Compare The Best Cryptocurrency Brokers
Interested in trading crypto CFDs like Bitcoin, Ethereum and Ripple but confused about where to start? Let us help!
Crypto CFD trading is a relatively new way to trade your favourite cryptocurrencies, without having to stump up all your cash in one go. But how does it work?
To get started, we’ve listed some of the leading crypto CFD brokers below (all are fully regulated). We’ve also added plenty of content around crypto CFDs – what they are, how to trade them, the benefits & risks, etc. This info can be found below the comparison table.
What is Cryptocurrency CFD Trading?
Firstly, CFD stands for “Contract for Difference“, and a CFD is a derivative product, settled between a trader & broker in ‘cash’ rather than by the delivery of physical goods. Confused?! Keep reading.
Put in simple terms, people who trade CFDs do not actually own the underlying asset; instead, they are speculating (betting) on the price movement of an asset. If a trader is correct in their prediction of an assets’ future value, they will make a profit. Likewise, if they speculate incorrectly, they will have made a loss.
CFDs are a very popular trading vehicle for most types of asset classes, including cryptos. Learn more about CFDs by clicking here.
Top 3 Cryptocurrency Brokers in 2022:
Simple Trading Platform
Litecoin, Monero, NEO, Stellar, TRON
Low Trading Costs
Ether, Dash & Litecoin
Cash, Litecoin & Ripple
Important Features To Consider When Choosing a Crypto Broker
Choosing the best crypto broker is a decision that you should spend some time deliberating over. There are a number of key factors to take into account – some of these are outlined below:
- Trading Costs
Brokers make their money a number of ways; spreads, commissions, overnight financing costs, your trade losses etc. Please familiarise yourself with what each broker will charge you. Here are some of the standard costs involved in trading;
- Spread costs: how wide are their spreads? The tighter the spread the better chance you have of making a profit. Are spreads fixed or variable?
- Commission charges: are there any commission costs involved when trading with them?
- Overnight financing charges: do they charge to keep a trade open overnight?
- Inactive fees: believe or not, some brokers will charge you a fee if you don’t trade with them in a certain amount of time, say 3 months. Please ask your broker if they will charge you if you do not trade with them every month.
Do some research before opening an account with any cryptocurrency broker. Ask yourself, does the CFD broker have sufficient regulatory licences to fill you with confidence? Always look for a broker that is FCA or ASIC regulated.
Never trade with a cryptocurrency broker that is not regulated.
Trading with a regulated entity has many advantages; most notably that a broker will be monitored closely by a governing regulator in accordance with local laws.
- The Crypto CFD Trading Platform
Is their trading platform and app easy to use? Before deciding which CFD broker you want to trade crypto with, you will need to trial their platform and mobile app to see if they’ll be suitable for what you require. There are some very poor trading platforms out there – don’t settle for this! We’d recommend opening a demo account with a few brokers to test their systems out. Only then will you know which platform suits you best.
- The Range of Cryptocurrency Markets Available
Before opening a live trading account you should ensure that the cryptocurrency broker has the markets you wish to trade. Not all brokers offer cryptos and even if they do offer some, they might not be the ones you are after so please check before opening an account.
How Do You Trade Cryptocurrencies?
If you are considering trading one of the 1,400+ cryptos that exist, then there are two ways to do so:
1. Speculate on the price movement of a crypto by trading it with a CFD broker, who specialise in leveraged trading.
2. Sign up to a Crypto exchange and buy the physical crypto.
There is a key difference between the two methods mentioned above.
With option 1, you are simply speculating on the price movement of a crypto using a CFD broker. This option means you DO NOT own any cryptocurrency.
With option 2, you are actually buying the physical instrument, i.e. Bitcoin, Litecoin etc. for its full value. You are buying it in the hope that it will increase in value so you can sell it for a profit at a later date.
The major disadvantage of option 2, compared to option 1 is that you will need to stump up the full amount of cash in order to buy the crypto. So if you’re buying one Bitcoin, you would need to have around USD $25,000 (Jul22) to pay for it. Whereas with option 1, you wouldn’t need the full $25,000 and that is because you are trading using leverage. With option 1, you would only need a small % of the actual value, say around 5%.
What is Cryptocurrency?
Unless you’ve been hiding under a rock for the past few years, you’ve probably already heard of cryptocurrency. In fact, Bitcoin and cryptocurrency were two of the highest searched terms on Google in 2019. But not everyone knows what it is.
