Best Bitcoin Brokers
Every successful investor and trader should consider adding Bitcoin and other digital assets to a well-rounded and diversified portfolio. Read on to discover DailyForex’s picks for the best Bitcoin brokers (based on reviewing over 100 Bitcoin brokers on eleven criteria) so that you can choose the right one for you.
Bitcoin Industry Overview
Bitcoin officially launched in 2009 but was a pure retail phenomenon for many years until 2016 when its price began to increase exponentially. It formed a massive bubble which burst in December 2017 after just failing to hit $20,000. This dramatic increase created many new retail millionaires before the Crypto Winter of 2018 sent it spiraling down to below $3,100. It was a necessary development, allowed Bitcoin to mature, and attract institutional capital. Regulators around the globe warmed up to this new asset class. The Covid-19 pandemic of 2020 led to panic selling by retail traders while professionals dumped Bitcoin to meet margin calls for equity portfolios. This led Bitcoin down to a reaction low below $4,000 from where it launched a strong recovery. By the end of 2020 Bitcoin was again close to its all-time high price. Bitcoin remains volatile but also possesses tremendous profit potential. More companies have added Bitcoin to their balance sheets, banks have started to embrace it, and it has solidified itself as a viable store of value, often labeled digital gold.
While the mining of the first block of Bitcoin, on January 3rd, 2009, also referred to as the genesis block of Bitcoin or Block 0, started a revolution, the idea of digital assets dates back over a decade. Many companies floated ideas and implemented or used digital assets before the yet-to-be-identity behind Satoshi Nakamoto mined the now-infamous Block 0 of Bitcoin, which created a new asset class. Computer engineer Wei Dai and computer scientist Nick Szabo, the creators of Bitcoin predecessors b-money and bit gold, respectively, were early supporters of Bitcoin. Satoshi Nakamoto, per rumors but without official proof, mined 1,000,000 Bitcoin before disappearing from the public, handing over the project to Gavin Andresen, the lead developer at the Bitcoin Foundation.
Fast forward a decade, and an entire ecosystem exists around cryptocurrencies and digital assets, of which there are more than 7,000, and the number continues to grow. Following the 2008 global financial crisis, trust in the fractional reserve banking system diminished, debt continues to pose a significant threat, and many, especially those below the age of 40, sought an alternative to fiat currency. The demand for cryptocurrencies results in many exchanges vying for the title of the best Bitcoin exchange. It leads to improvements in their trading platforms and services to attract traders. Bitcoin remains the most valuable cryptocurrency, and most online Forex brokers start to offer trading in this evolving asset class, either via direct market access or through derivatives, most commonly contract for differences (CFDs). Investors and traders need to understand the difference between buying and selling the actual currency or doing so with a derivatives contract.
At first, most Bitcoin transactions took place on cryptocurrency exchanges, but Forex brokers expanded into the sector. Today, most offer Bitcoin CFDs, and some support various wallets to allow transactions of actual cryptocurrencies. Our review examined over 100 brokers to determine the best Bitcoin brokers for November 2020. The sector remains in its infancy but has matured to a level where trading has become more stable, price action respects technical parameters, and a growing number of professionals have entered the market. Companies, especially software companies, and banks started to embrace Bitcoin and company as an asset, and investors and traders have one more sector to analyze, trade, and generate profits. Bitcoin trading will continue to attract new traders and expand its market share among traded assets. With this list of our best Bitcoin brokers, you will have the infrastructure to add Bitcoin trading to your daily routine successfully.
Bitcoin Trading Regulation
As with all assets, regulation varies by jurisdiction, and in the case of Bitcoin and other digital assets, it may differ between regions within the same country if there is some kind of federalized political system. Since all our reviewed brokers provide exposure to the cryptocurrency market via CFDs, traders do not possess ownership of the underlying asset. Therefore, cryptocurrency regulation, spotty and changing as it may be, does not apply. All that matters is that the broker remains well-regulated and compliant with all rules, and CFD traders have nothing to worry over. It is important to note that those seeking to buy and hold, or hodl as the cryptocurrency sector refers to it, must do so by purchasing Bitcoin on an exchange, which requires a cryptocurrency wallet. CFDs are for trading purposes with a short-term approach only, due to daily financing costs on leveraged overnight positions. So, if you want to hodl, you must own the asset in your cryptocurrency wallet, but if you seek to trade and profit from the volatility in price action, you will do so with ease by using CFDs. Ensure you do so with a regulated broker, which was a criterion for all the Bitcoin brokers we reviewed.
