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The Rise of Online Cryptocurrency Brokers

Generally speaking, there are two types of cryptocurrency traders and investors. You either do all of your trading on a cryptocurrency exchange and frown as soon as someone mentions the words “online broker,” or you’ve realized that there are benefits to using forex brokers when trading cryptocurrencies.

This is something that has been dividing the cryptocurrency industry for the past couple of years which is why we thought we’d try and settle the debate once and for all.

The reason being that the number of cryptocurrency brokers and the quality of their platforms is constantly increasing, and the benefits of using a broker is really starting to outweigh the disadvantages.

In other words, the arguments against using online brokers are getting less and weaker.

Cryptocurrency Brokers Are Constantly Upgrading

As mentioned, the world’s leading cryptocurrency brokers are constantly being updated and upgraded to fit the ever-increasing demand of their clients. And never before have we seen such substantial changes as when cryptocurrencies became mainstream.

You see, these online brokers are technically forex brokers that also offer CFD and other derivatives. However, the forex and CFD market has been rather slow the past few years, and the introduction of innovative services has been rare because they haven’t been needed. Customers were happy with the product and service they received and didn’t care to ask for more.

Until cryptocurrencies came into the picture, that is.

You see, when cryptocurrencies started becoming popular a few years ago, online brokers were quick to jump on the trend. However, this new market and all of these new tradeable assets required brokers to think outside of the box.

Plus500 was the first forex broker to launch a CFD on Bitcoin, and it didn’t take long before other brokers joined. Shortly after that, customers started demanding more versatile instruments, so the brokers started combining cryptocurrencies in pairs with both other digital currencies and regular fiat currencies. Eventually, plus500 first hat resulted in cryptocurrency indices being created, and so forth.

For each new service that the brokers launched, customers demanded more, and during the 2017 bull run, IQ Option decided on a bold move. After having optimized their cryptocurrency CFDs, the broker realized that they needed to do something more, so they launched a full-blown cryptocurrency wallet, a decision that would change the industry forever.

Shortly after IQ Option launched their wallet, eToro announced that they were working on their own cryptocurrency exchange, which brings us to the ongoing debate we mentioned earlier.

You see, some traders only trade cryptocurrencies on exchanges such as Binance, and they typically refuse to even consider using a broker for their trading. The only problem is that they usually don’t understand how technically advanced these brokers and their platforms are, and most of them don’t realize how much the industry has changed.

In an attempt to prove these traders wrong and highlight the benefits of trading with a broker, we’ve listed some of the advantages and disadvantages of using a broker instead of an exchange.

Advantages of Trading with A Broker

  • Versatility – Brokers tend to have multiple platforms as well as countless tools and services that no cryptocurrency exchange offers. Also, many brokers let you trade cryptocurrencies as derivatives or as if they were using an exchange.
  • Safety – Let’s face it, cryptocurrency exchanges are not very safe and they get hacked too easily. An online broker, on the other hand, has superior safety measures, and they’re constantly audited and reviewed by governments from all over the world.
  • Leverage & Margin – Few cryptocurrency exchanges today allow you to increase the exposure of your positions by using leverage, something that online brokers have been offering for years.
  • Access to other Markets – Maybe the biggest benefit of trading with an online broker is that they offer several markets. For instance, you can trade forex, stocks, cryptocurrencies, and commodities all at the same time. A cryptocurrency exchange only lets you trade digital currencies.

Disadvantages of Trading with A Broker

  • Increased Risk – We mentioned that leverage was an advantage and we’re sticking to that statement. However, leverage also increases the risk and your potential loss.
  • Harder to Invest – Not all brokers have an e-wallet or an exchange, meaning it can be more difficult to invest long-term.
  • Limited Selection – While online brokers offer cryptocurrencies in different formats (i.e. CFDs, indices, etc.) they often limit themselves to 10 or 15 assets at once. At the same time, some of the leading exchanges offer thousands of cryptocurrencies on the same platform.
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