BTC Exchanges vs CFD Brokers

The Bitcoin and other cryptocurrencies have become extremely popular in the year 2017. The main factor behind this is rather simple – an enormous growth. Even though historically the Bitcoin rate has been fluctuating for hundreds of percent, this year the Bitcoin has grown around 15 times. Such a huge increase in a price have risen the interest from the various financial traders. Today we are going to take a look at two main places where one can trade bitcoins.

BTC Exchanges

Bitcoin and altcoin exchanges are pretty much similar to the stock exchange. These web services are letting people buy and sell cryptocurrencies for fiat (EUR, USD etc) currencies. In previous years, the main purpose of such exchanges was to allow people to buy bitcoins not only for the speculative and investment purposes but mostly for various transactional purposes: like buying illegal items online or depositing an account at . Later, these sites or the vendors themselves would come back to the bitcoin exchange to convert their BTCs to a more generally accepted type of money.

Advantages of BTC Exchanges

When it comes to trading, there is one main advantage of doing it through an exchange. You do get to physically possess the coins. This means that you can actually get the file out of the exchange, download it and store it securely.

Disadvantages of BTC Exchanges

Yet there is a number of disadvantages. First of all, the bitcoin exchanges have been crashing and going out of business before. Even if they are regulated, you still risk that your money can be stolen by the hackers. The funds at the bitcoin exchanges are not protected, unlike the funds kept in banks or regulated brokerage houses.

Besides that, you are unable to gear up. This means that you can only trade the funds that you have.

Finally, the trading software provided by the exchanges is still quite undeveloped.

CFD Brokers

If you are reading this article, you obviously know about the existence of the Forex brokers. Recently, most of these brokers have converted to FX and CFD Brokers, meaning that now they not only give you access to the currency market but also provide you with the stocks, metals and other financial instruments in the form of . The idea behind a CFD is that you are not buying or selling a financial asset on the real market, you rather purchase a contract to re-buy or sell the asset once you decide to, keeping the difference in price to yourself.

Cons of CFD Brokers

Most of the brokers do not physically buy the coins on the fly. This leads to a slightly different trading conditions, which are quite simple – there is a certain time expiration of your bitcoin contract. Many brokers will eliminate all of your cryptocurrency positions at the midnight, whether you are in a profit or in a loss. While it may not have a big impact on the day traders, for the positional traders it might be a show stopper.

Pros of CFD Brokers

Well, if you are a day trader, the advantages are quite obvious. First of all, you can get access to the financial leverage. Its size is incomparable to the FX pairs, yet it still allows you to trade between 2 and 20 times more money than you actually have, depending on the brokerage.

In addition to this, the commissions (or spreads) tend to be a bit lower than on a regular exchange, as a brokerage company can aggregate the prices from the different exchanges. This way you are getting the best possible buy and sell rates.

Also, CFD brokers are much more developed in terms of the trading technology, support services, and advisory, as trading is the core of their business.

The final thought

If you are looking to get a real possession of the cryptocurrencies for a long-term investment or simply to blow them up at some bitcoin casino websites – the exchange is the place to go. However, if you are looking for professional day trading of the cryptocurrencies – you have to opt in for a CFD broker.