A common question traders ask is what to look for when choosing a crypto prop firm. How do you distinguish a good prop trading firm from a bad one?
Well, in order to discover that, it is first best to understand the pros and cons of the best prop firms themselves, and then you can determine which factors work best for you. We’ll explore more below.
Index
Pros of Crypto Prop Trading:
Cons of Crypto Prop Trading:
Conclusion
Key Takeaways
Prop trading firms bestow generous starting account balances upon new traders starting their journey in crypto trading
There are pros as well as cons to crypto prop trading, with the former including access to advanced trading tools and the latter including the need to adhere to set rules
Traders deciding on a crypto prop trading firm must evaluate the trading rules, the size of the funded account, and trading conditions available
Choosing which crypto prop trading firms to partner with can be difficult. Most successful traders want access to the most starting capital and the trading conditions. In this article, we take a look at what differentiates crypto prop trading firms and how to determine which one is the best to start crypto trading with.
Crypto prop trading firms can seem like the perfect scenario for beginner and experienced traders. They offer prospective traders a chance to trade crypto using large amounts of capital provided by someone else. While the opportunity is immense, not all proprietary trading firms are created the same.
A prop firm provides generously funded accounts to new prop traders, but this privilege comes with responsibilities – and any serious crypto prop trader must be aware of the pros and cons that come with starting a prop trading account at prop firms.
In this article, we’ll tell you about the pros and cons of crypto trading at proprietary trading firms, as well as what you should be looking for when deciding which crypto prop trading firm to partner up with.
Pros of Crypto Prop Trading
Capital Efficiency and Leverage
The best prop firms present a compelling opportunity by offering significant starting capital that many individual traders may lack access to. This injection of capital empowers traders to allocate larger sums to their trades, potentially yielding higher returns from successful strategies. This financial advantage serves as a primary incentive for aspiring crypto prop traders.
A traditional proprietary trading firm is usually a financial institution focused on financial instruments like stocks, bonds, commodities, and derivatives using its capital rather than client funds. These firms often employ sophisticated trading strategies, algorithms, and technology to identify and capitalize on market opportunities. Crypto proprietary trading firms are different. They are specialized prop firms within the crypto market, focused primarily on crypto assets.
Leading crypto prop firms, like Breakout, for example, extend normal offerings by providing leveraged trading options on assets like Bitcoin,Ethereum, and dozens of altcoins. In addition to upfront starting capital, the availability of leveraged trades allows funded traders to make substantial bets in cryptocurrency markets. This could potentially lead to significant gains upon the successful execution of their trading strategy. This blend of ample capital and leveraged trading amplifies the appeal of aligning with the best prop trading firms, like Breakout, in the crypto market.
A strategic partnership with one of these prop firms not only fosters growth but also enhances the trader’s potential to thrive in the ever-evolving market.
Advanced Trading Tools and Technology
To develop one of the best funded trader programs, crypto trading firms strive to provide a prop trading arena fueled by the latest technological advancements, ensuring that the trading experience rivals that of any other centralized exchange (CEX) or trading platform. These cryptocurrency prop firms relentlessly pursue the integration of state-of-the-art innovations in the industry.
Crypto prop trading firms may provide access to advanced trading instruments, trading algorithms, and other financial instruments that individual traders might not otherwise have access to. By leveraging these trading instruments, traders within the best prop firms can gain a competitive edge, executing trading styles with precision and efficiency. This access to advanced resources not only enhances trading capabilities but also expands the potential for generating significant returns in the ever-evolving crypto market landscape.
In the case of Breakout, liquidity is sourced from the tier-1 centralized exchange, Bybit, offering traders the same level of sophistication found on an industry-standard trading platform with the best available conditions for trade execution.
Educational Resources
For crypto prop firms to generate profits, their traders must be equipped with the necessary tools for success. The evaluation process of a crypto prop trading account, where potential traders undergo testing in a simulated trading environment mirroring actual processes, proves to be an invaluable tool. It enables traders to experiment with their strategies in a risk-free setting before venturing into live trading.
A prospective trader receives demo funds and can test out various strategies that they would implement with a live account. With these virtual resources at their disposal, traders are allowed to engage in a hands-on exploration of diverse trading strategies, mirroring those they anticipate employing in live trading scenarios.
This demo environment not only provides traders with a rehearsal before transitioning to a full real-world account but also allows the prop firm to distinguish between skilled traders and those who may not be as proficient. Consequently, the firm can allocate its substantial starting capital to traders who demonstrate their aptitude and potential for success
Risk Management
Lone-wolf traders bear the responsibility of developing their risk management methods, a process that can be extensive and challenging, considering the multitude of factors to consider in formulating a successful trading strategy.
