A common entity in the investment industry is the ‘broker’. This is an individual – sometimes a firm – that charges a fee or commission for executing buy and sell orders. These are orders that an investor would submit. Oftentimes, this entity will correlate with traders, estate agents, and of course, stockbrokers.
Moreover, a broker also refers to the essential role of a firm when it operates as an agent for a customer. On top of that, charging the customer a commission in exchange for its services. The revolutionizing of this entire process is thanks to the paradigm shift that the Internet would cause.
The job of brokers goes beyond just executing client orders. In addition, they will often provide investors with helpful research, investment plans, and intelligence in the market. They may also cross-sell other financial products and services their brokerage firm offers clientele. These include access to a private client offering that provides tailor-made solutions. Specifically, for clients that have a high net worth.
There was once a time when only the wealthy could afford a broker and access the stock market. This would change upon the boom of online broking, the outcome of which would be a surge of discount brokers. It allows investors to be able to trade at a lower cost, but without any personalized input.
Right off the bat, we associate brokers with traditional finances. However, with the rising popularity of cryptocurrency, brokers are beginning to integrate with digital currency. Bitcoin is one of them, reaching an all-time high value that is upwards of $20,000 in January of 2018. This article will go over the best brokers pertaining to the famous crypto.
First things first, we should take a closer look at Bitcoin. True, explaining this cryptocurrency may seem irrelevant as many already know what it is, but it will provide context for when we go over the best brokers.
Bitcoin is a distributed digital currency that runs on a peer-to-peer system. Transferring it between two people anywhere in the world who accept the currency can be both instantaneous and secure. In a way, it is like digital cash. To elaborate, you are able to send bitcoin to any other Bitcoin user in the world. It is essentially a transfer of value, just like traditional currencies. However, unlike traditional currencies, Bitcoin is not a physical item; it only exists digitally.
In 2009, the world saw the release of the first cryptocurrency in the form of open-source software. This basically means that anyone has the ability to examine the code and make additions to the Bitcoin network. Once again, unlike traditional currencies, Bitcoin is a ‘decentralized’ creation. What this means is that there are no central authorities (i.e. banks or political institutions) controlling the amount of circulating bitcoin.
Bitcoin as a whole offers users with the promise of lower transaction fees than conventional online payment mechanisms. Furthermore, its operation is at the hands of decentralized authority, unlike currencies that are government-issued. To repeat an earlier point, there are no physical bitcoins. Instead, there are only balances that exist on a public ledger in the cloud. Along with all Bitcoin transactions, it undergoes verification by a tremendous amount of computing power.
How it works
So, how exactly does Bitcoin work when there is no one controlling it? Well, the system, in the most rudimentary sense, is actually quite simple and organized.
Bitcoin utilizes public key cryptography and a ‘proof-of-work’ protocol to process and corroborate payments. Bitcoins are typically sent (or “signed over”) from one Bitcoin address to another. Moreover, it is entirely possible that each user would possess a large number of addresses.
Each and every payment transaction is broadcast to the network. Furthermore, it becomes an addition to the Bitcoin blockchain so that it’s impossible for the bitcoins to be spent twice. After about an hour or two, each transaction will lock in time (in a block that is mined every 10 minutes) by the processing power. This massive amount of power will continue to extend the blockchain.
In contrast to fiat currencies, with no government printing new currency, the Bitcoin blockchain controls bitcoin distribution. Specifically, how much will be produced. The total supply of Bitcoin to ever be created is capped at 21 million. What’s more, there are over 17.5 million in circulation and 85% have been mined.
There is a hard cap set for the number of mined bitcoins. With that in mind, there are a lot of people who are arguing over how Bitcoin can scale for massive use. Though, this leads into what makes Bitcoin so unique as a cryptocurrency, unlike conventional currencies. That being it is microscopically divisible. Let’s assume that you want to transfer just 0.00000001 bitcoins. In this case, you are able to, which makes the number of 21 million Bitcoins pretty arbitrary.
Why should we trade it?
Trading bitcoin, like most procedures, is accompanied by an array of advantages and disadvantages. This comes as no surprise, especially since cryptocurrency as a whole is still in its infancy. The chances of unfavourable results are prevalent and one cannot ignore them so easily.
Naturally, due to it being a highly-volatile asset, it carries a lot of risks with it. Moreover, it correlates with the risks that come from investments in general. Investing more than you are able to afford to lose is never a wise idea. That same nagging worry applies to cryptocurrency trading as well. However, online trading is becoming incredibly accessible. It is important to keep both the benefits and drawbacks of the market in mind when participating.
Disadvantage #1 – A limit to historical data
Bitcoin’s existence spans almost a decade and in that time, it has made a variety of developments and improvements. In spite of this, there is a limit to the historical data available for the remaining cryptocurrencies on the market. Therefore, it is very difficult to create an accurate technical analysis that draws from data. This is because it’s tricky to follow important factors. Some of these include trends and momentum, support and resistance levels, and patterns in general.
