Looking for the best cryptocurrency brokers in 2020? We compare all the top trading platforms, looking at the criteria that really matters, including price, leverage, spreads and trading conditions.
Our guide to crypto trading takes you through all the key criteria and explains the terms you need to know before you get started.
Where can I find the best crypto brokers?
Look no further! Our website enables you to shop for the best cryptocurrency trading platforms, listing all the most important selection criteria at a glance.
What are cryptocurrency brokers?
Cryptocurrency trading brokers are companies that provide trading venues for buyers and sellers from all over the world to come together to trade cryptocurrency assets in a transparent manner.
The trading venue is usually an online trading platform, which can either be a proprietary product designed by the broker, or a turnkey product designed by a third-party company and customized for each broker that signs up to use the platform.
What is cryptocurrency trading?
Cryptocurrency trading is the online trading of tokens and assets that are created using distributed ledger technology, in order to profit from the minute-by-minute change in value of these assets.
Cryptocurrency trading was an accidental creation. The original cryptocurrency was Bitcoin, created in 2009 by an entity known pseudonymously as Satoshi Nakamoto. It was created as a decentralized alternative to fiat currencies, enabling peer-to-peer transactions on a distributed ledger platform in a manner that was transparent, immutable and without centralized control. As newer cryptocurrencies were created and people began to demand for them across the world, willing to pay appropriate prices for them, a new market was created. This led to the birth of new exchanges and platforms where buyers and sellers could meet and transact on their chosen cryptocurrencies.
Thus, cryptocurrency trading was born. Brokers and exchanges have been able to standardise these platforms in order to provide the same trading conditions as other traditional assets such as stocks, commodities and indices.
Cryptocurrency trading can be done in two ways. You can buy to profit from rising prices, or sell to profit from falling prices. The value of cryptocurrencies is subject to the forces of demand and supply. This is why their values fluctuate. It is the price fluctuations that provide the opportunity to profit from the trading of these assets.
How do cryptocurrency broker platforms work?
There is a difference between cryptocurrency exchanges and cryptocurrency brokerages. If you are trading with a cryptocurrency brokerage platform, you are trading on the basis of the change in prices of the underlying cryptocurrency assets without actually owning or exchanging the physical cryptocurrencies.
However, the process remains the same. You have to select the crypto asset to trade, and it comes with a bid-ask price quote. You may decide to buy/sell at market price, or to buy/sell at a price that is cheaper than the market price (limit order) or more expensive than the market price (stop order).
Cryptocurrencies are usually traded in pairs, except for a few platforms where a single crypto contract may be offered. When you opt to buy a cryptocurrency pair, the trade is executed at the ask price. When you opt to sell a crypto pair, the trade is executed at the bid price.
So if LTCUSD is quoted at 44.58/45.67, the buy order is executed at 45.67 and the sell order at 44.58. Either way, the trader pays a spread which in this case, is 1.09 units of currency.
The trader would then need the price to move in his or her favour to be able to close out the trade in profit. So if the buy order of 44.58 eventually gets to say, 50.58, the trader would have made 6.00 on each unit of cryptocurrency pair bought.
The total profit is calculated by multiplying the total number of units or lot sizes invested in the trade, by the profit per unit. Assuming the trader purchased 100 units of cryptocurrency, this would translate to 100 X 6 = 600 currency units (could be US Dollars, British Pounds or Euros).
The best part is that since you do not take physical ownership of the assets, you do not need to bother with security issues like the hacking of wallets and private keys. You simply deposit funds using any of the payment methods listed by your cryptocurrency broker and start trading immediately. Some payment methods offer same day deposits and withdrawals, which makes the process even more hassle-free.
What should I look for in a cryptocurrency brokerage service?
When making a decision on what cryptocurrency brokerage service to go for, there are certain selection metrics you must use.
- Choose a regulated cryptocurrency brokerage – The Financial Conduct Authority (FCA) regulates all financial services companies in the UK, and cryptocurrency brokerages are part of the mix. So you must ensure that you only use a regulated cryptocurrency brokerage. Regulation ensures that you have protection from a higher body, and have a channel to seek redress if the broker’s service delivery is below par.
- Variety of payment channels – The design of the international financial system means that certain payment methods may work in some countries but not in others. You must ensure that you choose a platform that provides you with several payment channels you can use. Payment channels could be fiat currency channels or cryptocurrency channels. The benefit of payment channels such as credit/debit cards, e-wallets (PayPal, Skrill, Neteller) and crypto channels is that they offer instant deposits and same-day withdrawals.
