What are the differentiating factors of a crypto broker and crypto exchange? Apparently, trading cryptocurrencies may seem to be a complicated venture not only due to the complex technologies involved in it but also due to the different opinions that different people possess for its practice.
Also, the different ways of trading crypto coins seem to make things all the more complicated, especially to a beginner.
However, it does not need to be like this, if only you know what you are getting into and with whom. Check out Best Ways to Short Sell Bitcoin.
In its most basic sense, cryptocurrency trading is an act performed by the investors that involves buying and selling of crypto coins.
It is typically done on the basis of the speculations made on the price movements of the digital assets and several tools are used for that matter.
If you want to trade crypto coins, there are two different ways in which you can do it. You may use either a cryptocurrency broker or a crypto exchange.
In order to make the right choice between the two, you should first know the difference between them very clearly.
Differentiating Factors of a Crypto Broker and Crypto Exchange
However, knowing just the basics is not enough to trade cautiously and efficiently in this highly volatile market.
In order to gain a sound knowledge you should know much more than the basics and delve much deeper.
Typically, whether you are a beginner or an experienced crypto trader, at the end of the day, what you will want is to have complete peace in mind.
You must have full confidence and know that your crypto coins are in safe and reliable hands, before, during and after trading, whether you choose a crypto exchange or a crypto broker.
Therefore, do not skip any part of this article to cut down on the reading time.
In simple terms, a cryptocurrency broker can be an individual or a firm that acts as the intermediary when you buy and sell crypto coins in different markets. The prices of the crypto assets in this regard are usually set by the brokers.
If you are a beginner, it is better to go with a cryptocurrency broker. They will offer the most suitable environment and a vast range of services to trade different major crypto coins such as:
- Ethereum and more.
Whether you exchange fiat currencies for crypto or the other way round, everything happens on the broker platform and not done directly by you.
There are several different advantages of using a crypto broker especially by ones who have just stepped into the exciting world of digital assets. These include:
- The prices are set by the broker which means you will not have to take the pain of doing a lot of research on your own to ensure a successful trade.
- A crypto broker is the best option if you especially want to buy or sell small amounts of crypto coins.
- It is very easy to use the services offered by a crypto broker which is a significant benefit for a beginner who seldom knows the intricacies involved in crypto buying and selling.
- The crypto brokers will also allow you to exchange cryptocurrencies in different fiat currencies including US Dollar, British Pounds, Euro, and Swiss Franc.
- It is easy to set up this established system since you do not have to deal with the complexities involved in blockchain.
- The crypto broker usually has more sophisticated technical instruments which will even allow leveraging or borrowing funds to boost your position kaming this much faster as compared to doing them on your own.
Most importantly, if you choose the right crypto broker, you will get adequate support till the deal is completed.
The crypto broker will also offer a wide range of services to facilitate a trade. This includes holding your crypto coins for you in theirs or any other third-party wallet till you buy or sell them off.
The fees and commissions charged by the broker is the most significant downside. It may be high which is why you should weigh all available options.
Moreover, if you happen to choose an unreputable broker or a fraudster you may lose all your money.
Choosing a Crypto Broker:
When you choose a crypto broker from a number of such brokers, you should make sure that you get all that you want from them. You should therefore look into some specific aspects that distinguish the best from the rest. These are:
- They must have proper credentials to signify their level of competence.
- They must also have top-of-the-class security systems.
- They must have a user interface that is intuitive and easy to use.
- The APIs should be top of the class.
- They must work in compliance with the national regulatory measures.
- They must support different fiat currencies.
- They must be easily accessible whether you use your mobile phone or a desktop computer.
In addition to the above, they must also have a reliable and knowledgeable customer support team available to answer your queries and clear your doubts 24/7.
In order to use a crypto broker platform, the process followed should be simple, fast, and easy to understand. Ideally, if you choose a reliable broker platform, all you have to do is:
- Sign up and register with them via your email address
- Comply with the account verification process
- Choose a payment method according to your convenience and
- Deposit fiat funds.
Once these steps are completed successfully, you can start buying and/or selling crypto coins.
A cryptocurrency exchange, on the other hand, is an online crypto trading platform.
You buy or sell your digital assets directly with other buyers and sellers without a broker.
You can trade fiat currencies or digital currencies at the prices prevailing in the market at the time of making a trade.
The exchange will however charge fees for each transaction made.
Ideally, a cryptocurrency exchange is suitable for the advanced users, investors, and holders of cryptocurrencies.
- The crypto exchanges are a more reliable, safer, and secure option than a crypto broker to trade your digital assets.
- A little bit of research will enable you to find a reliable one easily since there are a large number of cryptocurrency exchanges available out there.
- They have a more advanced yet simple interface that is easy for the users to understand.
