Choosing a crypto broker has never been this easy

Dealing with cryptocurrencies has been facilitated considerably since crypto brokers have been introduced to the market. These companies or professional individuals help investors, traders and users through the buying and selling process by acting as an intermediary. When choosing a crypto broker, you must expect the prices to be set by them, which is highly beneficial for beginners.

People who are more skilled, however, would choose a cryptocurrency exchange. For example, if you want to know what is the Bitcoin price, you check Binance for trading cryptocurrencies based on current market prices.

Of course, choosing either one depends not only on your experience but also financial goals and willingness to expose yourself to risk. This article briefly touches on aspects to consider when choosing a crypto broker to fit your needs as an investor.

Pros and cons of working with a crypto broker

Given that the crypto market is relatively new, it’s essential to make sure you’re aware of the benefits and risks of choosing a crypto broker. Although they’re fitted for people who have no prior knowledge of trading cryptocurrencies, there are some aspects you need to consider.

One of the best things about a crypto broker is they provide a wide choice of technology and risk management tools, such as stop loss and take profit instruments. These are especially beneficial because they can protect you from considerable losses since the crypto market is known for its high volatility. Then you’ve got a noticeable speed of trading which allows you to be prepared for any major market changes in price. Finally, a broker provides constant customer support when you stumble upon a technical issue, including email, phone and live chat.

But there are also some disadvantages. First of all, you should be aware of the fees you’ll be charged for the brokerage services, which are usually the difference between the buying and selling prices, which is why you should expect some losses when entering a crypto position. Secondly, you need to find a trustworthy business or individual that won’t just strip you of your assets because scammers have infiltrated the crypto market too. Ultimately, when working with a crypto broker, you’ll be surprised to find their list of coins available for trading is relatively short compared to crypto exchanges, which won’t benefit your portfolio too much. If you still wish to choose a broker, here’s what you need to consider beforehand.

Check regulation aspects

As discussed, there might be scammers around the market regarding brokerage services. Still, you can avoid them and call them out by checking if an official supervisor, such as the following, regulate them:

• The Financial Conduct Authority (FCA) is the UK’s leading financial regulatory body and is currently checking if crypto asset companies provide anti-money laundering (AML) guidelines. They have also regulated security tokens;
• The National Future Association (NFA) requires that CPO (commodity pool operators) and (CTA) commodity trading advisors must address price volatility, valuation, liquidity and much more when engaging with crypto transactions;

You must avoid crypto brokers that showcase excessive marketing for their company or claim that you’ll make money rapidly. Genuine brokers will present you with the highs and the lows of trading and will only proceed to guide you if you agree to work with them.

Analyze trading conditions

When working with a crypto trader, you’ll receive a trading agreement that includes a few aspects of the trading process, some of which include:

• The scope of the broker’s operational duties;
• The circumstances in which you might be exposed to risk;
• The termination terms;
• Security interests;

Besides these aspects, there are two essential things to consider, which are usually found at the bottom of the contract: spreads and overnight financial fees. Exchange spread is the difference between two prices, which generally changes based on liquidity and market conditions, and you should check for a tighter spread to get better trading value. Secondly, overnight financial fees represent the interest paid on leverage which can increase compared to other times of the day because overnight trading usually offers more returns.

Investigate high leverage

Leverage trading requires you to borrow extra funds to increase your positions’ size. If done right, this action can considerably increase your gains, but there’s a higher risk of losing most of your capital. Therefore, it’s important not to let yourself be taken away by high leverage rates because crypto markets swing for at least 5% daily, which means you should strive for a lower leverage to avoid accidental liquidation.

This accidental occurrence may oblige you to owe tax money to the IRS on your liquidations, which is also usually mentioned in terms and conditions on exchanges. You need to learn them before getting a crypto broker. Remember that even if you get greater losses than your initial capital investment, you still need to pay your broker the charge fees, premiums, and margin rates stipulated in the contract.

Do your research

Finally, this is the advice that everyone talks about, but only a few have the patience to analyze the market thoroughly before asking for a broker’s services. As a form of prevention, you should learn how to separate genuine from fake information so that you’ll never risk your money. The broker you choose should be trustworthy and have the same value as you so their practices can align with your needs.

And since the crypto market is relatively new, you should expect considerable changes to happen overnight because of the volatility of cryptocurrencies. Finally, before starting this investment journey, make sure you have some money aside for at least six months of living so that regardless of what happens with your investments, you don’t risk getting broke from crypto investing, which is not that rare. Just as with betting, some people don’t actually have a backup plan and put all their money into investing, which is not advisable.

Bottom line

A crypto broker can guide you if you’re at the beginning of the road with crypto investing. However, you need to be aware of the disadvantages, mainly the fees you need to support regardless of your earnings.