Cryptocurrency, especially Bitcoin, has proven to be a popular trading vehicle, even if legendary investors such as Warren Buffett think it’s as good as worthless.
Part of cryptocurrency’s popularity is due to its volatility, since these swings allow traders to make money on the price moves.
For example, at the start of 2017, the price of Bitcoin broke through the $1,000 barrier. By the end of the year, the digital currency had reached nearly $20,000.
Almost a year later, Bitcoin was hovering around $3,200. But it sprung back to life in 2019, rising to more than $10,000 and then significantly higher — crossing the $60,000 level in early 2021. It touched an all-time high above $68,000 in November 2021, but has since been under intense pressure.
It’s this kind of price movement that has attracted traders looking to ride the waves to profit. While some traders like to own the currency directly, others turn to the futures market.
Futures may be an even more attractive way to play the volatility of digital currencies such as Bitcoin, because they allow traders to use leverage to magnify their gains (but also magnify losses). But futures involve a lot more risk in exchange for that potentially higher reward.
Robinhood is a great option for buying cryptocurrency directly.
You’ll also get to take advantage of Robinhood’s wildly popular trading commissions: $0 per trade, or commission-free, though you’ll still be paying a built-in spread markup on any trades.
And if you’re into more than just cryptocurrency, you can stick around for stock and ETF trades for the same low price.
Robinhood’s slick app makes trading so easy, though those looking for a full-featured trading experience will be disappointed.
Kraken is a cryptocurrency exchange that allows you to trade in dozens of different digital currencies such as Bitcoin and Ethereum, as well as emerging ones such as Cardano and Solana.
You’ll pay a 1.5 percent fee, or 0.9 percent for stablecoins, plus additional fees if you’re using a card and funding through a bank.
More active traders can benefit from a premium tier called Kraken Pro, where the fee range declines to 0.16 percent to 0.26 percent.
Kraken is not yet available to residents of New York and Washington state.
Binance is a specialized trading platform that allows you to buy and sell digital currencies, including the largest such as Bitcoin and Ethereum but also dozens of other much smaller coins, too.
In total, you’ll have access to around 60 cryptocurrencies.
The commission structure at Binance is low and only gets cheaper the more you trade.
Trading fees start at 0.1 percent of your trade value (i.e., $10 for every $10,000 traded) and fall from there, depending on your trading volume over the prior 30 days.
Coinbase is a specialized cryptocurrency-focused platform that allows you to trade digital currencies directly, including Bitcoin, Ethereum, Solana and Tether.
In total, you’ll have access to more than 100 cryptocurrencies.
You’ll also be able to store your coins in a vault with time-delayed withdrawals for additional protection.
The exchange’s commission structure is steep.
It charges a spread markup of about 0.5 percent and adds a transaction fee depending on the size of the transaction and the funding source, though its Pro platform is cheaper.
eToro offers cryptocurrency trading commission-free, but like many other brokers it charges a spread based on the cryptocurrency being traded.
You’ll pay a markup of 75 basis points for Bitcoin, but more obscure cryptocurrencies can run closer to 500 basis points, or 5 percent.
One major feature at eToro is CopyTrader, which allows you to follow and identify other top traders on the platform and copy their trades.
Be sure to do your research before committing to this strategy.
Whenever you’re selecting a broker, it’s important to consider all of your needs.
And for new traders in cryptocurrency, you’ll want to figure out whether you want to own the virtual currency directly or whether you want to trade futures, which offer higher reward, but also higher risk. - Bankrate