As you might guess from the title, the purpose of this article is to compare cryptocurrency exchange platforms and the forex brokers that offer cryptocurrency CFDs on their trading platforms. Crypto trading conditions may seem alike on both trading venues, but there are minute differences between them. There are also aspects of their operations which are similar. Let us look at the areas in which they are alike as well as dissimilar.
What are the similarities between cryptocurrency exchange platforms and cryptocurrency CFD brokers? Their similarities border on the following points:
A) Same Methods of Analysis
It does not matter if you are trading a cryptocurrency on an exchange or you are trading a CFD contract on a cryptocurrency: you will use the same methods of analysis to derive your results. The same news that will send the price of Bitcoin up on the Binance exchange is the same news that will drive up the price of the CFD contract of BTCUSD on the RoboForex platform. A morning star pattern on the crypto exchange chart will have the same outcome on a crypto CFD chart. So the same principles of technical and fundamental analyses can be used to trade on both the crypto exchange platforms and the crypto CFD platforms.
B) Profiting Via Bi-Directional Trading
You can make money from cryptocurrency CFD trading by buying a contract when prices are rising, so as to profit from selling at a high price after buying at a low price. You can also sell high and buy low, when prices are falling in a process known as short selling.
On cryptocurrency exchanges, you can also profit from rising and falling prices, albeit in a different way. You can purchase a deposit crypto, hold it on the exchange as it gains value, then use it to purchase an altcoin it is paired with when prices are about to turn. You then hold the altcoin until it gains some value, then resell it for the deposit crypto. You rinse and repeat. Let’s use an example.
Supposing for instance, you want to profit from trading Binance Coin’s pairing with Bitcoin (BNB/BTC); how would you go about this process using the procedure we have described? You can buy Bitcoin from a third party or even on Binance using a Stable coin. If prices of BNB/BTC are falling, hold your BTC. When the pair bottoms out, your BTC would be worth more than when you bought it. You can then use it to buy BNB and allow BNB to rise. When BNB rises sufficiently to a resistance level, you can sell it for BTC and you repeat the process all over again. Thus you would have profited from rising and falling price scenarios.
In what ways do cryptocurrency exchange platforms differ from cryptocurrency CFD brokers? These points below highlight the major differences between cryptocurrency exchanges and cryptocurrency CFD platforms.
A) Trading on Margin
Majority of cryptocurrency exchanges do not offer margin trading (i.e. trading with leverage). The trader has to come up with the entire capital to be used to initiate trades on the exchange platforms. Although a few platforms such as Binance and PrimeXBT are starting to change the narrative in this regard (more on this later), majority of trading even on these platforms are not done on margin. This has its disadvantages and advantages. The advantage is that the non-use of leverage helps to curtail the risk that a crypto trader is exposed to in the highly volatile environment that cryptocurrencies present. The disadvantage is that the trader can also miss out on potentially bigger gains which could accrue from winning trades that are leveraged.
B) Crypto-only Transactions
Governments across the world have not hidden their hostility towards cryptocurrencies and exchanges where they can be traded. Look at Facebook’s Libra and all the dust it is raising among world leaders. As an instrument of government, the central banks of various countries regulate their countries’ banks and financial institutions. As a way of clamping down on exchanges, many central banks have instructed their regulated financial institutions not to offer banking services to exchanges. That is why most cryptocurrency exchanges (except a few in the US and UK) cannot accept deposits or withdrawals performed in fiat currency. To bypass these restrictions, these transactions are performed strictly in cryptocurrencies.
In contrast, cryptocurrency CFD brokers are platforms that primarily offer forex and other CFD assets, and are regulated entities with integrated payment gateways that include bank wires and other payment methods which are all bank-linked. As such, deposit and withdrawal transactions can be performed in fiat currencies.
C) Assets Traded
On cryptocurrency exchanges, the trader trades the actual cryptocurrencies. Therefore, every deposit, withdrawal or trade transaction (buy or sell) involves the exchange of actual cryptocurrencies. On cryptocurrency CFD platforms, the trader does not need to own the actual cryptocurrencies as these are not the assets traded. Rather, what are offered to traders are contracts based on the price differences between trade entry and exit. In other words, the traders trade “contracts” on cryptos, not the cryptos themselves.
D) Wallet Ownership
As a follow-up from the last point, the fact that the actual cryptos are traded on exchanges means that crypto exchange traders must have a wallet in the cryptocurrency they will be transacting in. This is required for deposits and withdrawals. In contrast, those who trade on broker platforms which offer crypto CFDs do not need wallets as there are no cryptos to hold, deposit or withdraw.
