Cryptocurrencies have been one of the hottest trading trends in the world for the past couple of years. Even since the market cooled down after the massive bull run in 2017, the interest in trading cryptocurrencies has remained high.
With that said, many traders are still limiting their trading to the big cryptocurrency exchanges, which, in many ways, might not be the best solution. In fact, we would argue that cryptocurrency trading is best done using online brokers and in the following post, we’ll outline the reasons why.
Online Brokers Offering Cryptocurrencies
In case you didn’t know, an online broker is a brokerage service offered online through top-shelf trading platforms. These platforms and brokers have the ability to support a range of different assets, unlike a cryptocurrency exchange that only offers cryptocurrencies.
For example, most brokers offer forex trading as their main product but they often provide derivatives based on everything from stocks and commodities to indices, as well as other assets, including cryptocurrencies.
eToro is currently one of the top online brokers in the world and they recently launched their cryptocurrency product in the North America., effectively making them one of the best online brokers in the U.S. They are also available in Europe, most of Asia, as well as selected countries in Africa, making them a great option for almost everyone that’s looking to trade cryptos.
And with that said, let’s take a look at four reasons why you should consider trading your cryptocurrencies with a broker instead of an exchange.
Brokers Are Regulated and Therefore Safer Than Your Average Exchange
All the top online brokers in the world are tightly regulated by organisations such as the Commodity Futures Trading Commission (CFTC) in the U.S. and the Financial Conduct Authority (FCA) in the UK. That means that they have to live up to very high standards and that they are subject to regular audits and controls. It also means that they must incorporate the highest level of customer-safety measures.
A cryptocurrency exchange, on the other hand, is unregulated meaning there is no third-party regulatory body that oversees their operations.
In turn, this means that exchanges are generally unsafer for customers and traders. It also means that they are more subject to hacks and cyber-attacks. In fact, it’s not uncommon that exchanges get hacked and since they are unregulated, they have no obligation to refund any lost funds.
Our point is that when you are protected when using an online broker and you’re not protected at all when using an exchange.
Bigger Selection of Popular Cryptocurrency Pairs
Generally speaking, an online broker doesn’t offer as many cryptocurrencies as an exchange. However, many exchanges have hundreds of assets on offer with most of them being altcoins that very few, if any, ever trades with.
Instead of offering hundreds of assets that few people trade, brokers focus on offering sought after assets. Brokers also tend to provide access to exciting cryptocurrency pairs such as BTC/EUR, ETH/GBP, etc., which you rarely find at exchanges.
In other words, even though online brokers can have a smaller selection of cryptos on offer, the assets they offer are handpicked for their potential. It’s a great example of the expression “Less is More”.
Better Use of Leverage to Increase the Exposure for Each Trade
An integral part of all online brokers is the use of leverage which helps traders optimize their exposure on each trade. This concept stems mostly from forex trading which requires traders to use leverage to be profitable. Although, that same concept is very easily transferred to cryptocurrencies.
So, by using an online broker you can apply safe and regulated leverage to your trades to maximise the potential profit on each and every position you open.
Automation and Copy Trading for Improved Efficiency
Lastly, all the best online brokers in the world offer trading robots and other automatic trading solutions. This is a commonly-used method in almost all forms of trading except for cryptocurrency trading on exchanges.
Automatic trading is definitely not for everyone, but for the people that like it and learn how to master it, the benefits are incredible.
Also, eToro, which we mentioned at the beginning of the article, as a feature called copy trading where new and inexperienced traders can copy more successful traders, thus improving their ability to make a profit.
Copy trading is not actually the same as automated trading, although the two methods share a lot of similarities. However, just like automated trading, copy trading is a great reason as to why you should consider dumping your exchange for an account with an online broker.