cryptocurrency history. Even though many people were caught in total surprise by the hack and theft, insiders at Mt Got say that the hack came as no surprise. According to well-placed sources, Mt. Got was a combination of inexperience, poor management, and neglect. According to Mark Karpeles who was accused of just wanting to be the CEO of Mt Got and not being involved in the day-to-day runnings of the company said that the theft of the millions was caused by the weakness of the system.