Cryptocurrencies have become one of the hottest investment instrument around the world. Every day some new headline related to digital currencies hits the market. In 2019, US regulators allowed Bakkt to launch a BTC backed futures exchange. Earlier this year, investing and trading cryptocurrencies got legalized in India.
Also, for the past couple of years, digital assets were gaining lots of popularity, but during this pandemic, it has become a sensation. Observing all these incidents, many new traders are looking for the best place to buy cryptos such as Bitcoin, Ethereum, Litecoin etc. They are searching for best and popular crypto exchanges for trading.
Limiting your trading to cryptocurrency exchanges might not be the best solution. In fact, crypto trading is better done using online brokers. Thus, in this blog, you will get to the answer to why you should prefer a broker instead of an exchange to buy digital currency.
Online Brokers Offering Cryptocurrencies
Before starting with the reasons to choose a broker over an exchange, let’s understand what an online broker is.
An online broker is a brokerage service which is offered online through top-most trading platforms. These platforms and brokers support a vast range of digital assets, as opposed to cryptocurrency exchanges that offer only digital currencies. For example, most brokers offer forex trading as their primary product but they also provide derivatives based on stocks and commodities to indices as well as cryptocurrencies.
Now, it’s time to look at the reasons to prefer a broker for trading your cryptos instead of an exchange.
Brokers are Regulated and Safe
Almost all the top online brokers are strictly regulated by authorities such as the CFTC (Commodity Futures Trading Commission) in the US and the FCA (Financial Conduct Authority) in the UK. This clearly means that the online brokers have to attain those high standards, and they are subject to constant and systematic audits and controls. Also, this makes them ensure that they include the highest level of customer-safety measures.
On the other hand, crypto exchanges are unregulated which means that they are not overseen by any third party regulatory body. This makes the only-crypto exchanges a bit unsafe for traders. They are also more prone to hacks and cyber attacks. Hence, online brokers provide you more protection than an exchange.
Large Cryptocurrency Pairs to Trade
An online broker offers a lesser amount of digital currencies as compared to an exchange. Most of the exchanges offer hundreds of digital assets to trade along with altcoins, which very few people trade. Thus, brokers focus on offering those crypto coins that are in huge demand rather than less profitable options.
Brokers usually provide their customers with crypto pairs such as BTC/EUR, ETH/GBP and other such which are rarely found on exchanges. So, although brokers have a small selection of cryptos to offer, they have the potential to get more ROI.
Better Use of Leverage
Another essential feature of online brokers is the use of leverage which helps traders in improving their exposure on each trade. This concept originates from forex trading which needs traders to use leverage to earn profits. Therefore, by using an online broker, you can have safe and regulated leverage for your trading which will increase the potential of profit on your each and every position.
Automated and Copy Trading
Most of the best online brokers around the world offer trading robots and other automatic trading solutions. This is a very commonly used technique in the most forms of trading except crypto trading on exchanges. Automatic trading may not be liked by everyone, but those who like it and have mastered it, know that it has incredible benefits.
There are some brokers which allow for copy trading. Through this, new and inexperienced traders copy successful traders which enhances their ability to earn profit. Hence, this adds another reason to why you should choose an online broker over an exchange.
Greater Liquidity Pool
Whether it is forex or digital currencies, every asset needs to have someone who will buy or sell them. More the people will buy and sell, the more liquid the exchange is considered. When a new crypto exchange comes in the market, it needs to open up all of its trading pairs order books to provide a platform for traders to trade. This distributes the liquidity from existing platforms which has a negative impact on the smaller exchanges that you might be trading with.
Online brokers here have the potential to avoid such situations by monitoring the market and acting on the instruction provided by traders to buy or sell cryptos based on an estimate or quoted value. By distributing sells and buys across the high liquidity exchanges, brokers get to increase their combined order book liquidity for a specific asset. This means that traders can trade cryptocurrency with maximum available liquidity.
It can be undoubtedly said that an online broker is best to choose for trading cryptocurrencies over an exchange platform. If you are looking for any platform to buy or sell cryptos then it is highly recommended doing thorough research and check for spread and slippage fees. Hence, look for a reputable broker that provides better market rates and has lower fees.
One such online cryptocurrency broker platform to buy Bitcoin and other cryptos in India is PCEX Member. Here, you can buy top cryptocurrencies such as BTC, ETH, XRP, BCH and multiple others in Indian Currency. It is one of the top crypto brokers to buy and sell Bitcoin providing its services in Estonia, Hong Kong, Singapore, Belarus, UAE, Japan, Thailand as well. By trading at this crypto broker, you get better market rates and lower fees which increases your profitability.