Interactive Brokers for Cryptocurrency: Is It Worth it?

If you like the crypto trading features of Interactive Brokers and want to right away, go for it and make an account for crypto trading or investing.

By enabling traders of well-known digital assets such as Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC), in addition to conventional investments, Interactive Brokers has made notable progress in the cryptocurrency sector. Interactive Brokers appeals to both new and seasoned investors because of its easy-to-use platform, which provides a consolidated method of handling many asset types. This post will explore the features, advantages and possible negative aspects of trading cryptocurrencies with interactive brokers.

Does Interactive Brokers Allow Crypto Trading?

Having launched this feature in September 2021, Interactive Brokers allows trading of cryptocurrencies. Through its partnership with Paxos Trust Company, customers can trade a range of cryptocurrencies. Among the cryptocurrencies available are Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH). Clients can access either four or eight various cryptocurrencies depending on their trading level. Interactive Brokers also provides trading in Bitcoin and Ethereum futures, giving extra options for investors.

Advantages of Using Interactive Brokers for Cryptocurrency

Interactive Brokers (IBKR) has emerged as a competitive player in the cryptocurrency trading space, offering several advantages that set it apart from traditional crypto exchanges.

Here are the key benefits of using Interactive Brokers for cryptocurrency trading:

• Regulated Environment: Operating under rigorous regulatory control, Interactive Brokers offers investors a safer trading environment compared to many cryptocurrency exchanges. This regulation helps reduce risks related to hacking and fraud.
• Low Trading Fees: With commissions ranging from 0.12% to 0.18% of the trade value, IBKR presents some of the lowest trading fees in the business. This is significantly less than most crypto exchanges' usual rates, which may go as high as 2.00%.
• Centralized Platform: Interactive Brokers clients can trade cryptocurrencies alongside various asset classes, including equities, options, futures and ETFs. This consolidated approach offers a consistent view of all investments and aids in portfolio management.
• Access to Real Cryptocurrencies: IBKR lets customers trade real cryptocurrencies instead of derivatives or exchange-traded notes (ETNs) since it debuted crypto trading in 2021. Investors looking to hold digital currencies directly will benefit from this access to actual assets.
• Wide Selection of Cryptocurrencies: IBKR supports trading several cryptocurrencies. Customers can trade popular coins including Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH). Users with Crypto Plus authorization can also access additional coins like Polygon (MATIC) and Chainlink (LINK).
• Advanced Trading Tools: Interactive Brokers' advanced trading tools and analytics appeal to both new and seasoned traders. Features like market scanners and risk management tools enable users to make informed trading decisions.
• Easy Fund Management: The platform offers smooth cash management solutions, allowing clients to quickly deposit and withdraw funds in multiple currencies. Users can also convert between cryptocurrencies and fiat currencies at competitive rates.
• Availability of Futures Trading: In addition to spot trading, Interactive Brokers allows customers to trade futures on Bitcoin and Ethereum.
• Mobile Trading Options: IBKR's mobile app lets users trade cryptocurrencies on the go, providing flexibility for those who prefer to manage their assets from their mobile devices.
• Support for Multiple Currencies: Clients can fund their accounts using different cryptocurrencies, such as Bitcoin and Ethereum, which simplifies trading for crypto fans by eliminating asset conversion into fiat currency.

Requirements and Limitations for IBKR Crypto Trading

Before you can start trading cryptocurrencies on Interactive Brokers (IBKR), there are specific requirements and limitations to be aware of. 

First and foremost, you must request the appropriate trading permissions. IBKR offers two options: Crypto Basic, which allows trading in four major cryptocurrencies (Bitcoin, Ethereum, Litecoin, Bitcoin Cash) and Crypto Plus, which provides access to four additional coins (Chainlink, Polygon, Uniswap, Aave), 24/7 trading and the ability to hold USD in your Paxos account.

However, not all countries are supported for crypto trading on IBKR, with the United States being eligible but most European Union countries excluded.

Additionally, if you choose Crypto Plus, you need to pre-fund your account with USD before placing trades.

IBKR also requires that at least half of your account activity be non-crypto related to maintain your trading permissions.

Lastly, while IBKR offers a selection of popular cryptocurrencies, the choice is still limited compared to dedicated crypto exchanges.

Interactive Brokers Crypto Fees

The commission rates range from 0.12% to 0.18% of the trade value, with a minimum fee of $1.75 per order. Importantly, this minimum is capped at 1% of the trade value, ensuring that larger transactions remain cost-effective.

Unlike many other platforms, IBKR does not impose additional spreads or markups on cryptocurrency trades, allowing for transparent pricing. This structure positions IBKR favorably against traditional exchanges, where fees can reach up to 2.00% or more. 

Crypto Trading Cost Comparison

How to Buy Crypto on Interactive Brokers

Here's a step-by-step guide on how to buy cryptocurrency on Interactive Brokers (IBKR):

1.     Open an Account: If you don't already have one, visit the Interactive Brokers website and open a trading account. You will need to provide personal information and complete the identity verification process.

2.     Request Crypto Trading Permissions: Log into the IBKR Client Portal. Navigate to the settings menu and select "Trading Permissions." Here, you can request permission for cryptocurrency trading, choosing between Crypto Basic (for Bitcoin, Ethereum, Litecoin and Bitcoin Cash) or Crypto Plus (which includes additional coins like Chainlink and Polygon).

3.     Fund Your Account: Before you can buy crypto, ensure your account is funded. You can deposit funds via bank transfer or other accepted methods. If you plan to trade cryptocurrencies, consider converting your funds to USD if necessary.

4.     Access the Trading Platform: Once your account is funded and permissions are granted, you can access the IBKR trading platform through desktop, mobile or web.

5.     Select Cryptocurrency: Use the search function to find the cryptocurrency you wish to buy. Select from available options based on your trading permissions.

6.     Place an Order: Click on the cryptocurrency you want to purchase, enter the amount you wish to buy in USD and choose between a market order and a limit order. Review the order details and confirm that everything is correct before placing your order.

Monitor Your Investment: After purchasing, keep track of your investment through the IBKR platform. You can view real-time price changes and manage your holdings alongside other assets in your portfolio.

Can I Transfer Crypto Out of Interactive Brokers?

Yes, you can transfer cryptocurrency out of Interactive Brokers (IBKR), but the process involves converting your crypto into fiat currency first. To do this, log into your IBKR account and navigate to the trading platform. Select the cryptocurrency you wish to sell and place a market or limit order to convert it into USD. Once the transaction is complete, go to the "Transfer & Pay" section in the Client Portal. From there, click on "Transfer Funds" and select "Make a Withdrawal." You can withdraw the funds via wire transfer, ACH or other supported methods. Keep in mind that IBKR does not allow direct crypto withdrawals.

Is Interactive Brokers Worth It for Crypto Trading?

In conclusion, Interactive Brokers offers a compelling platform for cryptocurrency trading with its competitive fees, regulatory oversight and access to major cryptocurrencies like Bitcoin and Ethereum. The ability to trade alongside traditional assets in a secure environment enhances its appeal. However, the limitations regarding direct crypto withdrawals and the need to convert crypto to fiat before withdrawal may deter some users. Overall, if you value low costs and a regulated trading experience, Interactive Brokers is worth considering for your cryptocurrency investments. It provides a solid option for both novice and experienced traders looking to diversify their portfolios.