Brokers by Type
Bitcoin Brokers: Why They Are Needed and How to Choose the Best One
Bitcoin (BTC) is the most liquid, expensive, and sought-after cryptocurrency. Many consider it the currency of the future, as it has repeatedly broken price records.
BTC serves as both an investment asset and a speculative tool, making it suitable for long-term capital investments and profiting from frequent and strong price fluctuations. Bitcoin has garnered the interest of speculators accustomed to earning from cryptocurrency.
This growing interest has led to the emergence of Bitcoin brokers. Let’s delve into why they are necessary, the different types available, and whether they can be trusted.
Types of Bitcoin Trading Brokers
In 2022, Bitcoin brokers can be broadly categorized into two groups. The first group offers investment options based on Bitcoin, such as ETFs (Exchange-Traded Funds) and futures contracts. These are known as exchange brokers.
The second group consists of off-exchange intermediaries and dealers often referred to as “kitchens.” They simulate cryptocurrency trading.
It’s important to note that purchasing actual Bitcoin through a broker is not possible; however, various derivatives can be acquired.
Leading exchange brokers that offer Bitcoin futures and ETFs include Interactive Brokers, a prominent player in retail forex trading, a prime broker, liquidity provider, and a major player in its field. For example, Interactive Brokers provides futures contracts from the CME Group, the largest derivatives marketplace. These contracts are equivalent to 5 BTC, making them five times more expensive than actual Bitcoin.
In 2021, BCS promised a Bitcoin-based ETF listed on NYSE, which represents a full-fledged exchange asset with real value.
The second group of Bitcoin brokers is extensive and includes a mix of fraudsters unrelated to trading, as well as legitimate “kitchens.” These kitchens operate legally and contribute to the ranking of Bitcoin brokers.
“Kitchens” do not execute traders’ transactions but rather offer proprietary derivatives. While it is possible to make a profit with them, this is only feasible if the Bitcoin broker is licensed and trustworthy.
Reliable BTC Broker: Where Can You Trade Bitcoins Now?
Choosing a Reliable Bitcoin Broker The criteria for selecting a cryptocurrency intermediary are similar to those for traditional forex brokers:
Possession of a license Transparent service Reasonable service fees Good reputation The majority of brokers who offer cryptocurrency pairs fall short in the first criterion. They either lack a license entirely or possess an offshore license.
Our top Bitcoin broker recommendations help you choose a reliable intermediary. We meticulously assess each broker, collecting information and feedback from various independent sources to provide an accurate evaluation.
Do You Need a Bitcoin Broker? To make the right choice, it’s important to answer the question: “Why?” If your goal is to trade fiat-crypto pairs, finding a broker might be sensible. If you wish to trade cryptocurrency on the market, a crypto broker may be unnecessary.
Bitcoin Broker vs. Cryptocurrency Exchange: Pros and Cons
What are the advantages attributed to cryptocurrency brokers online?
Convenience: Traders need not navigate blockchain settings themselves. They can open an account and start trading. Fewer technical issues: Support is readily available for quick assistance. Advanced platforms: Available for PCs, smartphones, and tablets. Leverage: Offers the chance to amplify profits with less capital. The primary downside of cryptocurrency brokers is their costs. They charge commissions and increase spreads.
With “kitchens,” the costs are coupled with a conflict of interest. They might manipulate client transactions to avoid paying profits out of their own pockets.
Turning to cryptocurrency exchanges, the registration process is simple, and the customer support is responsive. Additionally, purchased instruments can not only be sold but also withdrawn to external wallets or other exchanges, enabling arbitrage opportunities.
Leverage is also manageable. Leading cryptocurrency exchanges offer derivatives, such as crypto futures, which allow for opening and closing substantial positions, even without the required capital.
The key advantage of cryptocurrency exchanges is that their costs can be minimal or nonexistent. Market makers, those who sell cryptocurrency below market value and buy it at a higher price, receive this privilege as they provide liquidity through their orders. Exchanges incentivize this behavior.
Fees on cryptocurrency exchanges are significantly lower than those of brokers, often by tens or hundreds of times. If your goal is Bitcoin trading and not derivatives, exchanges are the way to go.