So now we have identified the similarities and differences between cryptocurrency exchanges and crypto CFD brokers, here are some examples of both trading venues and what you can expect to get from them.
Here are some of the prominent cryptocurrency exchange platforms:
Binance is the biggest cryptocurrency exchange in the world by daily trading volume. Originally situated in Hong Kong, Binance was forced to move to Malta in the face of pressure from regulators there. Binance has recently opened up margin trading on its platform. It offers the trading of hundreds of cryptocurrencies, and uses five main cryptos as its transaction currencies. These are Bitcoin, Ethereum, Ripple and a number of Stablecoins such as Tether and PAX.
How do you trade on Binance? The process starts by selecting the currency which will serve as your default base cryptocurrency. This is because cryptos are traded in pairs with other cryptos on Binance. It is your deposit crypto which you will use in trading another crypto, provided the pairing is in the Binance list of assets. Most traders use Bitcoin as the base cryptocurrency, so a Bitcoin wallet is a necessity. You can get a wallet from a third party provider, buy BTC from a third party and send this to the Binance exchange. Once the deposit transaction is confirmed, you can search for cryptos that are paired with BTC and start trading accordingly.
OkEx is a Malta-based cryptocurrency exchange that was founded by Star Xu. OkEx offers spot trading and margin trading of cryptocurrencies. Unlike Binance where there is a basic and an advanced interface, OkEx runs its entire retail trading cryptocurrency trade operations from a simplified interface, which is actually an all-in-one trade portal. OkEx offers three base cryptocurrencies for its trade operations: BTC, OKB (the platform’s native crypto) and Stablecoins (Tether/USDT and USDK). Deposits must therefore be made in these cryptocurrencies, and trading can then commence by choosing pairs that feature these three cryptos in pairings with hundreds of other coins.
OkEx also offers perpetual contracts and futures contracts on various cryptocurrencies. These are contracts where the cryptos are not paired, but are traded individually just the way you would trade commodities or index assets in the conventional markets. So for instance, you may have a contract such as BTC0726 or LTC0726, which are contracts for Bitcoin and Litecoin individual assets and which have a future expiration of July 26th. These contracts therefore test the trader’s ability to perform medium-term and long-term technical analysis on individual cryptos. These contracts can be set to expire weekly, bi-weekly or quarterly, or they can be traded as perpetual swaps.
Margin trading on OkEx allows trader to hold positions that are 3 times to 5 times greater than their capital. In other words trades can be performed at 3X or 5X margin. The margin amount depends on the crypto being traded. OkEx is therefore a cryptocurrency exchange that allows greater trading flexibility than Binance does.
BW offers Over-the-Counter (OTC) style trading of cryptocurrencies which allows trading of fiat and crypto pairs as well as regular cryptocurrency exchange trading. The exchange also lists newly tokenized ICOs and runs a token Launchpad platform. The exchange has its own native token known as BWB, and along with BTC, Bitcoin Cash, Tron, Ethereum and QC, forms the base cryptocurrencies listed on the BW platform. Every other altcoins is traded as a pairing with these base cryptos.
The OTC exchange features the opportunity to use fiat currencies such as the US Dollar, Euro, British Pound, Thai Baht, South Korean Won, Japanese Yen, Hong Kong Dollar and Chinese Yuan to purchase cryptos.
The main cryptocurrency exchange is quite simple and does not present features out of the ordinary. You will get the chart of the asset, the order book and trade order sections on the interface. Just like Binance and OkEx, you need to own a wallet of the base cryptos, purchase the cryptos either from the in-house OTC exchange or from an external source, before you fund your exchange account.
Coinegg is a cryptocurrency exchange which features as its base currencies BTC, ETH, EUSD and USDT. Like BW, it has an OTC exchange section which allows users to purchase cryptos using fiat currency. It also a regular exchange which allows users deposit in its base cryptos and trade these with their associated altcoins pairings.
Coinegg has most of the features found on the exchanges already discussed, so we will not spend too much time describing the exchange.
To be fair, there are many more other high ranking crypto exchanges: Kucoin, Poloniex, Sistemkoin, Huobi, BitMEX etc.
Most of them have the same features as discussed above. Although, BitMEX is to be singled out because it was one of the crypto exchanges that pioneered margin trading as well as trading of cryptocurrency futures. Margin on BTC trades is as high as 100 times the original capital used by the trader. All deposits are made using BTC and in addition to the conventional pairings of BTC/USD and other fiat-crypto pairings, each crypto can also be traded as a futures asset. These crypto futures are traded in just the same way as the crypto futures on the OkEx crypto exchange.
And Kucoin is a special exchange in the sense that there are lots of trading contests and giveaways, as well as token airdrops. A newsletter is sent out to subscribers each week, and traders can also sign up to receive special alerts on when tokens have been listed on the Kucoin exchange.
