Crypto exchanges and crypto brokers are both online platforms where you can trade cryptocurrencies. It’s similar to a stock exchange or the currency exchange at the airport. However, the services provided can be very different, especially for someone who is not tech-savvy or who doesn’t have many funds to begin with.
In this article, we’re going to highlight the fundamental differences between the two and why, regardless of the increasing number of crypto exchanges, more than 10 million traders choose to use a crypto broker such as the LH-Crypto platform, whose solution we’re going to analyze in-depth.
What’s Wrong with Crypto Exchanges
A crypto exchange has a specific role to play in the market: act as an online platform where you can buy, sell, or exchange cryptocurrencies. If you want to trade these tokens for profit, these online platforms should be everything you need, right? Well, that’s not as easy as you may imagine.
While exchanging one kind of cryptocurrency for another is supported by many of the popular crypto exchanges, such as Binance or GDAX, there are many other factors to take into consideration.
Let’s say you’re just now joining the crypto world. You’re ready to put your money in and make your first trade. In traditional trading, there is a straightforward process to doing just this:
- Open an account on the platform of your choice
- Deposit the amount you want to trade in your desired currency
- And you’re ready to go
In crypto, however, things are different. While opening an account on an exchange is a similar process, you might have to open many accounts and do unnecessary transfers between them in order to make all your trades.
First of all, not all crypto exchanges allow for deposits in fiat currency. Actually, the most popular crypto exchanges at the moment don’t support any fiat trading pairs. If you don’t own any of the supported cryptocurrency you can’t enter the market. Not a friendly experience for beginners.
And this leads us to another issue, each crypto exchange decides for itself what tokens to list. There are rumors that the top-tier exchanges are charging between $1 to $2.5 million for a token listing. These are rumors because everything happens off the books. The communication between the token issuer and the exchanges is made on private messaging platforms like Telegram, and the money is usually transferred anonymously in cryptocurrency as a “donation”. With or without money, the exchange is still in charge. Bitcoin SV (Craig S. Wright’s forked version of Bitcoin) recently became delisted from a various number of exchanges with no clear reasons.
And to top it off, in an interview with Changpeng Zhao, the CEO of Binance, he stated that the crypto exchange is a private company who can list or delist any token at any time for any reason. Sounds more like a cartel than a fair trading platform.
Crypto brokers, more than an alternative
Crypto brokers are the foreign exchange dealers’ correspondents in the crypto world. The trading process on these online platforms is closer to the currency exchange at an airport, commonly known as OTC (over the counter) trading services. The exchange happens between the buyer or seller and a broker.
Thanks to various technological advancements, there is no actual counter and the platform features can range from the automatic fiat-crypto conversion on deposit to enhanced trading analytics.
After 2017 crypto hype, more crypto brokers appeared in the space. On a simple search, you can find a long list of recommendations: Swissquote, Dukascopy Bank, LH-Crypto, eToro, ThinkMarkets, XTB, FXOpen, and many more companies offering this type of service.
However, in this articles, we’re going to focus on three solutions that are distinctive enough to give you the opportunity to choose the one which fits your interests. Here they are:
- LH-Crypto, one of the projects whose ICO was successfully completed a year ago collecting $11 million. The result of that success is the implementation of a fully functional crypto broker platform currently used by over 10 million traders across the globe.
- eToro, while it’s one of the most popular brokers among retail traders, the addition of its cryptocurrency CFD offering is rather recent, being added in 2018. Its platform comes with more than 1,400 trading instruments but it remains on the high end of the range, being more expensive than other crypto brokers.
- XTB, could easily win the beginners’ choice of crypto brokers, its platform offering multiple unique features for those who are just getting into trading. Anyway, how tempting this sounds, its mobile app lacks essential features, such as syncing watchlists. If you’re not trading on the go, this could be a choice for you.
We broke down the crypto exchanges, and now let’s examine that analysis for crypto brokers:
- Include trading instruments for cryptocurrencies, Forex on fiat currencies, precious metals, major company shares, and commodities.
