What’s the newest asset class taking the investment world by storm?
Cryptocurrency. Lack of regulation is its biggest appeal. However, that may change, given a recent call for regulating this segment. Though it is a big hit with investors, especially because of the record run of Bitcoin, the most popular of all the digital currencies, there have been skeptics crying foul over the legitimacy of this investment class.
Quick look – Best brokers for cryptocurrencies
- Best for US traders – Coinbase
- Best overall – AvaTrade
- Best for choices – Plus500, Etoro, AvaTrade
- Best platform and tools – AvaTrade
- Lowest minimum deposit – Etoro
- Best for leverage – Plus500
- Best for customer service – AvaTrade
- Best promotion – AvaTrade
- What is cryptocurrency?
- Characteristics in the cryptocurrency market
- Why the cryptocurrency craze?
- Cryptocurrency terms
- Pros and cons of cryptocurrency trading
- Best overall for US-based traders
- Best overall for traders outside of the United States
- Best for number of choices
- Best platform and tools
- Best (lowest) minimum deposit
- Best for leverage
- Best for customer service
- Best promotion
- Compare top brokers
The mushrooming of cryptocurrency is proof that it’s moving toward mainstream acceptance. Apart from Bitcoin, there are a multitude of cryptocurrency options for traders such as Litecoin, Ethereum, Ripple, Bitcoin Cash, Dash, etc.
Trade Bitcoin Futures
If you are looking for a solid US based company to trade Bitcoin Futures, TradeStation is your best option. They offer low commissions, overnight daytrade margins, and more interest earned on your existing cash balance.
What is cryptocurrency?
Technically, cryptocurrency, also known as digital currency, are entries made in a digital ledger which cannot be tampered with unless they fulfill certain conditions. In other words, it is a peer-to-peer electronic cash system. The best part is, it is decentralized, with no server or central authority.
Cryptocurrency consists of each peer in a network of peers who have a record of the complete history of transactions and are privy to the balance of every account.
Ultimately, cryptocurrency is a medium of exchange created and stored electronically in the blockchain using encryption techniques with a two-fold purpose:
- To control the creation of monetary units.
- To verify the transfer of funds.
This image showcases how cryptocurrency works:
Cryptocurrency is a medium of exchange created and and stored electronically in the blockchain.
Characteristics in the cryptocurrency market
Those interested in trading in cryptocurrency should have a good understanding of the characteristics of the cryptocurrency market.
This market is decentralized, with no government or bank involved. This ensures privacy of transaction and elimination of transaction charges. What’s more, there is no capital limit with respect to the transactions.
The supply of cryptocurrencies are limited, as it cannot be created arbitrarily and will have to be mined by digital means. For example, Bitcoin founders have stipulated that only 21 million Bitcoins can be mined in total.
Why the cryptocurrency craze?
The cryptocurrency craze is reaching a feverish pitch due to several reasons, some of which are listed below:
- It ensures fraud-proof transactions, given that everything is done digitally, which disallows counterfeiting or reversal of transactions by senders.
- Settlement is immediate.
- Lack of transaction fees, with the miners currently being compensated by the network.
- Universal recognition, as it is not affected by interest rates, exchange rates, charges, etc.
In simple terms, block is like a page of a record or ledger. Blocks are files where data concerning a digital currency network is stored permanently.
It is the list of all transactions in a peer-to-peer network.
Mining is a computationally-intensive process the computers or nodes in a cryptocurrency network complete to verify the transaction record. In return, miners receive digital coins as compensation.
Computer system used for mining cyrptocurrencies.
Any computer that connects to a blockchain is called a node.
These are websites where cryptocurrencies can be bought or sold, or in other words, exchanged in return for other digital currencies or traditional currencies.
Initial Coin Offering, or ICO, is selling a new digital currency or token at a discount by a company to raise money. It is the means by which a new cryptocurrency venture raises funds.
A software program used to store private and public keys which are used to send and receive digital currencies and monitor their balance by interfacing with various blockchains.
Pros and cons of cryptocurrency trading
- Staggering returns. Going by the breathtaking rally in Bitcoin, you have the potential to get rich investing in digital currencies. From $968.23 at the end of last year, Bitcoin has rallied over 740 percent and has recently scaled the $8,000 barrier.
- The potential presented by the cryptocurrency as a preferred medium of savings, especially as fiat currencies, are exposed to geopolitical, economic and financial uncertainties and makes it a preferred investment choice.
- Not the best bet for investors seeking fixed returns, as an investor in the digital currency is not entitled to dividend income.
