Choosing the Right Bitcoin Broker for You

As with any other commodity, there are different ways to go about buying and selling bitcoin. On one hand, a person can go directly to an exchange and do it themselves. This, however, raises the problem of having to manage multiple buy and sell orders in order to move large sums of bitcoin and regular monitoring to oversee existing limit orders.

Another option is to pay someone to do this for you. This post lists the major bitcoin brokers. The factors you should consider when picking a broker are also outlined.

OTC Trading

To begin, it is useful to know what over-the-counter trading is. Per Investopedia, over-the-counter trading is "a security traded in some context other than on a formal exchange such as the New York Stock Exchange (NYSE), Toronto Stock Exchange or the NYSE MKT, formerly known as the American Stock Exchange (AMEX). The phrase 'over-the-counter' can be used to refer to stocks that trade via a dealer network as opposed to on a centralized exchange."

Bitcoin and altcoins are easier to sell OTC than other securities, as bitcoin does not need any type of packaging or other specialized handling. With large buy or sell orders, it may be advantageous to go OTC for several reasons:

• An exchange may not have the liquidity on hand to accommodate a large order.
• It may take a long time for an exchange to settle a large order.
• If your order must be settled from a number of smaller orders, transaction fees could skyrocket.
• Exchange trading tends to be automated. This allows for quick price position movements, but also offers little protection from price shifts caused by demand/supply - which a large order on an exchange with limited liquidity is likely to trigger.
• Sell and buy prices can be negotiated.
• There is less fear that a partial order may go unsold/unbought.

OTC trading is recommended for those seeking to trade at least $250,000 in bitcoin, although trades less than this amount can also find benefit from OTC trading.

An OTC negotiation can be complicated, so a good brokerage firm is a must for those new to OTC trading. In exchange for adding a spread between the buy and sell price or charging a commission, brokerage firms connect buyers and sellers, help to negotiate the trade contract, and vet quotes.

Bitcoin Brokers

Bitcoin Market Journal has reviewed the top five bitcoin brokers. The findings of this research are:

BMJ Rating	Reputation	Location	Fees	Services
Genesis Trading 5/5 Regulated	5/5	USA	No fees. Genesis charges a buy/sell spread above the XBX Bitcoin Index to transactions. Minimum transaction: $75,000.	Out of Hours Trading
ItBit 4.5/5 Regulated	5/5	USA	0.10 percent per transaction. Minimum transaction: 25 BTC.	All USD funds insured.
Cumberland Mining 4/5 Regulated	4/5	USA	No fees. Cumberland charges a buy/sell spread to transactions. Minimum transaction: $100,000.	Advisory services
BitStocks 4/5 Regulated	4/5	UK	Advisory accounts: 25 percent of total profit. OTC Dealing Desk: Negotiable. Minimum transaction fees: advisory account -- L 25,000; OTC Dealing Desk -- L 5,000.	Advisory Research
Richfund 3/5 Regulated	3/5	China	2 percent on USD trades	Exchange, arbitrage, investment and incubation

Evaluating Brokers

When picking your bitcoin broker, it is important to consider:

• Reputation. When dealing with firms handling large amounts of your money, trust is everything. You must be able to trust that your money is safe and that the broker will work to get you the best possible deal. Questions you should ask are:
  • Who owns and operates the brokerage?
  • Is it regulated? If not, why?
  • What is its reputation from users and the industry? As bitcoin itself is not regulated, it is important that who you trust to handle your bitcoin business is of impeccable integrity. There may be limited recourse available if your million dollar sale goes bad.
• Fees. The fee charged should be reasonable. Great service costs money, but the fee should not be exorbitant. If you are an active trader, a heavy fee structure may quickly become unsustainable.
• Customer service. If you are investing large sums of money, you want to do it with someone that will promptly answer your calls and emails. Reviews should reflect speedy response times, effective problem resolution, and friendly dispositions among the response team.
• Time zone compatibility. If you are working with a brokerage whose working and trading hours are the time you are sleeping, you may not be able to quickly respond to market news or communicate with your broker without inconvenience. Thus, it is better to deal locally, unless you have access to the Asian or European trading hours.

Want to know more? Read Bitcoin Market Journal and learn to invest like a pro!