The Bottom Line
With the price of Bitcoin now consolidating after reaching new all-time highs in March 2024, it’s critical to choose the best online brokerage that matches your personal preferences and needs as a crypto investor. eToro’s unique socially-focused platform enables individuals to follow along with, copy the trades of, and learn from top-performing traders, while the availability of Smart Portfolios offers the opportunity to invest in a managed collection of cryptocurrencies based on a specific theme or strategy.
If you are a beginner looking to dip your toes into crypto for the first time, a beginner-friendly trading app with no fees or minimum, like Robinhood, may be a good place to start. Conversely, experienced traders looking to execute more advanced trading strategies in the crypto markets will appreciate what Interactive Brokers brings to the table with its selection of technical analysis indicators, charting tools, and comparatively low trading fees. Finally, if you are most interested in investing in crypto ETFs, Fidelity is your best choice as it offers a suite of Bitcoin ETFs for its customers.
Compare the Best Online Brokers for Trading Crypto
| Company | Fees | Account Minimum | Currencies | New Spot Bitcoin ETFs |
|---|---|---|---|---|
| eToro | 1% + variable spread, 2% crypto asset transfer fee | $10 (for U.S. residents) | 105 (total), 3 (in 47 U.S. states) | Yes |
| Interactive Brokers | 0.12% to 0.18% with no added spreads, markups, or custody fees | $0 | 4 | Yes |
| Robinhood | 0% | $0 | 15 (in 48 – 49 U.S. States), 35 (in the E.U.) | Yes |
| Fidelity Investments | 1% | $1 | 3 | Yes |
What Is a Crypto Broker?
A crypto broker is an online platform that enables traders and investors to buy and sell cryptocurrencies. Popular examples include Robinhood and eToro.
Unlike crypto exchanges, which are typically not regulated, online brokerages offering crypto trading support are generally regulated financial services companies, assuring investors that their funds are safe and that their investments are compliant with existing regulations.
Additionally, online crypto brokers are typically easier to use than crypto exchanges, which typically come with a high learning curve for first-time users.
How to Get Into Crypto Trading
Starting with crypto trading using an online crypto broker involves only a few steps. Let’s take a look at them.
- Choose a broker: Select an online brokerage account that suits your preferences and needs as an investor.
- Set up an account: Create an account with the online broker and deposit funds. In the case of online brokers, that will typically be dollars (or any other fiat currency).
- Buy crypto: Choose the cryptocurrencies you want to invest in after researching each asset to ensure you know what you are buying and are happy with the level of risk you are taking.
- Securely store your crypto investments: When buying crypto using an online broker, you are often given the choice between storing your investments with the broker or withdrawing them to a personal crypto wallet. Choose whichever option you feel more comfortable with after educating yourself about the pros and cons of self versus third-party crypto custody.
Pros & Cons of Crypto Brokers
Now, let’s take a look at the benefits and drawbacks of trading crypto using an online crypto broker.
Pros
- A familiar look and feel: Investors used to buying and selling securities via an online broker will feel more at home trading crypto on the same platform than on a crypto exchange.
- Regulatory compliance: Online crypto brokers are typically regulated, ensuring compliance with existing regulations of all investments made via the platform.
- Customer support: While crypto exchanges often lack effective customer support, online brokerages, especially large established ones, typically provide high-quality customer support.
Cons
- Limited control of funds: Holding your crypto assets with a broker means that you typically can’t access your cryptocurrencies to spend them online or deploy them on decentralized finance protocols.
- Limited cryptocurrency support: Most online brokers tend to only offer a handful of cryptocurrencies to trade, limiting the potential for investors to build a broadly diversified crypto portfolio.
Alternatives to Crypto Brokers
Crypto brokers provide an easily accessible and familiar avenue for trading cryptocurrencies. However, they may not be for everyone. Alternatively, you could also trade cryptocurrencies on centralized or decentralized crypto exchanges.
- Centralized crypto exchanges: If you are looking to earn investment income through staking or lending, creating an account on a centralized crypto exchange would be the more suitable option.
- Decentralized exchanges (DEXs): If you want to trade a wide range of digital assets and feel comfortable using a Web3 wallet, you could also trade crypto on decentralized exchanges (DEXs).
How to Store Cryptocurrency
As a cryptocurrency trader or investor, you have the choice between storing your cryptocurrency investments on an online trading platform or in a personal crypto wallet.
While the convenience of holding your crypto assets on an exchange or with an online broker may be appealing, storing your digital assets in a crypto wallet to which only you have access is widely considered the more secure option.
When it comes to crypto wallets, you have the choice between software and hardware wallets. Software wallets are applications you can download on your smartphone or computer to store your assets, while hardware wallets are physical devices used to store the private keys that provide you access to your crypto holdings.
The right crypto storage solutions will depend on your personal preferences and level of technical expertise, but holding your digital asset investment offline in a hardware wallet is arguably the safest option for most crypto traders and investors.
Frequently Asked Questions
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Crypto trading refers to actively buying and selling cryptocurrencies to generate regular trading profits. Unlike crypto investing, which involves buying and holding digital assets for the longer term, crypto trading focuses on short-term profits and typically involves following market trends and the use of technical analysis indicators to determine entry and exit price levels.
Cryptocurrency trading takes place on dedicated crypto exchanges or online brokerage platforms and can be done via the spot or crypto derivatives markets.
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When it comes to trading cryptocurrency, you have the choice between using a broker or a crypto exchange. If you already have an account with an online broker that supports crypto asset trading, it’s probably easiest to also use it to trade digital currencies and tokens. The familiarity, convenience, and ease of use speak for using a broker to trade crypto. Moreover, brokers are regulated financial services companies that provide a high level of security and regulatory compliance.
Crypto exchanges are typically less regulated and come with higher security risks, as they are popular targets for hackers looking to steal cryptocurrency. Moreover, they are typically a bit more difficult to use than popular online brokers, such as Robinhood and eToro. Having said that, crypto exchanges usually also provide additional investment options, such as staking and interest-bearing accounts, allowing crypto traders and investors to earn yield on their crypto assets.
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Crypto trading can be profitable if you have an in-depth understanding of what drives price movements in the crypto market and are able to apply technical analysis in an effective manner. Deploying adequate risk management strategies is also an essential piece of the puzzle to limit downside risk in this highly volatile market.
It’s important to note that while the elevated volatility of cryptocurrencies can create a potentially lucrative environment for traders, it can also lead to steep trading losses for unskilled traders, especially when leverage is being used.
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Spot trading in crypto refers to buying and selling actual cryptocurrency with immediate delivery as opposed to trading crypto derivatives, such as perpetual swaps, which enable you to speculate on the price of the underlying asset without actually owning it.
How We Choose the Best Brokers For Crypto Trading
Cryptocurrency traders aim to profit from price fluctuations, leveraging market analysis and trading strategies. However, cryptocurrency trading carries risks of extreme volatility, regulatory uncertainty, and security vulnerabilities. To help our readers find the best platform to meet their needs, we researched 26 online brokers and evaluated them based on a number of criteria critical to cryptocurrency trading, including fees, available crypto assets, trading and research tools, plus additional features.