Cryptocurrency is a unique subset of digital currency that was designed to act as an alternative means of exchange, i.e. different to the currencies that we use daily in exchange for goods and services (Australian Dollar, Euro etc.) Crypto uses sophisticated encryption techniques (namely cryptography) to turn readable information into almost-unbreakable codes; thus ensuring transactions are secure, controlling & regulating the currencies’ use.
Unlike ‘ordinary’ currencies like the Australian dollar or Euros, crypto is a decentralised function, i.e. it is not controlled or regulated by a central government.
The Benefits of Trading Cryptocurrency
You can go ‘Long‘ and ‘Short‘
When you trade cryptos using CFDs, you are speculating on the price movement of a crypto. This means you can profit from both a rising market and also a falling market. So if you think the price of Bitcoin will decline, you can open a SELL trade – you will profit if the price of Bitcoin declines in value.
When trading cryptos using CFDs, you are speculating on the price movement only. You do not actually buy the physical asset. Therefore you don’t have to worry about ownership costs and trying to sell the asset etc.
Cryptocurrencies are extremely volatile assets – their price movements can be quick and large. If you speculate correctly, you can profit very quickly. On the flip side, if you speculate incorrectly, your entire trading balance can be wiped out in a second so please be careful
The Risks of Cryptocurrency CFD Trading
- Extreme Volatility Cryptos are extremely volatile assets and it’s not uncommon for there to be a large price movement, even on a quiet day. If you are thinking about trading cryptocurrencies you need to be aware of the risks involved. It’s more likely you’ll go bankrupt than become rich trading cryptos so please be careful and trade sensibly.
- Large LossesCFDs are a leveraged trading product. So you only need to deposit a small amount of cash onto your trading account in order to access significantly large trade sizes. If you fund your account with say $2,000, open a trade and then that trade moves badly against you, you might be liable to pay the broker more than your $2,000 deposit. Please beware of the risks involved before opening a trading account.
I’m Still Confused – How Does Crypto CFD Trading Work?
Let’s use an example:
- You think that the price of Bitcoin will rise over the coming week and you wish to profit from this anticipated price movement.
- One option is to buy some Bitcoin via an exchange (although this option is tiresome, complicated and expensive).
- Another option is to open a CFD trading account, fund the account and enter a BUY trade on Bitcoin. Again, you do not own any Bitcoin – you are merely speculating on the price movement of it. Furthermore, you do not need to pay for the full price of one Bitcoin as CFD trading is a leverage trading product.
- A week later, the price of Bitcoin has increased. This means you have speculated correctly. Congratulations – you’ve made a profit!
To sum up; when trading CFDs, you are betting on whether the price of an asset will increase or decrease. As you (and your broker) do not own any actual Bitcoin, contracts for difference offers traders a hassle-free and simple way to generate profits on changing crypto prices.
What is a Crypto CFD Broker?
A cryptocurrency CFD broker acts as an intermediary between buyers and sellers of crypto. Remember, that if you trade cryptocurrencies using CFDs, you do not own any “physical” crypto – you are simply speculating on its price movement.
As you are just trading on the price movement, rather than actually owning it, your trades are passed through a OTC (“Over The Counter”) dealer network, rather than via a centralised exchange.
A CFD broker will provide speculators with a crypto trading platform in which to buy & sell crypto, live pricing & charts, a trading desk to call, customer support etc.
To find an honest and fair crypto broker, please review the table comparison above.
How Do You Know if a Crypto Broker is Regulated?
Trading with a regulated cryptocurrency broker is critical. PLEASE DO NOT TRADE WITH AN UNREGULATED BROKER.
All CFD brokers are required to state who they are regulated with, along with their registration number. If you cannot find this information easily, then be suspicious. Any regulated broker will be proud to tell that they’re regulated, while an unregulated broker will try and hide this from you.
The responsibility is on you to conduct your research and to find whether a cryptocurrency broker is regulated or not. Luckily, you can check this by going to your local financial regulator’s website and typing in the broker’s name. For instance, if you are residing in Australia, simply go to https://asic.gov.au/ and search ASIC’s register.
Can You “short sell” Cryptocurrency?
Yes you can, but only when using a crypto CFD trading platform.
Remember that when you trade CFDs, you can BUY and SELL the market, including crypto. For instance, if you think the price of Ripple will fall, you can open a CFD trading account and place a SELL trade on Ripple. If the price of Ripple does indeed decline, you will make a profit. On the flip-side, a price increase in Ripple would result in a loss to a trader.