Trading crypto currencies has become very profitable this year, and everyone wants to get into the trend. Conventional trading involves buying your crypto currencies from an exchange, which could be physical or online-based. Regardless, this is just one way of going about it. The other way could be through an FX broker. These brokers already have the infrastructure set up for trading, as they already have trading platforms and the necessary infrastructure. Therefore, the match seems fitting. The question is which method is better between an exchange and an FX broker. We contend that FX brokers have a lot more to offer, and here are three good reasons.
Security for your cryptocurrencies
Since the crypto currencies are a virtual currency, they have to be stored in a virtual wallet, one either based online or installed on a computer or smartphone. These wallets are always prone to attacks from hackers, and some hackers have been able to successfully steal people’s crypto currencies in this way. The Mt. Gox incident in 2013 proves that it is indeed possible for hackers to take people’s crypto currencies from their wallets.
There are even hardware wallets you can use as you would a flash drive. These are even easier to lose considering how small they are. With cryptocurrencies, the private key is all that proves that you own what you claim to do. If you happen to lose it, then your crypto currencies are lost forever. This is another risk to your crypto currencies.
However, if you use an FX broker to trade the same crypto currencies, then you won’t be at risk any of these aforementioned risks. FX brokers only use CFDs to enable crypto currency trading, you’re not actually buying any . Yet, the profits exactly match those of an exchange, only with less risk to your assets. Therefore, there is no chance of someone stealing your crypto currencies or of you forgetting your private key.
When you trade crypto currencies through an exchange, you only get as many crypto currencies as you can buy with your capital. With an FX broker, though, they can apply leverage to boost the profits you can earn with the same capital.
For example, if you have $1,000 and a certain crypto currency is going for, say, $100, then you can only get 10 of them from an exchange. In case the value of that crypto currency rose to $120 in a week, then you would make a $200 profit. On the other hand, assume you made the same purchase from an FX broker offering 1:10 leverage. With $1,000, you could have bought $10,000 worth of the crypto currency, that’s 100 of them. If the price rose to $120, then your profit would be $2,000, yet you only risked the same $1,000 as a trader who went through an exchange.
As you can see, using an FX broker in crypto currency trading has the potential to produce much more profits. Of course, there are downsides to using leverage while trading, but it can still increase a trader’s profits.
Access to favorable quotes
Every crypto currency exchange in the world will have different quotes for different crypto currencies. Their value depends on demand and supply, and an exchange with higher demand will have a higher quote price. If you intend to buy or sell crypto currencies, you may find that your exchange may not have the friendliest quotes. Instead, with an FX broker they can trace their crypto currency CFDs to the best prices for their clients. Remember, they don’t have to trade the actual asset, just track the price changes.