- Suitable deposit and withdrawal limits – Deposit and withdrawal limits will vary from platform to platform, so make sure you’re selecting a platform that suits the level of trading you want to do, whether it’s large or small.
- Good reputation – A broker can have all the qualities listed above, but if they have a poor market reputation, you need to avoid them. Reputation comes from the feedback and reviews of real, verified users on these platforms. There are many online forums where you can dig up user reviews and feedback about cryptocurrency brokers. These reviews are a gold mine and you should pay attention to them. They will help you identify brokers with a good reputation.
- Easy to Use Interface – Trading should not be complicated by using a platform that makes the job harder. Choose a platform with an interface that is visually appealing (to prevent visual fatigue) and easy to use.
- Wide list of cryptocurrencies – Having a wide list of cryptocurrencies to choose from ensures you are not stuck with non-performing assets. Cryptocurrencies do not always have the kind of volatility needed for trading. There are times when the price movements of some cryptos will be muted, while a few others are on fire. Having variation in asset listing allows you to trade where there are opportunities. As a top trader Nicholas Vardy once said, “there is always a bull market somewhere”.
Will I have to verify my broker account?
International financial regulations require that owners of financial trading accounts must be verified. The essence of verification is to prove that the account owners are who they say they are, and that no illicit funds find their way into the system.
Verification involves submitting a government-issued ID such as your international passport, drivers’ license or national ID card (selected countries), as well as a proof of address document (utility bill, bank statement). Additionally, cryptocurrency brokers will require you take a selfie in which you are holding one of your ID documents, and a piece of paper with the name of the brokerage and the current date written on it. You must scan all these documents and ensure they have no glare and that no part of the important information on the documents is obscured. Attach the scanned copies to the relevant section on the online account registration form.
It usually takes one business day to complete verification.
How secure is online trading?
Most trading platforms are protected with high-grade encryption technology, which encrypts all user information that is entered onto the platform. Many cryptocurrency brokers operate a hot/cold storage process where funds not being used for trading are lodged in the members’ area of the website and not on the platform itself. Only funds being used for trading are left on the platform. The brokers reviewed on these pages offer a secure environment for online trading.
What if I forget my password?
If you forget your password, you can always recover it by following the password recovery process. You may be required to answer one or two security questions along the way. Usually, the process starts with clicking the “forgot password” phrase under the account login form. The exact process differs from one broker to another.
Can I trade multiple assets with broker platforms?
Broker platforms usually list several cryptocurrencies to trade, along with assets from other classes such as stocks, commodities, indices and fiat currencies. So you can trade multiple assets at the same time.
Do cryptocurrency brokers charge fees for trades?
The only fees you will pay for cryptocurrency trading are the spread (difference between the bid and ask prices) and the rollover fee for leaving positions open overnight. Trading cryptocurrencies on brokerage platforms is commission-free.
What are the advantages of using a cryptocurrency brokerage?
There are several advantages to using cryptocurrency brokerage platforms. They are secure and do not involve the use of wallets. Hacking of wallets and stealing of wallet information such as private keys has been the number one problem with cryptocurrency exchanges with millions of dollars lost annually. This problem does not exist with cryptocurrency brokerage platforms.
Another advantage is the fact that you can trade with leverage. This means that you can setup and hold larger positions than you normally would have been able to, using a smaller amount of money.
You also have access to tools and resources for analysis such as indicators, charts, news bars as well as market research tools.
What are the drawbacks?
You do not own any cryptocurrencies when you trade with a crypto brokerage platform. So if you want to take possession of Bitcoin, Ethereum or other cryptos, it is not possible using brokerage platforms. You should instead go to an exchange, where you can buy cryptocurrencies.
Misuse of leverage can lead to serious problems on crypto platforms and overnight rollover fees for Bitcoin can also be very high, potentially eroding any profits you’ve made.
Should I use a cryptocurrency trading broker?
- If your purpose is to trade Bitcoin, Ethereum and other cryptos without owning them, you should use a cryptocurrency trading platform.
- If you want to use leverage to increase your position, trading platforms are your best option.
- If you desire to trade without worrying about whether hackers will break into your wallet and clear your funds, trading platforms represent a relatively hassle-free option.
- If your desire is to trade in a regulated environment, this is the way to go.
Can I use a cryptocurrency brokerage platform on my mobile phone?
Absolutely, most cryptocurrency brokers offer mobile apps for the iPhone and Android devices, allowing you to trade your popular cryptocurrency assets from your smartphones and tablet devices.
Is CFD trading the best way to buy and sell bitcoin?
