Crypto Exchanges vs. Crypto Brokerages - Which is Best?
Cryptocurrency exchanges and brokerages make up the crypto market and are two distinctly different types of trading platforms which both have similarities to each other and some major differences.
While some users prefer to use brokerages others prefer to use exchanges, and there are many new traders that are still getting to grips with the difference between these two types of platforms and the advantages of using one or the other.
This guide helps to break down the difference between crypto exchanges and crypto brokerages and looks at different benefits of using each one and the advantages of using one over the other, starting with a look at the differences between brokerages and exchanges and then breaking down the advantages of each and then giving a few examples of some of the best crypto exchanges and best crypto brokerages on the market in 2021.
What’s the Difference Between Exchanges and Brokerages?
Crypto exchanges are used to exchange coin A into coin B though can be bought directly using a range of funding sources, which depending on the exchange, can include debit or credit cards and wire transfers, accepted methods should be reviewed to choose one that accepts your desired source.
Exchanges can be centralized, decentralized, or custodial/non-custodial yet no matter which they are, each share common principles, some of the most popular ones include Coinbase and Binance which are licensed and regulated by officials to ensure fair and non-manipulated trading environments.
Brokers, on the other hand, are intermediaries between investors and markets, unlike exchanges, when buying crypto through a broker, investors do not possess them nor do exchange ones already owned, rather, brokers lock client deposits as collateral and in return gives trading power to the customer with which they use to execute trades on behalf of their clients.
Brokers use various sources to set prices and fees they are willing to sell for and hold investor funds or partner with other brokers to sustain sufficient supply, while having the authority to set their own prices they usually keep them consistent with others in the same markets to sustain demand for their services.
What are the Advantages of Crypto Exchanges?
Trade Against Other Traders
Crypto exchanges can bring gains when strategically leveraged and can help bring movement to even stagnant portfolios with glacial-crawling growth, exchanges are battlegrounds of investors continually trading against each other in hopes of being on the profitable side of trades.
Trades between investors largely influence asset value and volatility which fluctuate more the greater trading volumes become, an example of this is Bitcoin, whose value in January went from over $40,000 to under $30,000 and then rebounded to over $55,000 as of February 21st.
Cryptos can be traded any time of day as its market never closes, with round-of-clock sessions and daily trading volumes measuring in the billions of dollars, trades between an ever-growing number of profit-hungry buyers can cause coin values to quickly raise or fall which can be profitable either way depending on the trade and order type.
More Common
Crypto upended the way we transact and revolutionized how we share assets of value with others which is what exchanges support, they also lay the base from which many more advantages for traders stem.
Cryptos eliminate intermediaries that were once needed to trade meaning middlemen adding little value and high fees can be avoided, crypto transactions are processed by miners instead of institutions making fees lower than bank-made transactions, and thanks to P2P technology, trading is cheaper and but more profitable too as profit-cutting central authorities are eliminated from the picture.
Another vantage point of using crypto exchanges is that smart contracts can be used to automate functions that in traditional systems would need to be facilitated by middlemen, smart contracts are simply algorithms that automatically execute trades when pre-defined conditions are met, this rids the need for financial intermediaries that charge commissions and slow down portfolio growth.
Cryptos are decentralized currencies that are available to investors in all parts of the world, its global reach, in addition to low exchange fees, gives crypto markets access to an ever-growing network of investors which allows even more liquidity to pour into markets that previously had little reach, given that more liquidity improves prices and transactions times, crypto exchanges became powerful driving forces in the gains reaped by assets, holders, and miners, whom of which enable the speedy and low-cost transactions all crypto holders have come to appreciate.
What are the Advantages of Crypto Brokerages?
Generally Better Security
Crypto brokers offer derivative products that let traders enter contracts in which they speculate the price for a given digital currency, products can include crypto futures, crypto options, and crypto CFDs, those using a broker never own assets and only have the ability to buy or sell the contract underlying it as prices fluctuate.
Traditional brokers have the advantage of offering a vast selection of investible securities though you normally can only trade futures and not cryptos directly, in contrast, exchanges are limited to offering currencies but give ownership of the asset to investors, brokers provide reliable security and can help manage funds and trades, as such, not owning assets is no dealbreakers for investors focused on short-term, high-capital gains.
Binance is a reputed broker known for secure trading environments, CFDs can be traded with leverage and cryptos can be bought using cash, it is one of the most popular brokerage services around known for being well-secured as its content/data is transmitted using SSL encryption and security protocols that strongly protect its network and users of it.
Better Tools and Features
Brokers provide traders regulated markets to trade in and offer high-leverage investment opportunities not often available on most exchanges, this is why most trade cryptos via CFDs as they can use more funds than they have to open positions, and since most are regulated by CySec and the FCA, customers are better protected from fraud and other unscrupulous business practices.
Many seek exposure to crypto through reputable brokers via CFDs as this investment has benefits over buying and selling cryptos directly one of which being the ability to leverage-trade assets, which works well for many asset types, including cryptocurrencies.
