Breaking Boundaries: Exploring the World of Prop Trading Crypto
5 minutes read
21. 2. 2024
Crypto prop firms are on the rise, especially as we head into the BTC halving and the start of the bull market in 2024. You may be confused about what sets crypto prop firms apart from traditional prop trading or trading independently. Let’s take a closer look.
Crypto prop trading firms allow traders to access significant starting capital
There was a 900% increase in search queries for “prop trading” between 2022 and 2023
The best crypto prop trading firms allow traders to receive payouts based on their trading performance
Crypto prop trading firms offer lucrative opportunities to traders in the crypto market, but how do you know if you’re cut out to achieve success? Maybe you have experience in traditional financial markets but not sure if your experience translates to the crypto market.
In this article, we take a look at what differentiates crypto prop trading from normal trading and look at some of the pros and cons.
Crypto prop trading firms are different from traditional financial institutions in that they utilize their own capital to employ experienced traders to execute trades on their behalf. While normal trading platforms earn revenue through trading fees, prop trading firms offer proven traders access to substantial initial capital. In practice, however, the distinctions between regular trading and crypto prop trading firms are more than just firms giving traders their funds.
Let’s take a look at what differentiates a crypto proprietary trading firm, and how potential prop traders can leverage the opportunity.
Our crypto trading environment sources liquidity from one of the
best Tier 1 centralized exchanges. We believe this is a
first-of-its-kind implementation of Tier 1 exchange liquidity for an
evaluation-based crypto product.
One advantage for crypto prop traders is the extensive support and guidance provided by proprietary trading firms, resources that would otherwise be unavailable. An example of this is the evaluation phase aspiring crypto prop traders with track records must complete before receiving an activated trading account and access to the prop trading firm’s own capital. This advanced crypto prop trading evaluation process can prove invaluable, as it trains traders to follow effective trading strategies and prepares them to start trading crypto assets with a funded account by implementing risk management tools, adhering to trading rules, and simulating a live market environment.
In the early stages, the evaluation process places prospective traders in a simulated trading environment, where they must adhere to the same standards and risk-management tools that will apply when their full account is activated. Daily loss limits will be implemented, and traders must demonstrate their ability to stay within the acceptable loss range. They’ll also avoid prohibited practices and adhere to in-house standards at the crypto prop trading firm.
The evaluation process can prove invaluable for would-be individual traders at proprietary trading firms, as it trains them to follow effective trading strategies and prepares them to start trading crypto assets with a funded account.
It’s a great testing ground to determine how much starting capital the trader will be given.
Compare this to normal cryptocurrency trading, where the trader is simply thrown in at the deep end to either sink or swim. Crypto prop trading firms do more than just provide funded accounts.
Good traders are equipped with educational resources, a supportive community, and preparation through an evaluation process, enabling them to refine their skills as needed.
Yes, trading alone does provide more freedom initially. However, this freedom must be weighed against the increased risk that comes from being completely independent.
When you consider this along with the market opportunities that come from trading with more capital than you have access to, traders have a tremendous opportunity to benefit from the crypto market. A great proprietary trading firm provides traders with the resources to help them succeed. Not only is a normal crypto trader limited by their personal nest egg but they are obliged to shoulder all of the potential losses of their trading activities. They’re responsible for navigating tremendous market volatility on their own, with no outside help. While the high volatility of the cryptocurrency market can allow for outsized returns, it also radically increases risk.
For this reason, prop trading firms can provide traders an opportunity to receive payouts in the short term, but potentially expand their careers by keeping the majority of the risk on the side of the prop trading firm.
While it remains true that a trader can simply trade their personal accounts, by spreading the risk to prop trading firms and using additional capital, traders have a higher chance of building a successful career as trader that doesn’t falter after a few bad trades.
Prop trading and crypto prop trading firms, in general, are gaining visibility across financial markets.
There was a 900% increase in search queries for “prop trading” between 2022 and 2023 alone.
Crypto enables greater opportunities for traders than in traditional markets thanks to the 24/7 nature of the market and higher volatility.
This offers the potential for great profit with the right trading strategies and financial instruments but also poses risks of substantial losses.
Expect crypto prop trading to become more commonplace as traders become acquainted with the strategy of diversifying risk when trading in the crypto market.
Indeed, crypto prop trading is already surging. This is evidenced by Breakout’s shift from offering prop trading across various markets to exclusively focusing on crypto in early 2024. A decision was driven by heightened demand for its crypto prop trading services, which already comprised over 90% of the platform’s usage at the prop trading firm.
There is a great opportunity for traders looking to dive into the space. With resources at your disposal, an opportunity to use outside capital, and the ability to receive performance-based payouts, it couldn’t be a better time to take the leap at a prop trading firm.
Breakout’s crypto environment closely simulates live markets, featuring dynamic conditions mirroring real-time changes in spreads and order book depth.