- Most of the crypto trading exchanges charge quite a low fee as compared to that charged by a crypto broker. There are even a few that may allow making zero-fee transactions for specific crypto coins albeit with some terms and conditions.
In addition to that, most reliable and major crypto exchanges come with several crypto trading tools and bots that will allow you to make more educated trading decisions and make automated trading.
Most importantly, you can trade in larger volume on a crypto exchange than with a crypto broker.
If you do not know how an exchange works, you will find it quite difficult to trade on that platform.
Moreover, there may be a few specific crypto exchanges that may not have multiple or easy payment methods.
Choosing a Crypto Exchange:
Though it is almost the same factors to consider while choosing a crypto exchange as you would for a crypto broker, you should delve deeper to eliminate the risks from trading on a platform directly.
Before you start looking for a crypto exchange to trade your digital assets, you should have a sound knowledge about how they work.
Knowledge about the theory is essential before practicing it first-hand. Inexperienced and ignorant traders stand a high chance of incurring heavy and irrecoverable losses.
Research on the crypto exchange or exchanges that you feel are right for you.
This will help you to get familiarized with the trading platform and determine whether or not it is suitable for the crypto trading strategy you want to follow.
The other factors to consider includes:
- The fiat market and trading pair support
- The payment methods offered by the crypto exchange
- The jurisdiction and operation
- The user interface which should be intuitive, responsive and easy to use
- The scalability and user support provided
- The safety mechanism in place and
- The type, integration and functionality of the APIs that will help you in making automated trading.
And, you will be much better off if you go through the reviews on the specific crypto exchange so that you end up choosing one of the most reliable and reputed exchanges.
This will also protect you from falling prey to scams, hacks, money laundering and other non-acceptable activities that are common in the crypto world.
To start trading with a crypto exchange, you will need to first set up an account with them. The process to follow here are:
- Download the app
- Sign up in the website directly
- Type in your email address
- Set up a strong password.
The sign up process will only be completed when you click on the Verify Email option in the verification email sent to your inbox.
It is then you will be prompted to the KYC verification process. Furnish all the details required, which may vary from one crypto exchange to another but the basics remain the same.
It is only after that your account creation process will be completed.
Next, you have to deposit funds. You may do so by choosing any convenient payment option supported by the crypto exchange.
Make sure that the transaction information is submitted to the exchange for the necessary verification process.
Then you should buy the cryptocurrency but make sure that you know the current price of it beforehand.
The user interface of the crypto exchange will guide you through the process which however involves placing a ‘Buy’ order by clicking on the ‘Buy and Sell option’ on the dashboard.
Once the order is executed, you will then need to pay for the fee and other charges that may be applicable for your specific transaction.
Though lower than the crypto brokers, these fees can vary. Specific trading exchanges may also offer discounts up to 50% on the trading fees if you pay it via their native tokens, depending on their policies.
If you still find it difficult to make out which among crypto exchanges or a crypto broker is suitable for you to trade your digital assets, this simplified and summarized comparison table will make this much clearer and easier to understand.
- A crypto broker will be able to offer much deeper liquidity than a crypto exchange that offers average liquidity.
- The market depth of a crypto exchange is limited but that of the crypto broker is potentially much higher.
- Though there are exceptions, the customer support and service of a crypto exchange is much limited but that of a crypto broker is much more and experienced.
- The crypto exchanges usually come with features that are designed for the average users and beginners while that of the crypto brokers are meant for the more experienced and advanced traders to use.
- Ideally, the crypto brokers will allow fiat usage but as for the crypto exchanges it depends on their business policy as to whether or not they will allow such usage.
- When you choose a crypto exchange, you will be able to trade with a wider and more diverse range and more number of crypto coins while the crypto broker will not offer such an advantage since they deal with a low number of crypto coins.
- When it comes to spreads, that of a crypto broker will be pretty tight but in case of a crypto exchange it will be much wider and more flexible.
- If you are worried about the safety and security of your funds, it will be well protected when you use a crypto broker firm or an individual but it will not be the same if you decide to choose a crypto exchange for trading your digital assets.
Finally, most of the crypto broker platforms are regulated but when it comes to crypto exchanges, it will depend on the location of the exchange.
If you consider the deposit options, the crypto broker will offer you with more options such as a bank account, a credit card, a debit card, different types of e-wallets, as well as different types of crypto coins as well. And, usually there are no deposit fees
Also, when it comes to making withdrawals it is better to choose a crypto broker over a crypto trading exchange.
This is because you will not have to pay high fees to the broker. Usually, the withdrawal fee may be anywhere between 0% and 3%.
On the other hand, there are a few specific crypto exchanges that may charge you as high as 6% as withdrawal fees.
Trading crypto coins through an exchange is the most conventional way to do so directly but you can also do it through a crypto broker.
However, it is elementary that you know the difference between them and the pros and cons before using.