A decade on from the launch of Bitcoin, cryptocurrencies, once a niche interest, have come to be traded widely all over the world. As a truly international type of currency that’s still largely free from regulatory entanglements, they have thrown up all sorts of new issues and opened up new possibilities, not least for brokers, which have already had to undergo a lot of changes this century as trading has expanded online. How have brokers coped with these changes and what do they now have to offer traders with a serious interest in these currency options?
Three types of trade
There are three principal types of trade involving cryptocurrency which you can access through established brokers. Firstly, you can buy and sell the currencies themselves. Volatile markets mean that there is quite a bit of money to be made from this, especially with a broker that offers good leverage (though this also means, of course, that there is good money to be lost). The second type involves spread betting and opens up more potential because it gives you the option of going short, so you can make money when the currency you are interested in decreases in value. The third type is the buying and selling of crypto CFDs, which create the potential for higher returns than trading in cryptos directly.
Alongside these, some brokers will let you use a cryptocurrency as your base currency, enabling you to utilize it when making any other type of trade they offer. The value of this approach remains uncertain due to exchange rates that can fluctuate rapidly, but it can be attractive to those who are determined to use cryptos as much as possible to push for more widespread social acceptance of them.
In order to make predictions that will enable you to profit from cryptocurrency trading, you’ll need to be able to read cryptocurrency charts. There’s a lot of variation in the quality of what brokers have to offer where this is concerned. Some have adapted the candlestick charts used for other trade types, which has the benefit of offering their clients something they’re already likely to be familiar with and which is therefore relatively simple to interpret in context. More useful, though they require many users to learn some new skills, are relative strength index (RSI) charts, which are increasingly available. This is an area where brokers are likely to improve their offerings over time, partly in response to increased demand. There is, at present, a shortage of educational material on learning to read cryptocurrency charts in comparison to the other learning resources that most of the big brokers provide, but this too seems likely to improve.
One of the big challenges for brokers trying to move into the cryptocurrency trading market is that because it isn’t centered on a particular geographical area, the market is usually open 24/7. By contrast, even online brokers tend to be open only five days a week or to have significantly reduced resources available to their clients at the weekends. Some are now expanding their opening hours to cope with demand in this area, but others have so far proved reluctant to change, probably because the overheads they would then accrue are not justified by the other trades available on those days and it’s risky for them to rely on crypto traders alone to finance the change.
Finding the right broker
As you will already understand if you’ve read this far, crypto trading is an area in which the differences between what different brokers have to offer are substantial. All else aside, the range of cryptocurrencies offered by each varies a great deal. You should be prepared to read a lot of forex broker reviews to find one that’s right for you. You shall, of course, also need to keep in mind all the usual concerns associated with choosing a broker, checking that those that interest you are properly registered and regulated and have a good reputation, as well as making sure that the websites and software they offer are secure.
Just to complicate matters, there are quite a few smaller brokers out there which have capitalized on the slow pace of change at the larger ones and have sought to win market share by specializing in cryptocurrencies. Although some of these are genuine and offer tempting deals, you’ll need to do your research carefully to make sure you’re not scammed. In particular, you should be wary about crypto ICOs, which are very vulnerable to collapse even when they have been set up with the best of intentions.
In short, cryptocurrency brokerage is far from perfect at this time but it’s getting better fast and traders have a lot to look forward to.