Crypto exchange or broker: where to trade cryptocurrency
The rapid rise in the value of digital assets has breathed life into crypto-trading, which was losing popularity. Crypto traders divided into two large camps, defending their position, where to best trade bitcoin, ethereum or litecoin - on a cryptocurrency exchange or in the MetaTrader trading terminal at the broker.
Let's look at the pros and cons of both cryptocurrency trading options.
The main difference between trading on a cryptocurrency exchange and at a broker
Each of the types of crypto-trading has its own advantages and disadvantages, but there is a fundamental difference between them, which must be understood by every trader.
A cryptocurrency exchange uses real cryptocurrency for trading, which is on its exchange account of the trader. That is, real digital coins are sold and bought, so to speak.
Brokers use CFDand the trader profits by predicting the price of the asset. Naturally, we are not talking about any real turnover of the traded cryptocurrencies.
Advantages of trading cryptocurrency on a digital exchange
- the trader is the physical owner of the cryptocurrency. Even if its price falls, it still remains in the owner's account;
- a large number of assets are available for trading on digital platforms. At the moment, we are talking about more than 2,000 tokens;
- arbitrage trading is allowed when trading on cryptocurrency exchanges. That is, if you have an account in the same cryptocurrency on two exchanges, you can make a profit due to the difference in the price of the asset on different platforms.
Disadvantages of cryptocurrency exchanges
- not all digital platforms are in the area of responsibility of financial regulators;
- electronic wallets of exchanges can be attacked by attackers, usually resulting in irretrievable loss of funds;
- The liquidity of assets is limited, especially during moments of sharp declines in the value of cryptocurrencies;
- In order to open a transaction, you need a counterparty;
- Most cryptocurrency exchanges only accept deposits and withdrawals of cryptocurrencies, preferring not to mess with fiat money. Even if there is an opportunity to deposit your account on a cryptocurrency exchange in dollars, it will be accounted in USDT - their digital equivalent;
- The trading interface of all exchanges is different and requires study at each exchange;
- there is no possibility to limit risks stop loss order.
Advantages of cryptocurrency trading at brokers
- the most basic advantage - the activity of the licensed broker is in the jurisdiction of a certain financial regulator. In case of any disputes, the trader can contact the regulator to solve the problem;
- there is no problem with liquidity - a deal with cryptocurrency will be guaranteed at the current price, there is no need to look for buyers or sellers;
- margin trading is available - a trader can open positions in a volume that significantly exceeds his available funds, due to the leverage;
- Deposits and withdrawals are made in fiat currency, eliminating the need for several successive exchanges and losses on the differences in exchange rates;
- Deposit for cryptocurrency trading is expressed in dollars, which is a kind of insurance against a possible collapse of the cryptocurrency market;
- The trader can use additional insurance - a stop-loss order, which automatically closes an unprofitable deal at a set price;
- The broker allows you to open sell positions in assets that are not available to the trader, providing them, as if on credit;
- a wider arsenal of technical tools for analysis, as well as the ability to use any trading strategies and robots;
- trading takes place in the terminal MetaTrader 4 or 5, the functionality of which is the same for all brokers;
- the verification procedure at the broker is somewhat easier than at the cryptocurrency exchanges, where the conditions are more stringent.
Disadvantages of brokers
- The list of cryptocurrencies available for trading is very limited. As a rule, these are digital coins from the top ten;
- the trader is not the physical owner of the cryptocurrency. If a stop-loss is not set and the price goes against the trader, it can completely nullify the deposit;
- Swap - commission charged by brokers for transferring position to the next day, can be both positive and negative. Negative swap in case of a long-term position can significantly reduce the amount of profit;
- The spread on cryptocurrencies at brokers is usually much wider than on cryptocurrency exchanges.
So where is it better to trade cryptocurrency - on the exchange or with a broker? There is no single answer. Evaluate all the advantages and disadvantages, and then make a decision that suits you, and let trading cryptocurrency bring you profit in any case.
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