CFD trading is the way to go if you want to buy or sell Bitcoin without owning it or going through the hassle of securing your wallet and your transactions. Furthermore, you can use leverage to trade Bitcoin as a CFD asset. Exchanges that allow buying and selling of Bitcoin with actual transfer of the asset do not permit leveraged trading. There are also safety issues with exchanges – many have fallen victim to hacking.
Is online cryptocurrency trading legal?
Yes, in the UK Bitcoin CFD trading as well as online trading of other cryptocurrencies is legal. You can buy or sell CFDs on Bitcoin and other cryptocurrencies without restriction. However, there are limitations in many other countries. In the US, only regulated US-based exchanges can offer cryptocurrencies for trading. In many other countries, various levels of restrictions exist…some countries have outlawed online cryptocurrency trading completely (e.g. China, Iran, Bolivia, Ecuador, Colombia and India). You must find out what the laws in your country are before engaging in cryptocurrency trading.
Can I transfer from a CFD trading account into my PayPal account?
Yes, some cryptocurrency brokerage platforms will permit deposits and withdrawals from/to PayPal accounts. We have a guide that explains how this is done.
What if my chosen broker platform closes down while I have open trades?
Every regulated trading platform, no matter the market (cryptocurrencies included) are required to be part of the Financial Services Compensation Scheme (FSCS). This is a scheme that requires all financial trading providers (e.g. cryptocurrency brokers) to make a contribution to a fund, which serves as trader insurance. The scheme provides for a maximum compensation of £50,000 to traders whose monies are lost as a result of broker insolvency or liquidation. Furthermore, brokers are usually required to segregate the funds of their clients so that, in the unlikely circumstance of the broker becoming insolvent, those funds are usually unaffected.
It must be said that the situation in many other countries is a lot different. Again, you should find out what trader insurance packages exist in your location before doing business with a broker.
Is cryptocurrency trading totally anonymous?
Usage of a cryptocurrency brokerage platform is not anonymous. Your trading account can only be activated if you have provided your government-issued ID) drivers’ license or international passport) and proof of address (utility bill, bank statement, etc).
Are there minimum and maximum deposit/withdrawal amounts?
E-wallet and card options usually come with minimum deposits and withdrawals that range from £25 to £100. Bank transfers usually have the highest withdrawal limits. However, the limits depend on which cryptocurrency broker is used.
Are there trading limits?
Trading limits refer to the minimum and maximum amounts that a trader can trade. These usually differ from platform to platform. Consult with your provider to find out what your limits are, if any.
Can I access my full trading history on a cryptocurrency brokerage platform?
Yes, you can. Every cryptocurrency platform has a trading terminal which features a full history of all open and closed trades, along with other information about those trades such as lot size used, entry price, exit price, total profits or losses made, duration of trades, etc.
Is it easy to switch CFD platforms?
Yes, and you can even use multiple platforms at the same time if you choose.
Can deposits be made in cryptocurrency or just fiat currencies?
Cryptocurrency brokerage platforms are usually built with the ability to accept several fiat currency options such as credit/debit cards, e-wallets such as Skrill or PayPal and bank wires. However, some platforms are now offering the chance to deposit in Bitcoin or Ethereum. In such instances, you would need to procure the cryptos from a third-party source.
Are my cryptocurrency trading profits taxable?
Tax payments on the proceeds of cryptocurrency trading in the UK only apply if you are able to generate over £11,700 in the course of a year’s trading activity. You will then be liable to payment anything between 10% and 28% as capital gains tax once your earnings exceed this limit. Tax laws on cryptocurrency trading differ from country to country. In the US, you will be liable to pay tax on profits generated. In Singapore, cryptocurrencies are regarded as commodities which attract sales tax. In South Africa, cryptocurrencies are regarded as assets of wealth and are subject to the regular tax paid on profits of trade. So it really depends on the country.
Are cryptocurrency brokerage platforms regulated?
The issue of regulation of cryptocurrencies is not standard across the world. In the UK, cryptocurrency platforms must be regulated by the FCA. In Gibraltar, the GFSC regulates cryptocurrencies. In many other countries, cryptocurrency brokerage platforms are unregulated. Check the status of crypto regulation in your home country before you proceed.
Is it possible to take on short trades on cryptocurrency brokerage platforms?
Yes, going short on cryptocurrencies is allowed on brokerage platforms. Even though this is initiated by simply clicking the SELL button on your platform, the underlying process is more complicated. You borrow the asset from the broker and sell at a higher price. Wait for the price to fall, purchase the asset at the lower price, and keep the profits while returning the asset to the broker.