In contrast, a crypto proprietary trading firm typically institutes a well-established set of terms, rules, and risk management practices that traders are required to follow. This pre-established framework provides traders with clearly delineated boundaries within which they must operate.
Thus, the best crypto prop trading firms streamline the trading process for traders, allowing them to concentrate solely on executing trades and staying abreast of market trends. Rather than relying solely on themselves, these elite prop trading firms furnish individuals with the resources necessary for success.
These risk management protocols serve the interests of both the firm and the trader. Navigating them imparts valuable lessons that can refine the trader’s methods, laying a solid educational foundation that remains beneficial even after their tenure in prop trading concludes.
Best-in-class
Our crypto trading environment sources liquidity from one of the best centralized exchanges – Bybit. We believe this is a first-of-its-kind implementation of tier 1 exchange liquidity for an evaluation-based crypto product.
Cons of Crypto Prop Trading
High Risk
Many of the potential downsides of trading with a crypto prop firm mirror those of trading cryptocurrency independently. Crypto markets exhibit high volatility, which can be advantageous if it results in higher gains. However, this volatility, coupled with the largely unregulated nature of trading digital assets, introduces a level of risk unparalleled in traditional market trading.
Many prop trading firms and individual traders contend with the extreme volatility inherent in crypto markets. Catalysts that are difficult to control can precipitate downward spirals across the entire market. A prime illustration of this occurred with the Sam Bankman-Fried incident involving FTX at the close of 2022. Bankman-Fried hailed as the poster boy of crypto at the time, was ultimately revealed to be involved in fraudulent activities. The news and subsequent collapse of FTX and Alameda triggered a downturn in the entire crypto market, catalyzing the impending bear market.
Such events underscore the importance of considering factors like these when engaging in cryptocurrency trading.
Lack of Control
Many of the potential downsides of trading with a crypto prop firm mirror those of While the clearly defined rules of the best prop trading firms can offer benefits to traders, these same rules may also constrain them in certain situations. Traders who prefer the freedom to trade as they see fit may find the strictures of a prop firm to be confining, leading to a reduced level of control over their own actions than they desire.
Prospective traders will need to decide whether they want to join the top prop trading firms. They won’t be able to join if they seek complete freedom over their trades since a prop trading firm will require adherence to certain rules. Bearing this in mind, some traders value full autonomy too highly to relinquish it, while others appreciate the sense of community and support provided by the prop firm, ensuring that their trades are secure and yield consistent gains.
Profit Sharing
In exchange for furnishing starting capital, crypto prop trading firms receive a portion of any profits generated by their traders. In the case of Breakout, traders retain up to 90% of their profits.
This arrangement is likely appealing to most traders, as retaining 90% of crypto prop trading earnings on a $200,000 Breakout Account exceeds the profits from a considerably smaller, self-funded starting account. However, for traders who are already well-funded and comfortable risking the majority of their own capital, profit-sharing with a prop firm may appear to entail an unnecessary loss.
Traders with a large bankroll and years of experience may feel that they can achieve a higher return on investment (ROI) by deploying their capital and engaging in crypto trading independently. Once again, it’s up to the specific trader as there is no universally correct answer. It depends on factors such as a trader’s risk appetite, access to capital, desired resources, availability of a supportive team, and other resources at their disposal. These considerations play a crucial role in deciding whether to join the best crypto prop trading firms.
Conclusion
Ultimately, enrolling in the best prop trading firms presents numerous benefits, along with a few drawbacks that depend on the circ*mstances of the individual trader. However, for those seeking increased starting capital and willing to adhere to the firm’s in-house rules, the advantages of becoming a crypto prop trader generally outweigh the disadvantages.
When selecting a crypto prop trading firm, it’s essential to prioritize firms that offer substantially funded accounts and allow traders to retain the majority of profits generated. Additionally, it’s crucial to opt for a firm that supports the desired trading style, such as leveraged trades and utilizes state-of-the-art software and analytic tools. Moreover, selecting a firm that provides clear and understandable rules and risk management practices is paramount.
Funded trading presents a tremendous opportunity for knowledgeable traders to test their trading skills through the evaluation process and gain access to additional capital in the trading pit. While funded trading comes with its set of rules, as mentioned above, typically, the benefits outweigh the costs. With the bull market in full swing and Bitcoin approaching its all-time highs, there couldn’t be a better time to enter the game. It’s up to traders to weigh the pros and cons and make their own personal decision regarding whether they would like to join the game at the best crypto prop trading firms.
Trading Conditions
Breakout’s crypto environment closely simulates live markets, featuring dynamic conditions mirroring real-time changes in spreads and order book depth.