- All the settlements with traders are done via cryptocurrencies, such as Bitcoin, Ethereum, Litecoin, and many others.
- Support margin trading, which, in the LH-Crypto case, it allows for deals with sums 100 times larger than your account balance for exponential growth.
- Allow earning profit regardless of the market’s movements (growth or fall in price) by selling CFDs (Contracts for Difference).
CFDs are financial derivatives made in the form of futures contracts. You essentially, as a trader, don’t need to actually deal with the underlying asset, the cryptocurrency transfers, which can go wrong in so many different ways. The actual trade is your prediction of the asset’s future value settled in cash payments. You, as a trader, only worry about putting the price difference in your pockets. This system works for any type of asset, anything from gold to soybeans to various fiat currencies in the FOREX market. It’s no surprise to see it being successfully applied to cryptocurrencies.
What are the Advantages of using a Crypto Broker?
1. In times of market inefficiency, you can still reap opportunities
A broker-dealer can provide traders visibility of these price differences, commonly known as arbitrage trading. In traditional markets, they are exclusively accessible to hedge funds using sophisticated automated trading systems. Anyway, LH-Crypto offers the same opportunities with cryptocurrency trading for any type of trader joining their platform.
2. Trading with more capital than a trader actually has
That’s right. CFDs are popular in trading due to their high-leverage opportunities. This means that with a 10:1 leverage you only need $100 to open a position worth of $1,000. While on a crypto exchange you are chasing crumbles, on a crypto broker you can earn considerable profit even on small price movements. LH-Crypto supports up to a 100:1 leverage.
3. Not just cryptocurrencies
LH-Crypto in particular places itself as the one-size-fits-all tool in its field. While they specialized in cryptocurrencies, their trading instruments include much more than that. More than 100 popular contracts are available:
- Forex market with fiat currency pairs
- Major company shares
- Contracts for precious metals
- Market indices and much more
4. Demo account
You don’t even have to risk your own funds to gain experience in trading — just try the LH-Crypto platform. This type of account is absolutely identical to real trading accounts. While deposits or withdrawals are not allowed, all the trading features in the listed markets become available to you upon registration with no commission or service charge.
5. FIAT accepted!
While most of the crypto exchanges don’t allow fiat deposits, most crypto brokers do. LH-Crypto not only supports a wide range of currencies into its platform, but it also comes with extra features to make account management seamless. One of these features is the automated crypto-fiat conversion. If you replenish your cryptocurrency account in fiat, the funds will be automatically converted to the selected cryptocurrency.
How to bring value to a community of traders?
LH-Crypto comes with more of such features. CFDs trading for crypto comes with a wide array of technology and risk management instruments. Not only comparable with the ones included in the crypto exchanges, but even more advanced. We’re talking about a technology that has been perfected after decades of serving the trading for other markets, including the FOREX one.
Advanced charting tools and analytical support offered by brokers help to make informed investment decisions and protect you from devastating losses… if you know how to properly use them.
LH-Crypto takes crypto education seriously, as serious as can be when it’s brought to you by crypto clowns! Their goal is to teach you the serious stuff in a fun way. People who are not tech-savvy are sometimes scared by crypto in general. Watching some of their videos will prove to you that everyone is welcome.
The friendly clowns Larson and Holz are well versed in cryptocurrencies. While the clown show has the goal of explaining the fundamentals, their daily videos of market analysis are increasing in popularity amongst traders of any levels, including professional traders.
If you want to join the crypto game you’ll have to use one of the two choices: an exchange or a broker. Apparently simple, this choice might be in your benefit or toss you into an everlasting process of trying to solve all the various hoops you’ll have to go through.
You can try to figure out your own way between fiat-crypto conversion, crypto wallets, trading pairs, and so on, or you can register for a trading account with access to all of the markets and the possibility of closing deals for an amount that is dozens, or even hundreds of times bigger, in case of LH-Crypto, than your account balance. That’s what trading on a crypto broker sounds like and more than 10 million traders are already taking advantage of. Would you like to join them? A demo account costs you nothing, and a pro account can earn you millions!