What to Look for in a Bitcoin Broker?
While managing your assets from a competitive Bitcoin trading platform remains essential, there are several other factors to consider when evaluating a broker to ensure you deposit your capital into a safe, secure, and transparent environment.
Here are some attributes each Bitcoin broker must excel at:
- Regulation: Always make sure that you trade with a regulated broker. It does not provide a 100% guarantee that you will not experience well-hidden malpractice, but it does go a long way to ensure you remain protected against outright fraud and theft. Traders must avoid trading with an unregulated broker, irrelevant of how attractive an offer may be.
- Reputation: Regulation is not all that traders should rely on, as reputation is equally important. A Bitcoin broker that enjoys the trust of a growing number of traders and has been operational for over a decade points to a secure trading environment.
- Price: While the price of Bitcoin may appear the same across all exchanges, you must look at the difference between the bid and the ask price, known as the spread. It is how brokers earn their revenues, and there can be vast differences in the mark-up, which will directly impact your profitability. Select a broker with tight spreads so you can earn more from each trade. Market makers with commission-free trading usually cover the difference with a notably higher mark-up.
- Payment Charges: Most brokers waive deposit fees, but some apply internal withdrawal charges. Also, check the costs of your payment processor, as most payment options carry costs. Depending on your preference and circumstances, you may want to make sure your broker supports your payment processor. You may also face currency conversion charges if you transact in a currency that differs from your account base currency.
- Customer Support: You never know when something unexpected occurs, and trading with a Bitcoin broker that offers swift access to customer support can assist. Since cryptocurrency trading takes place 24/7, look for a broker with 24/7 customer support. Otherwise, it will be less beneficial than you may need it to be.
- Design & Ease of Use: The best Bitcoin trading platforms will feature a user-friendly interface, allowing traders to manage their portfolios with ease. The MT4 and MT5 trading platforms require upgrades, available at a cost, to achieve improved usability for trading Bitcoin. Some brokers offer them free of charge, while others have developed a proprietary trading platform. Do not be afraid to test them all as demo accounts to see the differences and find the one that suits you the most.
- Variety of Coins: All brokers offering cryptocurrency CFDs will provide access to the top four assets by market value. It is adequate for new retail traders to get started, but if you require broader access, the choice of brokers will narrow significantly.
- Leverage: Trading CFDs without leverage defeats the purpose of a derivative contract, but always use leverage together with good risk management. It remains the most beneficial trading tool and also the most misunderstood and misused one. Since cryptocurrencies remain highly volatile, the maximum is often much lower than on other assets. Trading with a Bitcoin broker granting maximum leverage of at least 1:5 will offer enough of a competitive edge.
- Demo Account: A demo account is usually available at all brokers. Use it to test the trading platform, or if you have an automated trading solution, run it in a demo version first. Many brokers create more favorable conditions in a demo account to attract deposits from new traders. Many believe a demo account is ideal for learning how to trade, more effectively conducted in a live trading environment with a small initial deposit.
- Initial Deposit: The smaller the initial deposit, the greater the flexibility of your financial management. Most brokers lowered their minimum to $100, some have it as low as $1, and others waive it altogether. Also, check about follow-on deposits, as most brokers require a more significant initial one and lower it after that.
Pros & Cons of Trading Bitcoin with a Broker
There are pros and cons of trading Bitcoin with a broker rather than at an official exchange. It often depends on your preferences.
The Pros of Trading Bitcoin with a Broker
- CFDs do not require a cryptocurrency wallet
- Regulatory restrictions do not apply
- More leverage on assets
- Broader range of payment options
- 24/7 customer service
- Trading tools, research, and education
- Ease of use from customizable trading platforms
The Cons of Trading Bitcoin with a Broker
- Higher costs due to mark-up in spreads
- Not suited for long-term investors and hodlers
- Fewer assets
How do Bitcoin Brokerages Work?
Most Bitcoin brokerages write derivative contracts, usually CFDs, that allows traders to profit from price action without owning the underlying asset. CFDs remain the best assets for traders, developed for short-term trading with leverage. Since traders do not own the instruments, there is no need to sign-up for a cryptocurrency wallet. Brokers earn their revenues via spreads, commissions, or a combination of both. Some offer direct investments into the asset and provide clients with a cryptocurrency wallet.
