How a Crypto Prime Broker Benefits Investors

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Contributor, Benzinga
February 3, 2023

Are you considering entering the crypto market, but aren’t quite sure where to begin? Have recent market events left you conflicted about whether you should take your foot off the gas or jump into the asset class? Partnering with a crypto prime broker might help you decide, so read on to learn more about how doing so could benefit your crypto prospects. 

If you want to get the most out of your crypto investments, a prime broker can help you do just that. However, partnering with a brokerage firm is no small decision. Therefore, it is important to keep your investment goals front of mind when reviewing the benefits you can tap into by entrusting your portfolio to a brokerage.

Disclosure: eToro supports the following currencies: BTC, ADA, DASH, DOGE, EOS, ETH, LTC, NEO, XLM, XTZ, TRX, ZEC. eToro USA LLC; Investments are subject to market risk, including the possible loss of principal. T&Cs apply. *The bonus is available to Benzinga readers in the US for open states only. Served by eToro USA LLC.

What is a Crypto Prime Broker?

The concept of a prime brokerage is not new. Prime brokers have been a staple of stock markets for decades. 

In traditional investing, a prime brokerage is a “bundled package of services.” Naturally, a crypto prime broker is an entity that offers bundled services for cryptocurrency investors. 

At the most basic level, a brokerage facilitates the purchase and sale of cryptocurrency. A brokerage may offer some investor protection, but first and foremost these third-party entities simply and seamlessly facilitate trades.

A crypto prime broker offers additional services, beyond those of a general brokerage, with the best prime brokers providing services such as:

  • Asset management
  • Risk mitigation
  • Education 
  • Access to advanced tools
  • Feedback and guidance
  • Greater access to assets
  • Asset custody

Depending on the nature of your agreement with a crypto broker and the powers you extend to them, they may be authorized to trade your portfolio without consulting you directly. By granting a brokerage this agency, it can capitalize on fleeting marketing opportunities, to grow your portfolio, on your behalf.

Do Investors Really Need Crypto Prime Brokers?

A crypto prime broker can help clients navigate the rapidly evolving crypto market, distribute timely guidance, and tap into broader market liquidity. These are just a few reasons crypto investors should use a prime brokerage.

Top 4 Advantages of Prime Brokerages

Working with a prime brokerage can provide many advantages over investors who choose to take on the crypto market solo. By joining a top crypto prime brokerage, you can access benefits that include: 

1. Risk Management

A major advantage to working with a brokerage is the risk management it practices in the interest of your portfolio. When an experienced brokerage manages your assets, it helps to mitigate many risks found in the crypto sphere. You will have the opportunity to run any potential investment ideas by your brokerage, calling on its expert knowledge to guide your decision-making. This might help you avoid buying into fad cryptocurrencies or pump and dump schemes, which turn out to be devastating investment decisions. 

The built-in risk management of a brokerage is especially valuable during a bear market, when investors often chase unrealistic returns to offset losses. Speaking with a crypto broker can lead you to the objective mindset needed to tackle a bear market, sensibly. In recent months, the cryptocurrency market has been volatile. A skilled broker can help you get through the trying conditions, minimizing your losses.

Furthermore, brokers can assist you in taking calculated risks that will progress you towards your investment goals. 

2. Education on the Crypto Market

Has a new coin ever caught your eye, but you’ve stopped short of investing in it because you're not familiar with the asset? If this rings true with you, then you would certainly benefit from a crypto prime broker’s expertise. The right broker will not only manage your assets, but will also provide education on the market and new coins, and they will empower you to make better decisions and manage your portfolio more effectively. 

3. Greater Access to Assets and Liquidity

A prime crypto broker has the resources and financial channels at its disposal to expand your access to assets. A prime broker can connect you with crypto assets that match your risk profile.

When your funds are managed by a crypto broker you can capitalize on increased liquidity, which makes it far easier for you to trade in markets at the best possible prices. Whether you want to sell off an asset and cash out, or use your capital to purchase a different crypto coin, a broker can help.

4. Advanced Tools

A crypto prime broker can provide you with access to quality investment platforms and resources that turn out actionable intelligence, designed to better inform your decision-making. A prime example of a brokerage tool is analytics reporting software that sheds light on market trends and your portfolio's performance.

A prime broker can be a valuable partner as you get more involved in cryptocurrency investment. However, it is vital that you choose an experienced brokerage specializing in cryptocurrencies. 

A partner like Caleb & Brown offers 24/7 personal brokerage services and can help you navigate the complexities of the crypto market. Contact the company to learn more about its suite of services. 

Disclosure: ²Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts

Frequently Asked Questions

Q

How do prime brokers work?

A

Crypto prime brokers offer services such as facilitating crypto trades, providing clients with research and acting as a custodian of clients’ assets. Prime brokers also stay apprised of regulatory concerns and help clients stay compliant.

Q

Why is it called prime brokerage?

A

It’s called a prime brokerage because the firm offers a suite of different services as opposed to just facilitating trades. These prime services can help investors with everything from understanding their portfolios to deciding which assets are worth investing in based on the investor’s risk profile.

Q

How much do prime brokers charge?

A

Prime brokers typically charge basic fees for providing services such as conducting transactions and managing assets.

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