- Risk of being brought under regulatory purview
- Scalability of cryptocurrencies
- Hacking of cryptocurrency firms
- It’s possible to lose your capital.
Cryptocurrency can be traded through two ways. Actual cryptocurrency can be bought and sold at a cryptocurrency exchange. The digital currency as a speculative investment is traded as contract for difference, or CFD, through brokers.
A CFA is an tradable instrument that moves in tandem with the underlying asset and is a contract negotiated between the broker and its customer. Traders don’t actually own the underlying asset, but profits or losses when the underlying asset moves in relation to the position taken.
For our comparison purpose, only brokers were taken into account.
Best overall for US-based traders
If you’re a US-based trader, those no doubt that you have heard about Coinbase. It’s pretty large; the company has served over 200 million customers and handled about$150 billion in transactions.
Coinbase boasts great customer service, which is a huge win for customers of an online platform. And, your cryptocurrency – whether you’re trading Bitcoin, Ethereum, Litecoin, ERC20 token, or anything else – is protected. The platform uses vault protections, delayed withdrawals, and two-factor authentication. The best part? Your cryptocurrency is covered by insurance.
The desktop and mobile apps are simple to use, especially for first time traders. You have easy access to trends, charts, and can buy and sell with a few clicks. Set up recurring buys, too. The simplicity makes for a pretty seamless trading experience.
While their Digital Wallet service is free, Coinbase does have fees for buying and selling cryptocurrency. In the United States, Coinbase has a 4 percent base rate for all transactions. But exact payout, deposit, and transfer fees will differ depending on the amount and type of transaction.
Best overall for traders outside of the United States
AvaTrade has emerged as one of the overall winners among brokers offering cryptocurrency trading. It’s trading platform caters to various types of traders. AvaTrade also has additional trading tools such as live quotes and charts and it has carved a unique niche for itself in cryptocurrency trading.
The fairly affordable account minimum, competitive swap rates and the breadth of coins offered also makes it a preferred destination for investors looking to make some quick bucks through trading cryptocurrencies.
Best for number of choices
These are the digital currencies offered by brokers:
- Plus500 – Bitcoin, Ethereum/Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Ripple, IOTA.
- Etoro – Bitcoin, Dash, Ethereum Classic, Ethereum, Litecoin and Ripple
- AvaTrade – Bitcoin, Bitcoin cash, Ethereum, Ethereum Classic, Ripple, Dash, Litecoin, Monero, NEO
- ETX – Bitcoins
Best platform and tools
Among the brokers on our radar, most of them offer desktop, online, as well as web trading platforms.
Plus500 offers its proprietary trading platform, which comes in four versions: downloadable, web-based, app version and a version for Apple Watch Platform. The platform has a charting software, allows trading in multiple markets from the same screen and provides real time quotes.
eToro offers web and mobile trading platforms.
AvaTrade presents a wide-selection of platforms and also the option for automated trading. The trading platforms offered include AvaTradeAct, Metatrader 4, Mac Trading, Automated Trading, Web Trading and Mobile Trading.
AvaTrade looks like a clear winner this category.
Best (lowest) minimum deposit
Among the shortlisted brokers, the minimum deposit requirement is as follows:
Etoro is the clear winner in this category, as it has the lowest account minimum requirement.
Best for leverage
Best for customer service
Cryptocurrency trading happens 24/7, necessitating customer service around the clock. More importantly, live support is preferred over auto-attendants, given the complexities involved in trading digital currencies.
AvaTrade offers phone support and allows deposits and withdrawals through multiple avenues such as credit/debit card, wire transfer, e-payments, etc. The firm claims one-click functionality for buying Bitcoin or Bitcoin cash on its MT4 platform. Meanwhile, Plus500 does not have phone support, and instead, services clients through live chat and e-mail. Markets.com assists through in-platform live support and 24/5 help center.
Meanwhile, easyMarkets promises 24/5 support, the option to trade anywhere (mobile, tablet or PC) and market insight. UFX promises a personal trading coach and allows funding your account using Bitcoins.
AvaTrade scores highest in the customer service category.
- Etoro – Each new trader gets $100,000 in a demo account to practice trading
- AvaTrade – Up to $14,000 as launch bonus
- UFX – Offers a phone verification bonus of $50
AvaTrade emerges the winner in this category.
Compare top brokers
|Broker||Best Features||Spreads||Account Minimum|
||$0.003 over market for Ripple to $35 over market for Bitcoin||$100|
||1.13 percent for Bitcoin to 3.19 percent for Ripple||$400|