The Difference Between a Bitcoin Broker and an Exchange
There are three notable differences between a Bitcoin broker and an exchange:
- Brokers offer derivatives without ownership, while Bitcoin exchanges grant it. Therefore, the former caters to traders and the latter to investors.
- Spreads at Bitcoin brokers are usually higher.
- Brokers have fewer assets, often focusing on the top fifteen or less of the ones with the largest market capitalization. The best Bitcoin exchange will provide investors and traders with a broad selection of cryptocurrencies and other digital assets, allow for swift conversion between them, and grant superior liquidity, leading to improved trading costs.
Bitcoin Buying Fees
Before you can determine the best Bitcoin trading platform, make sure you evaluate the associated fees. They vary across brokers and consist of spreads, commissions, or a combination of both if you trade derivatives. Purchasing physical Bitcoin faces network costs and commissions, and depending on the payment processor, you may have to pay a percentage of the deposit amount.
Selling Short Bitcoin
One of the benefits of trading Bitcoin CFDs is that you can profit from price action in either direction. Short selling Bitcoin allows traders to earn from a decline in the price of Bitcoin, while they lose if the asset advances. The best Bitcoin brokers have no restrictions on trading strategies, granting complete freedom on how traders approach Bitcoin.
Bitcoin CFD to Hodl
Since a Bitcoin CFD does not offer ownership of the physical asset, and daily swap rates on leveraged overnight positions apply, it is not suited to hodl Bitcoin. Anyone interested in hodling should do so in a cryptocurrency wallet that can store Bitcoin after its purchase. Hodling derived from a typo on social media from the word holding, which caught on with the cryptocurrency crowd and is now part of the terminology.
Blockchain & Bitcoin
Many new retail traders often confuse the two or mistake them for the same product. The blockchain technology is not specific to Bitcoin, but rather a requirement for all digital assets to function. Bitcoin requires it, but there are many blockchain solutions, which do not require cryptocurrency assets, spanning other sectors. In plain English, a blockchain compares to a hyper-charged database. It can be centralized or decentralized, and various blockchains use different protocols. Bitcoin is a cryptocurrency that functions on the blockchain, where transactions are confirmed, ledgers maintained, and new Bitcoins mined.
The primary purpose of a cryptocurrency wallet is to store digital assets. It remains a requirement for anyone interested in owning the physical asset or to hodl Bitcoin and other cryptocurrencies. Bitcoin trading via CFDs does not require one since there is no ownership. There are many available, with two distinct ones to consider. A hot wallet is stored online, which remains vulnerable to hacking and theft. A cold wallet keeps Bitcoin offline, making it more secure. The former ideal if you need to make online transactions, so maintaining a small amount in a hot wallet is acceptable. The latter is the better alternative for hodlers. Several companies developed cold wallets, and you should keep most of your physical, digital assets in secure offline storage. Paper wallets fail to gain popularity and compare to gift cards. A generator will create a unique Bitcoin address that you can print and keep in a safe place. They are less convenient than a cold wallet but do not require hardware.
With the emergence of the cryptocurrency sector, new exchanges appeared. They allow investors to purchase physical assets delivered to their cryptocurrency wallets. All maintain hot wallets but store most digital assets in cold storage to protect them from theft. Many remain unregulated, some dominant ones went out of business after being hacked, and others appear across the world. Over the past decade, some more trustworthy and stable cryptocurrency exchanges started to form the nucleus of today's infrastructure for all digital assets. Over the next decade, more cryptocurrency exchanges may appear to cater to the growing demand, both from the retail and professional sectors.
Investors can often get improved pricing on exchanges, where broker mark-ups do not factor in. They charge a commission per transaction, and network fees apply. While some do try to comply with AML/KYC requirements, others maintain a pure cryptocurrency approach where privacy and anonymity remain superior to government and regulatory mandated rules and regulations. Others offer a hybrid approach, where investors can transact without account verification up to a specific limit. Trading with exchanges that operate in jurisdictions without proper oversight carries additional risks, and investors must weigh them carefully. The entire sector continues to evolve and mature, and more changes moving forward will reshape the current business model, bringing more in-line with well-established equity exchanges.