In this section, we highlight four promising crypto trading CFD brokers featured on our site with separate review pages. These brokers are unique in the sense that they offer high leverage trading on major cryptocurrency coins. However, caution is always advised when using high leverage for crypto markets because of their intense volatility.
RoboForex is a Belize-based forex and CFD broker that offers cryptocurrency trading with a leverage of 1:50. This is 25 times the leverage that is provided for cryptocurrency trading on EU and UK forex trading platforms. Over 20 cryptocurrency instruments are traded on the MT4, MT5 and proprietary R Trader platform, giving traders access to leveraged cryptocurrency trading on a regulated brokerage setting. The advantage of trading cryptos with RoboForex is that cryptocurrency trading is an everyday business. There are brokerages which suspend trading at market close on Friday, only for the market to gap to the weekly market open prices with lots of lost weekend trading opportunities. RoboForex has eliminated this and allows traders to place trades on BTC/USD, ETH/USD and other cryptos on Saturdays and Sundays.
Cryptocurrency trading on RoboForex does not end there. There is also the RAMM account facility, which promotes passive investment in an allocated account where a master trader can trade various assets including cryptocurrencies. Proceeds are shared between all participants according to the ratio of their stake in the RAMM fund. There is also the recently introduced CryptoIndexes product. This is an artificial market created by RoboForex, in which baskets of cryptos are pooled to form an index. This index can be then be shorted or can be traded long, tracking the overall market direction of the composite cryptos. Crypto.TOP is the index that was created to track the movement of BTC/USD, ETH/USD and XRP/USD. The mix is 1 unit of BTC, 10 units of ETH and 5000 units of Ripple. Crypto.ALT is a composite of 5 cryptos: 0.5 units of ETH, 2.5 units of LTC, 0.3 units of BCH, 400 units of Ripple and 0.75 units of Dash. These crypto indexes can be traded on the RoboForex MT4.
Crypto Rocket is the home of anonymous cryptocurrency CFD trading, either on desktop or web-based platforms. Android and iOS-based devices can also be used to trade cryptos on Crypto Rocket. This means that the trader does not need to undergo any form of identity verification. Just open the account, fund the account with Bitcoin or other accepted cryptocurrency and start trading with leverage of up to 1:500. The broker offers well-known MT4 platform, which provides different crypto pairs for trading such as BTC/USD, ETH/USD, LTC/USD, DSH/USD and many others.
Crypto Rocket has an interesting feature known as the Bitcoin Whale Alert. This alert is provided to inform traders about when huge amounts of Bitcoin have been moved from one exchange to another, or have been put up on an exchange for sale. Usually, such dumping of huge amounts of Bitcoin leads to increase in supply, which eventually leads to a fall in prices. So this facility helps traders know when they should be in a long position or short position.
FreshForex offers the trading of CFDs on cryptocurrency pairs (like BTCUSD) on its MT4 and MT5 platforms. Crypto CFDs are traded on Bitcoin, Leviarcoin, Ripple, Ethereum, Litecoin and Bitcoin Cash, all in pairings with the US Dollar. All crypto CFD trades carry a margin requirement of 1%, which is equivalent to a leverage of 1:100. Commissions are charged on crypto CFD trades and these range from $5.29 per Standard Lot for BTC/USD to as low as $1.63 per Standard Lot for BCH/USD. Cryptocurrency CFD trading hours are from Mon 00:05 to 23:58 (Eastern European time: UTC+2 in winter, UTC+3 in summer) to Sun 23:58 EET.
Apart from being able to trade several cryptocurrency CFD products, FreshForex also offers the opportunity to deposit and withdraw funds in Bitcoin, adding to the increasing list of brokers that are now offering this option. This option will require ownership of a BTC wallet.
PrimeXBT offers traders the opportunity to trade cryptocurrency CFDs using a trading platform that features other CFDs such as commodities and indices. The platform features fiat currency pairings with cryptos: BTC/USD, ETH/USD, EOS/USD and LTC/USD are the fiat-crypto assets that are featured on PrimeXBT. The amazing thing about this platform is the leverage offered: up to 100X the trading capital to trade BTC. There is also an interactive chart for all listed assets and the process of placing trade orders is highly simplified. The deposit currency is Bitcoin. You need to have a Bitcoin wallet and address. With the wallet and address, the trader can purchase BTC from an external source, and send same to the PrimeXBT account using the wallet.
Now that you know more about the differences and similarities between cryptocurrency CFD brokers and cryptocurrency exchange platforms, you may want to check a full list of crypto CFD brokers presented at FX-List.