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Best choice for trading cryptocurrencies


Exchanges, wallets or Forex: what’s the best choice for trading cryptocurrencies?

There are a least in 5 different ways you can invest in cryptocurrencies nowadays. They are: Bitcoin ATMs, Bitcoin futures, trading cryptocurrency on exchanges, Forex trading and storing coins in wallets. Each of these methods has its pros and cons. The exchanges are periodically hacked, use of wallets implies loss of money on commissions and time on transactions, while on Forex there is a limited choice of cryptocurrencies and there are swaps. In the article below we will discusse the advantages and disadvantages of each option to help you make the best investment decision.

Exchange, wallets or Forex: where is better to trade cryptocurrencies

In 2017, cryptocurrency became the most profitable asset. True, the risks of cryptocurrency were also the highest among traditional and non-traditional investment instruments. Although cryptocurrencies are intangible, they cannot be seen or touched, the rush demand for coins has led not only to the emergence of dozens of exchanges, hundreds of purses and exchangers, but also to the emergence of a separate direction in the production of video cards for mining, specially produced for the issue of crypto coins. Forex brokers, who added a new non-standard instrument to their assets, did not stand aside. And though many Forex-traders still prefer classical assets (currency pairs, metals, securities), cryptocurrency also gradually gain their attention, first of all, by their profitability.

Cryptocurrency trading options

Today, a trader can buy a cryptocurrency almost at every step, starting from exchanges and exchangers, ending with Bitcoin-ATMs. And let the terminals offer only Bitcoins, buying BTC and then depositing it to a card will take a maximum of 10 minutes without the risk of hacking and verification.

A trader has several options for trading cryptocurrency:

The advantages and disadvantages of each of these options, we will consider further.

1. Bitcoin Futures

With the launch of bitcoin futures, stock investors with high capital have the opportunity to invest in cryptocurrency without the risk of losing money on unregulated exchanges. Initially, it was even supposed that the bitcoin rate would decline due to the dominance of the “bearish” capital, but in fact the launch did not particularly affect the price of BTC. The weak points of this investment option are the high volume of start-up capital and the tax issue – the recognition of Bitcoin as an investment instrument officially imposes tax liabilities. The second challenge – you need to understand the principles of operation of CBOE, CME and futures, as well as the rules of the US stock market. For regular private traders or long-term investors the principles of wallets or cryptocurrency exchanges are more transparent and understandable.

2. Trading on cryptocurrency exchanges

According to the Coin Market Cap website, there are more than 1,300 cryptocurrencies in the world, and their number is growing every day. Each cryptocurrency is quoted on at least one exchange, of which there are dozens. Large exchanges have a wide range of cryptocurrencies listed, which can be bought after registering the wallet on the exchange. You can also mine cryptocurrency on exchanges. For example, Criptoria Exchange offers the exchange and mining of more than 220 coins. Exchange forums allow you to exchange views on potential cryptocurrency movements.

Another advantage of the exchanges –  the possibility to make money on the difference in coins’ prices at different exchanges. It all goes down to buying a cryptocurrency on the exchange, where the rate on it is the lowest, transferring coins to another exchange, where the rate is higher, and selling. Though the amount of such coins is decreasing, and the transaction commissions “eats up” the profit, the possibility of earning still remains.

Disadvantages of exchanges:

3. Storage of cryptocurrencies on wallets

Wallets differ from exchanges by a relatively greater security –  they are less likely to be hacked, although this also happens. True, for a smaller risk compared to the exchanges, the trader has to pay an additional commission and lose on transaction speed (with online wallets). Someone prefers to work exclusively with wallets, not trusting the exchanges, and someone uses the wallets for long-term storage. Wallets are more a trading tool than an investment option.

4. Cryptocurrency trading with Forex broker

It differs from all previous Forex trading options in that it is not a real asset, but CFD (contracts for the difference in prices). A trader does not receive a physical right to own a cryptocurrency, but only earns on his prediction as to where the price will go in the future. But the essence of earnings remains the same: earnings on the difference between the purchase and sale price of an asset.

In comparison with exchanges or wallets, cooperation with a broker looks more reliable for several reasons:

The advantages of trading cryptocurrencies on Forex:

Despite the obvious advantages in comparison with the exchanges, Forex has several disadvantages:

Conclusion

You can not say which investment option is better or worse. Each is optimal for a particular situation:

Forex will be interesting to those who earn on intraday strategies and save on swaps, preferring a moderate risk. If a trader has already established cooperation with a broker, then he does not need to open an account on the exchange.

You can combine all options to diversify risks. Your are welcome to share your opinion in the comments: which version of cryptocurrency trading seems best to you in terms of risk, cost and efficiency.

Author: Kate Solano, Forex-Ratings.com

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