ICO & Token
An initial coin offering (ICO) refers to the public sale of a coin on an exchange. It allows investors to take part in a new project based on expectations that it will yield disruptive results. Some compare it to an initial public offering (IPO) of a private company that lists its shares in a public market to raise capital. Most legal experts, correctly, disagree with that comparison. While some similarities may exist, an ICO resembles crowdfunding for a project using blockchain technology. After Bitcoin kick-started the cryptocurrency sector, over 7,000 assets followed suit, creating an entire ecosystem around it. Early enthusiasts account for a significant part of the initial financing, but institutional capital plays a growing role in it. Investors in an ICO treat the asset as a store of value and generally do not intent to sell for a quick profit.
A token is the opposite and intended for transactions. It is programmable for a specific purpose and can be multi-functional if needed. They usually remain stored on a different blockchain, with Ethereum the dominant one. Many dominant projects use the ERC-20 token on the Ethereum blockchain, and some migrate to their blockchain following an ICO. There are many token sales as new projects come online and crowd-sale their vision directly to potential future users. Therefore, the cryptocurrency and digital asset sectors are well-positioned to expand to all sectors of life.
While the cryptocurrency sector is exciting and offers excellent opportunities for investors and traders alike, they do not come without risks. Regrettably, the industry especially in relation to little-known coins is quite rife with scams and fraud, as criminals seek to profit from the increasing popularity, especially among new retail traders who often follow the social media hype without conducting due diligence. The risk of hacking of cryptocurrency exchanges and loss of assets persists, and while frequency decreased, the threat endures. Safe storage and security of private keys remain additional risks and challenges. This is one reason many Forex and CFD brokers do not offer physical transactions of assets while relying on derivative contracts. High volatility also adds a significant trading risk.
Methodology (How We Test/Choose)
We reviewed over 100 Bitcoin brokers based on eleven criteria. Each research consists of over 2,000 words and lasted more than ten hours. Over 100 brokers were reviewed in-depth and from a trader's perspective, ignoring the marketing tactics deployed by some to confuse retail traders. Therefore, we sourced the list of our Best Bitcoin Brokers from more than 200,000 words of dedicated research compiled over 1,000 hours, ensuring the most comprehensive approach to identify the Best Bitcoin Brokers.
The eleven criteria used in our research are:
- Regulation and Security
- Trading Costs
- Asset Selection
- Account Types
- Trading Platforms
- Unique Features
- Research and Education
- Customer Support
- Bonuses and Promotions
- Account Opening Process
- Deposits & Withdrawals
What is the safest Bitcoin exchange?
It depends on your geographic location and trading preferences. There is no single Bitcoin exchange or broker that is necessarily “safest” for all.
Can you buy Bitcoin in a brokerage account?
Yes, a growing number of brokers offer Bitcoin, but usually as a derivative contract. Some also support Bitcoin auto trading as an option.
What is a Bitcoin broker?
A Bitcoin broker allows investors and traders to transact in Bitcoin and underlying derivative contracts. There are Bitcoin brokers who developed a dedicated Bitcoin trading app to support trading it.
Do I need a broker to buy Bitcoin?
No, you can do so on an exchange or peer-to-peer off-exchange.
Who is the best Bitcoin broker?
The best Forex broker to trade Bitcoin depends, once again, on your needs and preferences. All five that made our Best Bitcoin Brokers list are competitive choices worth considering.
How much is the Bitcoin fee?
The fees vary across brokers and exchanges but can include spreads, commission, and a network fee if you purchase the physical asset. Deposit and currency conversion costs may also apply.
How are Bitcoin fees calculated?
It is a complicated practice of trial and error, but cryptocurrency wallets do the math for you. Miners need to verify each transaction, and they seek the highest reward. Each block has a limited size, and for the inclusion of yours into the next block, you must pay a fee. Usually, the calculation is in Satoshi per byte. For example, if your transaction is 10,000 bytes and the current cost on the Bitcoin blockchain is 12 Satoshi per byte, you will have to pay 120,000 Satoshi. As the Bitcoin trading price increases, so do the fees in fiat currency value.
Why are Bitcoin fees so high?
There is plenty of competition, a growing number of transactions, which significantly outstrip the supply of miners. Scaling has become a distinct issue with cryptocurrencies.
How do I know if a Bitcoin broker is regulated?
Each broker provides its regulatory information at the bottom of the homepage. You can then check it against the database of the regulator and verify.