Why You Should Avoid Crypto Exchanges and Trade with Crypto Brokers Instead: Crypto Exchanges V Brokers

Without any doubts, cryptocurrency is one of the hottest topics in the world of finance and technology. More and more people are interested in buying, selling, and trading digital assets such as Bitcoin, Ethereum, and Dogecoin.

But how do you get started with cryptocurrency trading? Where do you buy and sell your coins? What are the advantages and disadvantages of different platforms?

In this article, we will explain the difference between a cryptocurrency broker and an exchange, and why you should trade with the former rather than the latter. We will also provide some examples of reputable crypto brokers that you can use to start your trading journey. So let’s get started.

1. What is a Cryptocurrency Broker?

A cryptocurrency broker is a platform that allows you to buy and sell cryptocurrencies at a fixed price, which is usually based on the market rate plus a small commission.

A crypto broker acts as an intermediary between you and the crypto market, and provides you with a user-friendly interface, customer support, and various payment methods.

Examples of cryptocurrency Brokers include:

  • eToro: eToro is a social trading platform that allows you to buy and sell cryptocurrencies, as well as stocks, commodities, and forex. You can sign up for eToro here
  • Coinbase: Coinbase is the leading crypto broker in the US, offering over 50 cryptocurrencies, high security, and easy-to-use interface. Coinbase also has a platform for professional traders, called Coinbase Pro, and a crypto debit card, called Coinbase Card. You can sign up for Coinbase here
  • Bitpanda: Bitpanda is a European crypto broker that offers over 70 cryptocurrencies, low fees, and multiple payment methods. Bitpanda also has a service called Bitpanda Savings, which lets you set up recurring purchases of your favorite coins. You can sign up for Bitpanda here

You can check more examples and learn the best in this guide: How to Choose the Best Crypto Exchanges and Brokers (Apps) of 2024: A Comprehensive Guide

Benefits of trading with a crypto brokers.

1. Convenience: You can easily buy and sell cryptocurrencies with fiat money (such as USD, EUR, or KES) using your credit card, bank transfer, or mobile money. You don’t need to worry about setting up a crypto wallet, finding a matching order, or dealing with complex technical issues.

2. Security: You can trust that your funds are safe with a crypto broker, as they are regulated by financial authorities and follow strict security measures. You don’t have to worry about hackers, scammers, or losing your private keys.

3. Speed: You can execute your trades instantly with a crypto broker, as they have access to large liquidity pools and can fulfill your orders without delay. You don’t have to wait for network confirmations, or compete with other traders for the best price.

4. Education: You can learn more about cryptocurrency trading with a crypto broker, as they offer educational resources, market analysis, and trading tools. You can also get support from their customer service team, or join their community of traders.

Pros and Cons of cryptocurrency Brokers.

Trading with cryptocurrency brokers have both disadvantages and advantages. So let’s discuss them to see what benefits and effects they offer.

Pros/Advantages

  • You can buy and sell cryptocurrencies with fiat money, such as USD, EUR, or KES, using various payment methods, such as credit card, bank transfer, or mobile money.
  • You can use a simple and user-friendly interface, which provides you with guidance and support. You don’t need to have a good understanding of how cryptocurrency works, or how to use a crypto wallet.
  • You can trust that your funds are safe, as brokers are regulated by financial authorities and follow strict security measures. You don’t have to worry about hacking, phishing, or human error.
  • You can execute your trades instantly, as brokers have access to large liquidity pools and can fulfill your orders without delay. You don’t have to wait for network confirmations, or compete with other traders for the best price.

Cons/Disadvantages

  • You have to pay a commission for each transaction, which may be a fixed amount or a percentage of the trade value. This may reduce your profit margin or increase your loss.
  • You have to accept the price set by the broker, which may not reflect the true market value of the cryptocurrency. You may miss out on better opportunities or incur slippage.
  • You have limited options for trading strategies and tools, as brokers usually only offer basic buy and sell orders. You may not be able to use advanced features, such as limit orders, stop-loss orders, margin trading, or futures contracts.
  • You have less control and ownership of your funds, as brokers hold your coins in their own wallets. You may not be able to access your coins if the broker goes offline, gets hacked, or shuts down.

2. What is a Cryptocurrency Exchange?

A cryptocurrency exchange is a platform that allows you to trade cryptocurrencies with other users, based on the supply and demand of the market. A crypto exchange acts as a marketplace where you can place buy and sell orders, and match them with other traders.

Examples of cryptocurrency exchanges include:

  • Binance: Binance is the world’s largest and most popular crypto exchange, offering over 200 cryptocurrencies, low fees, high liquidity, and advanced trading tools. Binance also has a range of products and services, such as Binance Earn, Binance Smart Chain, Binance NFT, and Binance Academy. You can sign up for Binance here.
  • Kraken: Kraken is one of the oldest and most trusted crypto exchanges, offering over 100 cryptocurrencies, high security, and low fees. Kraken also has a platform for crypto futures trading, called Kraken Futures, and a service for crypto staking, called Kraken Staking. You can sign up for Kraken here.
  • KuCoin: KuCoin is a fast-growing crypto exchange, offering over 300 cryptocurrencies, low fees, and high rewards. KuCoin also has a platform for crypto lending, called KuCoin Lend, and a service for crypto mining, called KuCoin Pool. You can sign up for KuCoin here.