There are a wide variety of distinct trading tools to choose from. However, the limit on historic information does, in fact, make it a little more challenging. This is especially true when it comes to getting successful retail investor involvement.
Disadvantage #2 – High volatility
Admittedly, it is a hard task to accurately categorize high volatility as a disadvantage. However, it still poses quite a serious amount of risk with the big one being the potential loss of your money. This outcome is alarmingly plausible, especially in regards to margin trading. This is the practice of using funds one borrows from a broker to trade a financial asset. This creates the collateral for the loan from the broker.
This is the primary reason why countries like Japan are proposing to limit margin trading. Doing so will allow them to provide protection for several groups, particularly retail investors. There are reports that claim many stakeholders in the country are demanding a lower leverage cap. They have their reasons for this, which is mainly because of the volatility of digital currencies.
Disadvantage #3 – A severe lack of legislation
All over the world, governments are in a bit of a struggle. They are trying to figure out the best possible approach for putting cryptocurrencies within a certain regulatory framework. There is some skepticism and uncertainty surrounding how exactly legislators will treat Bitcoin and other cryptocurrencies. Among other concerns, this is something that is responsible for hindering institutional investors from entering the market.
Advantage #1 – Diversifying your investment portfolio
Once you begin to trade and invest in Bitcoin, you are able to balance your portfolio. Because of the industry’s volatile nature, there is another notable perk. You can count on the possibility of being able to rapidly boost your investments’ overall value.
It is difficult to ignore the fact that the cryptocurrency market was in a lengthy bear market in 2018. What’s more, the prices are currently deteriorating in value. Be that as it may, volatility makes it possible to quickly recoup one’s losses. Once again, though, it is important to take the risks into consideration. Moreover, you should only invest as much as you can afford to lose. Going overboard could lead to humongous losses.
Advantage #2 – Bitcoin’s continuing rise in popularity
It is no surprise that Bitcoin is the world’s leading cryptocurrency. Its introduction to the world sparked a new era of currency; a digital age in which money is not physical. With each passing year, its popularity only continues to grow to outstanding levels. Thus, it makes sense that its demand continues to grow, as well.
As you may recall, there is a limit to Bitcoin’s overall supply. As demand surpasses supply, it is no wonder that the price will supposedly grow substantially. With that in mind, let’s suppose that you are someone who wants to invest in Bitcoin. If that is the case, then it’s a good thing to consider its progressively widespread adoption as a strong merit.
As of June 2019, there are over 5,000 Bitcoin ATMs throughout the entire world. These machines are similar in design to a traditional ATM that disperses fiat currencies. Unlike conventional ATMs, some Bitcoin ATMs allow you to withdraw bitcoins. With these ATMs, you are able to virtually purchase bitcoin at any railway station in Switzerland. France would also announce that tobacco shops will permit customers to purchase cryptocurrency.
Advantage #3 – Institutional money matters
To echo a point from earlier, Bitcoin and the entire cryptocurrency market are still in a stage of infancy. Their progress is admirable, though it is not necessarily perfect, nor is it complete. For that reason, it is probably safe to assume that institutional money has yet to enter the scene.
In this sense, we may be witnessing institutions beginning to establish the tone. The Intercontinental Exchange (ICE) – the owner of the New York Stock Exchange (NYSE) – is in partnership with companies such as Starbucks and Microsoft. They currently have joint forces on a cryptocurrency solution going by the name of Bakkt. This platform would launch in December of 2018 following regulatory approval. This is a solution that plenty of experts believe opens the doors for institutional investors.
It is crucial to emphasize that Bitcoin trading is a risky undertaking. By engaging in it, you are taking on the risk of potentially losing your funds. Therefore, you should take into consideration a thorough trading guide or trusting a professional if you want to commence trading. Alternatively, you can take advantage of trading signals. These are available on an array of different trading platforms. There is a requirement for you too, in a way, trust someone else’s expertise or that of an algorithm.
Choosing the best broker
Now that we have context for what Bitcoin is and what trading Bitcoin entails, we can start going over brokers. Before deciding on which is the best broker, there are a few things that one needs to keep in mind. There are a plethora of Bitcoin brokers that exist on the market. Therefore, narrowing the list down to the best possible choice(s) would require a considerable amount of research.
Below are some of the key factors one should take into consideration when deciding on the better Bitcoin broker.
1 – Location
The main theme of when it comes to real estate is “location, location, location.” That same mantra can apply to brokers as well. Knowing the country you live in and whether or not there are any specific crypto trading restrictions is incredibly important. It’s possible that you may have found the best Bitcoin broker when it comes to functionality and trading tools. However, that does not matter if the broker does not operate within your region.
What’s more, you will need to check as to whether or not you can even purchase bitcoin with your own currency. If not, then you would need to convert, as this might require you to bear certain trading fees. This is what segues us to the next point about trading fees. Checking the verification process is an important task that you should do before anything else.
