Who are brokers?
Broker is an intermediary between a seller and a buyer in the securities, precious metals, real estate or Forex markets. There are also insurance and ship brokers, but we will not talk about them. You can even make your cryptocurrency trading exchange platform.
In traditional markets, brokerage is regulated, trades are insured, and the broker is legally responsible for its activities. The broker charges a commission for its services.
Why are crypto brokers needed?
The crypto broker acts as an intermediary and guarantor of a transaction between a seller and a buyer in the digital asset market. Cryptocurrency brokers also provide clients with professional tools for market analysis and investment portfolio management.
A striking example of crypto brokers is an OTC platform with support for cryptocurrencies. OTC or over-the-counter is an over-the-counter market where trading is carried out according to informal rules.
Since 2009, bitcoin purchase and sale transactions have been carried out on specialized resources such as the bitcointalk.org forum or in person. After the emergence of centralized exchanges, this method of trading cryptocurrency became OTC or OTC.
In 2013–2014, OTC brokers began to appear, which acted as OTC intermediaries between buyers and sellers of cryptocurrencies. OTC platforms check exchange participants, guarantee the security and confidentiality of the transaction. With the help of such brokers, you can quickly exchange a large amount of cryptocurrency for fiat money at a fixed rate.
What services do crypto brokers provide?
1. Client asset management
The broker forms and manages the crypto portfolio in real time. The broker can carry out margin trading on behalf of the client and use other trading methods.
2. Consulting and analytics
The crypto broker offers clients analytical tools that surpass the functionality on exchanges.
3. Exchange trading training
Crypto broker clients can hone their trading strategies through trial trades and copy trading.
4. Crypto broker problems
Insufficient regulation. The cryptocurrency market remains poorly regulated, so non-governmental and government organizations cannot provide protection for client funds transferred to crypto broker management. Brokers themselves face difficulties in opening bank accounts.
5. Crypto exchange hacks. Even exchanges with billions of trading volumes cannot avoid hacks. Mt. Gox, Bitstamp, Bitfinex, Coincheck, and Bithumb are just a few of the major sites hit by theft of users' crypto assets. Brokers use crypto-exchanges to manage client funds, so they also run the risk of being victims of hacker attacks.
6. Low anonymity. Crypto brokers approach the KYC procedure stricter than exchanges. When registering, individuals must provide a scanned copy of the passport, and legal entities – corporate documents. This policy makes it easier for a broker to work with traditional financial institutions, but may be unacceptable for users who value anonymity.
7. Limited set of cryptoassets. Some crypto brokers do not work with assets like Monero, Zcash, USDT, ZCoin and others, referring to the KYC and AML policies.
8. Over-the-counter trading (OTC, over-the-counter) OTC broker acts as an intermediary between buyers and sellers of large amounts of cryptocurrencies.
Advantages and prospects of working with brokers
Unlike traditional brokers, crypto brokers offer more leverage. In some cases, it reaches 1: 1000 – one dollar of the client can turn into a thousand. Thus, a trader can significantly increase the volume of his transactions and profits with the same capital.
Brokerage services are also more diverse than those offered by exchanges. Crypto brokers provide analytical tools and charts to help clients better build investment portfolios and manage risk.
A crypto broker can work not only with cryptocurrency and fiat money, but also with contracts for difference (CFD), commodities, indices, precious metals, securities and Forex.
A crypto broker can provide liquidity on trading floors, therefore, it offers clients the opportunity to close orders on time. The broker also offers leveraged trading and other trading methods to “play” on falling prices. At the same time, the client can instruct the crypto broker to manage the portfolio at his discretion without prior approval of transactions or take an active part in the performance of each operation.
How to become a crypto broker
First of all, those wishing to create a brokerage platform Artur Azizov from B2Broker advises to decide on a trading platform and a provider of infrastructure solutions.
Starting capital is an equally important issue for a beginner crypto broker.
A crypto broker must determine the target countries, organize the company's activities, and also take care of marketing, financial reporting and other aspects.