You can check more examples and learn the best in this guide: How to Choose the Best Crypto Exchanges and Brokers (Apps) of 2024: A Comprehensive Guide

Drawbacks of trading with a crypto exchange

Some of the drawbacks of trading with a crypto exchange are:

  • Complexity: You need to have a good understanding of how cryptocurrency works, and how to use a crypto wallet, before you can trade on a crypto exchange. You also need to be familiar with the trading interface, the order types, and the market indicators.
  • Risk: You are responsible for the security of your funds when you trade on a crypto exchange, as they are not regulated or insured by any authority. You are vulnerable to hacking, phishing, or human error, and you may lose your coins if you forget your password, lose your device, or send them to the wrong address.
  • Delay: You may experience slow transactions and high fees when you trade on a crypto exchange, as they depend on the network speed and congestion of the blockchain. You may also face slippage, which is the difference between the price you expect and the price you get, due to market volatility and low liquidity.
  • Isolation: You may feel overwhelmed or confused when you trade on a crypto exchange, as they do not offer much guidance or support. You are on your own, and you have to rely on your own research, judgment, and luck.

Pros and cons of cryptocurrency Exchanges

Pros/Advantages

  • You can trade a variety of cryptocurrencies, including some that may not be available on brokers.
  • You can benefit from the market fluctuations and arbitrage opportunities, as the price of a cryptocurrency may vary across different exchanges.
  • You can use advanced trading strategies and tools, such as limit orders, stop-loss orders, margin trading, and futures contracts.
  • You can retain full control and ownership of your funds, as you are the only one who has access to your private keys and crypto wallet.

Cons/Disadvantages

  • You need to have a good understanding of how cryptocurrency works, and how to use a crypto wallet, before you can trade on an exchange.
  • You are responsible for the security of your funds, as exchanges are not regulated or insured by any authority. You are vulnerable to hacking, phishing, or human error, and you may lose your coins if you forget your password, lose your device, or send them to the wrong address.
  • You may experience slow transactions and high fees, as exchanges depend on the network speed and congestion of the blockchain. You may also face slippage, which is the difference between the price you expect and the price you get, due to market volatility and low liquidity.
  • You may not get much guidance or support, as exchanges do not offer much customer service or educational resources.

READ ALSO: How to choose The Right and reliable cryptocurrency Exchange Platform or broker

Crypto Broker vs Crypto Exchange

A cryptocurrency exchange is a platform while a crypto broker acts as an intermediary between you and the crypto market, and provides you with a user-friendly interface, customer support, and various payment methods.

Some of the main differences between cryptocurrency exchanges and brokers are:

  • Price: On an exchange, the price of a cryptocurrency is determined by the market forces of supply and demand. On a broker, the price of a cryptocurrency is set by the broker, who may charge a markup or a spread.
  • Commission: On an exchange, you usually pay a trading fee for each transaction, which may vary depending on the volume and liquidity of the market. On a broker, you usually pay a commission for each transaction, which may be a fixed amount or a percentage of the trade value.
  • Payment Methods: On an exchange, you usually need to deposit and withdraw cryptocurrencies, which may require you to have a crypto wallet and pay network fees. On a broker, you usually can buy and sell cryptocurrencies with fiat money, such as USD, EUR, or KES, using your credit card, bank transfer, or mobile money.
  • Interface: On an exchange, you usually need to use a complex and technical interface, which may require you to have a good understanding of how cryptocurrency works and how to use a crypto wallet. On a broker, you usually can use a simple and user-friendly interface, which may provide you with guidance and support.
  • Security: On an exchange, you usually are responsible for the security of your funds, as they are not regulated or insured by any authority. You are vulnerable to hacking, phishing, or human error, and you may lose your coins if you forget your password, lose your device, or send them to the wrong address. On a broker, you usually can trust that your funds are safe, as they are regulated by financial authorities and follow strict security measures.

Here is a comparison Table showing the key differences between cryptocurrency brokers and exchanges

FeatureCryptocurrency exchangeCryptocurrency brokers
PriceVariable, depends on market forcesFixed, set by the broker
CommissionNo, but trading fees may applyYes, usually a percentage or a flat rate
Payment MethodsCrypto only, requires a crypto walletFiat and crypto, supports various methods
InterfaceComplex and technical, requires knowledge and skillsSimple and user-friendly, provides guidance and support
SecurityLow, vulnerable to hacking and scamsHigh, regulated and secured by authorities
SpeedSlow, depends on network speed and congestionFast, executes orders instantly
EducationNo, requires self-research and learningYes, offers educational resources and tools
SupportNo, limited or no customer serviceYes, provides customer service and community
Differences between crypto exchange and broker

Should I trade on the crypto exchange or should I trade with the crypto broker?

Now the Question that arises is Should I trade on the crypto exchange or should I trade with the crypto broker?

Choosing where to trade depend solely on many factors including your experience, your preference and what currency you trade so choose what’s best for you.

But also I would suggest that you trade with the crypto broker, as it offers more convenience, security, speed, education, and support than the crypto exchange.

However, the final decision depends on your personal preferences, goals, and risk tolerance.

You should do your own research and compare the features and benefits of different platforms before you start trading.

Bottom Line

As you can see, there are significant differences between a cryptocurrency broker and an exchange, and each one has its pros and cons.

However, if you are looking for a convenient, secure, fast, and easy way to trade cryptocurrencies, we recommend that you choose a crypto broker over a crypto exchange.

There are many crypto brokers available in the market, but not all of them are trustworthy and reliable.

That’s why we have selected some of the best ones for you, based on their reputation, features, and customer reviews.

Here are our top picks for the best crypto brokers in 2024: How to Choose the Best Crypto Exchanges and Brokers (Apps) of 2024: A Comprehensive Guide

We hope that this article has helped you understand the difference between a crypto broker and an exchange, and why you should trade with the former rather than the latter.

If you have any questions or feedback, please feel free to leave a comment below. Happy trading!

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