2- Trading fees
The central thing that you will be doing on the Bitcoin trading platform is, of course, trading. Thus, it is no surprise that trading fees are a crucial element to the process. You will definitely want to make sure that the fees are not only reasonable but are within the acceptable measure.
3 – Volume of the order book
It doesn’t matter if you are looking to buy or sell Bitcoin. What actually matters is that you make absolutely sure that there are enough people on the trading platform. Specifically, enough people that can fully satisfy your orders. To put simply, the larger the order book volume, the better.
4 – Transparency
Something critical to consider is that transparent cryptocurrency exchanges publish audit information on a regular basis. Additionally, it will publish information regarding its cold storage. One of the numerous things that any trading platform should prioritize is investor accounts.
5 – Limits concerning deposits and withdrawals
In online trading, you will need to deposit the funds you would want to be trading with. Eventually, you will want to withdraw them. It is important that you take a look at the payment options, withdrawal fees, deposit limits, and other specifications. Doing so will help you avoid losing money when trading. For that matter, top Bitcoin brokers will offer some sort of trading guide that can aid novices and retail investors with very little experience.
6 – Security
When you’re opening a trading account at a Bitcoin broker, you need to ensure that your funds are in storage. In regards to cryptocurrency, most of the best Bitcoin brokers depend heavily on cold storage solutions. With these solutions, they are able to properly prevent any possibility of interference from a third party.
At the same time, it is imperative that the most basic security measures should be put in place. Such examples of this include a comprehensive verification process, risk warning, 2-factor authentication, and others that are similar.
Much in other financial fields, theft is a prominent issue in cryptocurrency. For this reason, it is important that your top priority is avoiding becoming a victim of cryptocurrency theft. Therefore, carrying out thorough and exhaustive due diligence is extremely crucial. This is especially the case when it is prior to selecting the best Bitcoin broker or any cryptocurrency trading platform. This will be a useful way to help towards the prevention of losing your money.
So, we know the key factors that go into choosing the best Bitcoin broker. Now it is time for us to actually go over our options. Ultimately, the choice is subjective and it all depends on what you yourself want.
The most popular ones
There is no shortage of Bitcoin brokers on the market to choose from. There are plenty of options for traders to go through and select. Obviously, they all differ in terms of the overall range of diverse characteristics. The ones below are the best of the best.
eToro is a financial services company that the Cyprus Securities and Exchange Commission regulates and authorizes. It is among some of the most illustrious Bitcoin brokers that exist on the market. It provides investors with a wide range of helpful features to aid in their endeavors. When it comes to payment methods, the options vary widely. They can range from a basic transfer from your bank account to using Skrill, PayPal, and other different payment options.
The structure of the social trading platform allows investing in an array of forms. These include currencies, stocks, commodities, ETFs, cryptocurrencies, and indices. Generally speaking, opening a trading account on the platform is a straightforward process. Moreover, the withdrawal fees are actually not that high.
SimpleFX is one of the most popular trading platforms. It comes equipped with a user-friendly interface and a wide variety of tools. The design of these tools allows them to fully heighten the user experience.
Among many of its notable features, it’s the ability to trade CFDs that is one of its flagship offerings. Its system authorizes the following:
- Transfers that are fast and secure transfers
- An API manager that is comprehensive
- There is no minimum deposit or any withdrawal requirements
- Negative balance protection
Evolve Markets is a trading platform which is high up on the list of the best Bitcoin brokers. Investor accounts receive approval instantly while deposits receive confirmation within the span of a few minutes. It enables users to trade on commodities and forex, as well as cryptocurrency markets.
This trading platform does not possess a minimum deposit requirement. Moreover, there is a trading fee of 0.075% on cryptocurrencies, plus no fees on withdrawals and deposits. It permits users to buy or sell Bitcoin easily. What’s more, it boasts a seemingly powerful and dynamic trading infrastructure.
24 Option is a popular broker and is seen as one of the best available. It has many advantages, with one of them being the wide range of assets. On top of this, it also has deposits and withdrawals that are smooth and continuous. Be that as it may, the platform is also known for something else. That being fairly high spreads, as well as insufficient information when it comes to the types of accounts.
Markets.com is a broker whose operation is thanks to Safecap Investments Limited. This is a Financial Services Company, which Cyprus Securities and Exchange Commission regulates and authorizes. It shares a notable similarity with the other brokers on the list. That being it accepts an array of payment methods. These include Skrill, PayPal, NETELLER, wire transfer, and many others. The broker also takes immense pride in its customer service.
Plus500 is, inarguably, one of the most popular Bitcoin brokers, with a deposit minimum of $300. Much like eToro, Cyprus Securities and Exchange Commission regulates it. On the topic of risk management, the platform enables a few different tools; one of which includes risk warning. The execution of deposits and withdrawal is easy and can be done via credit cards, bank transfer, PayPal, and Skrill.