Best exchanges and brokers to invest in cryptocurrencies 2022
Commissions from brokers and cryptocurrency exchanges reduce the trader's profitability. However, it is not the only factor to assess to choose and should not be exclusive. There are several elements that need to be weighed, such as available assets, trading platform, security of funds, etc.
For this reason, in this article we will look at the differences, advantages and disadvantages of each of these two mechanisms. In the same way, we will perform an analysis of the best existing brokers and exchanges to invest in cryptocurrencies.
Choosing a broker or an exchange to invest in cryptocurrencies?
Everything is born from a basic question, does our trading require leverage or is it more oriented to the strategy of buy and hold?
In case of a response in favor of leverage, it is most natural for the trader to decide to contract with a cryptocurrency CFD broker. Although there are other mechanisms for investing in cryptocurrencies (such as financial futures on Bitcoin and Ethereum), CFDs have the advantage that they do not expire and are more flexible when it comes to choosing the size of the position.
What are cryptocurrency exchanges?
On the other hand, if you want to invest in cryptocurrencies without using leverage, one of the best ways to do so is by buying physically (even if these assets are virtual).
For this there are cryptocurrency exchanges: they are platforms where they are bought and sold through the existing supply and demand. They establish the market price that serves as the basis for launching CFDs and other financial derivatives on cryptocurrencies (the value is established on the basis of the free market).
An exchange, strictly speaking, is a place for trading cryptocurrencies; the rest are parallel services that the platform can offer. In short, they are virtual spaces that allow access to the market. As time has passed (more than a decade ago Bitcoin, the first cryptocurrency, appeared) these trading platforms have evolved in security and services.
When buying cryptocurrencies for cash, that is, physically, it is necessary to have a place to store them. In this case the user must have a wallet.
Cryptocurrency exchanges usually offer this service, including cryptocurrency exchange (i.e. exchanging one cryptocurrency for another, not buying or selling using traditional money).
We have mentioned the quality and services of these platforms for a reason. Having the cryptocurrencies stored, they can be stolen through a cyber attack on the wallet. There have been some cases. In any case, today exchanges have enough quality and technology to protect their clients ' portfolios.
Investing in spot cryptocurrencies through exchanges has a number of advantages, such as lower risk of price fluctuation and a greater amount of financial assets available to trade. An exchange has a much wider cryptocurrency offering.
What are CFDs?
Its name comes from its acronym in English: Contracts For Difference. And in reality they are contracts in which price differences that may exist on a certain financial instrument (in this case the quote of a cryptocurrency) are settled at two different times, which coincide with the opening and closing of the operation.
These derivatives allow trading both long and short. That is, it is possible to buy a CFD to sell it later and get profitability with a rise in the market, because its price evolves the same as the quote (long trade). Or, you also have the possibility to sell the CFD first to buy it back in the future and make a profit with a decrease in prices (short trade or short trade).
CFDs are leveraged products, which means that you do not need to deposit 100% of the investment. It is possible to open positions only by depositing a percentage of the volume as margin call.
Financial leverage allows you to multiply profits, but it also represents a risk. It must be handled with skill.
It is for this reason that the maximum leverage for trading cryptocurrencies was limited by the European financial authorities (ESMA) to 1:2. That is, you will have to deposit a security of 50% of the volume of the position. This measure only affects European-based cryptocurrency CFD brokers.
In reality, the biggest risks of CFDs come from misuse of leverage and lack of broker security. For this reason, it is essential to hire the services of a cryptocurrency broker that is properly regulated.
The costs of brokers and exchanges: spreads and commissions
One thing to note is that, when investing in cryptocurrencies through CFDs, brokers usually do not apply trading fees; these are set in the form of spreads.
In CFD trading, the broker offers two prices, one to buy and one to sell:
- Bid: is the price that the broker is willing to pay in case the user wants to sell the CFD. In other words, it's the selling price.
- Ask: it is the opposite price, which the broker is willing to sell. In case the client wants to buy the CFD, he will have to pay this price.
As can be deduced, the Ask price is always a few points higher than the Bid price. This difference is called a spread and is charged at the time of opening a position.
A CFD trade involves a buy and a sell, regardless of the order in which it is made (depending on whether it is a long or short trade). One of them is done to open the position and the other to close it. That is, you will always have to assume this spread.
In contrast, exchanges to invest in cryptocurrencies apply fees. Depending on the volume of trades over a period of 30 days and whether the order is limited or market-based, the commission percentage (on the size of the trade) is set.
What are the best brokers and exchanges to invest in cryptocurrencies?
Below, we leave you a list with the best exchanges and brokers to invest in cryptocurrencies, along with a small analysis of each of them, where we tell you their main characteristics.
Coinbase is defined as a place to buy and sell cryptocurrencies in a simple and reliable way. It is one of the leading platforms, with a total traded volume amounting to more than 400 billion US dollars, more than 43 million registered users and more than 100 countries supported.
Offers secure storage, 98% of client funds are stored offline. In addition, it has insurance for. This fact, together with its good practices, make this Exchange one of the best to invest in cryptocurrencies.
To start buying and selling cryptocurrencies through Coinbase, all you have to do is register and open an account. This process only takes a few minutes.
In addition, Coinbase has an application for mobile phones and allows the scheduling of periodic purchases.
If you want more information you can access their website by clicking here.
It is one of the most popular cryptocurrency exchanges that exist. It was the platform that had the largest exchange in the year 2018 (during the Bitcoin boom and the cryptocurrency market, before the subsequent fall).
Binance offers the possibility to invest in more than 100 cryptocurrencies. It offers quality customer service, available 24/7.
Security is also present: its platform is CCSS and works with ISO/ICO 27007:3013 security protocols. The URL you use is secure.
Registering with Binance is a simple and completely free process. It also has a mobile application.
Kraken has also been rated as the most secure cryptocurrency exchange. There is no doubt that it is one of the best that exist today.
One of its features is the support it provides to the investor in digital assets, whatever their level. It offers guides, resources and has a quality support service.
Kraken's platform is itself designed to be used by beginner cryptocurrency traders and investors. This does not exclude the fact that it is optimized to serve the most experienced. It also has a mobile app.
One of its main objectives is to safeguard clients ' funds and privacy. To do this, it maintains a comprehensive protection approach: 95% of client funds are offline. Without the constant monitoring of the platform (7 days a week for 24 hours). All confidential information is encrypted and, in addition, there is a team of experts dedicated to testing penetration in any area of the system.
There is no doubt that Kraken is also one of the best exchanges to invest in cryptocurrencies.
Bitpanda is one of the largest exchanges in the world and was founded in 2014. It was recently considered a unicorn as it achieved a value of over 1 billion.