The ability to do leveraged trading is one benefit of using a broker as it gives investors the ability to open positions using more capital than they have, an example of this may be a 5:1 leverage which means you would only need $1,000 to open a position worth $5,000 which means considerable profits can be earned from even small value fluctuations, leverage is offered by a majority of brokers though most exchanges, except for Kraken, Poloniex, and BitMEX, do not offer this feature.
Regulatory requirements towards virtual assets do not bind brokers, they are free to decide how much leverage they offer, this is why margins are often more than futures contracts and underlying assets, leverage amplifies profits but losses too so people should be cautious when leverage trading cryptos used CFDs.
What are the Best Crypto Exchanges?
Binance
Binance is a popular crypto exchange letting users trade from a large pool of coins that when sold are withdrawable at one of the lowest industry rates, with over a hundred tradable coins, stellar customer support, and minimal fees, it has become an investor-favorite crypto exchange.
Their vast selection of coins made them popular among traders wanting to diversify positions across many assets, from Ethereum (ETH) and Litecoin (LTC) to smaller coins like ZCoin (XZC) and CyberMiles (CMT), their many listings make it easy for investors to stake positions in today’s most popular coins.
Another perk of Binance is their low crypto-to-crypto exchange fees which are among the lowest in the industry as they only charged 0.1% on trades which is discounted by half if Binance Coin (BNB) is used to trade, which means investors can keep even more of their profits.
One unique attribute of Binance are the prizes that all traders are eligible to win, prizes change all the time though so far have included various cryptocurrencies like Ontology (ONT) and Waves (WAVES) which are given to customers for free, they once even gave away a Maserati, what other exchange has shown such generosity to its user base?
Coinbase Pro
Coinbase Pro is an advanced crypto trading platform owned and operated by Coinbase, Inc. and operated under the name GDAX when launched in 2015, it is a professionals trading platform offering a suite of tools aimed to meet the needs of seasoned traders.
Coinbase Pro offers high-volume trading solutions and tools to traders in the U.S. and other parts of the world who enjoy reliable security measures, low fees, deep liquidity, high trading volumes, and ease of use thanks to their revamped interface that allows for seamless trading.
This variant of the traditional Coinbase exchange, which is used most by newcomer investors, is designed for experienced and high-volume traders as Coinbase Pro offers advanced trading options which include stop and limit orders, in addition to fill/kill and 'good til canceled' orders.
Also alluring is the great support they give users, Coinbase Pro is backed by a dedicated team of support specialists known for resolving customer issues quickly, traders can expect speedy solutions to even complex inquiries and they offer phone support too which is useful for urgent or time-sensitive matters.
What are the Best Crypto Brokerages?
PrimeXBT
PrimeXBT is the world's leading cryptocurrency brokerage and has been a pioneer in the cryptocurrency market since its launch a little over three years ago when it brought industry-leading margin trading to the cryptocurrency market for the first time and since then has grown to manage up to $7 billion of global trade every day.
PrimeXBT is a leader in the cryptocurrency space and is a modern and advanced cryptocurrency brokerage that provides the opportunity to be able to trade a wide and diverse range of assets including cryptocurrencies such as BTC, ETH, LTC, and EOS and a number of the world's leading traditional assets like stock indices such as S&P500 and FTSE100, forex pairs such as USD/EUR and AUD/CAD and commodities such as gold and oil.
PrimeXBT is a safe and secure crypto trading platform that has never been hacked and that implements a range of bank-grade security measures including hardware security modules with rating of FIPS PUB 140-2 Level 3 or higher and cold storage of digital assets with multi-signature technology.
As well as this PrimeXBT does not use a hot and cold wallet system like many other trading platforms but instead only secures its uses funds in coal bullets, with this ensuring that hackers do not have access to the funds in any way at all and that they are protected.
Coinbase
Coinbase is the leading mainstream crypto exchange in the U.S. and is a trading safe haven for millions of new and experienced traders, this exchange quickly popularized due to the many products they offer, which include two trading platforms, wallets for retail investors, custodial accounts for institutions, and their own U.S. dollar stable-coin.
Founded in 2012 and operating as a licensed and regulated exchange, users in one of the forty states they cater to enjoy trading from a growing list of coins that first was limited to Bitcoin, but as they grew over time, supported coins expanded to include Ethereum, Bitcoin Cash, Litecoin, and many others.
Known for a solid variety of altcoins, users can trade or stake over twenty coins and easily too thanks to design revamps that made its interface easier to navigate, users can create an account and begin trading in minutes and can even earn free cryptocurrencies by completing Coinbase Earn offers that take only minutes to complete.
Trading on Coinbase is easy enough a caveman could invest, though this is no surprise as Coinbase has always innovated its features and interface with the needs of beginner investors in mind, it is accessible on iOS and Android devices though as a browser-based exchange does not offer downloadable software.
In Conclusion: Crypto Exchanges vs. Crypto Brokerages - Which is Best?
It's hard to say whether crypto exchanges of crypto brokerages are the best but there is certainly a number of advantages to crypto brokerages and they provide advanced tools and better security in general much of the time, however there are a number of world class crypto exchanges that provide good services as well.
The platforms that we have selected are the top brokerages and exchanges in the cryptocurrency market in 2021, with each of them providing their own unique advantages as well compared to many of the other platforms in the market.
You like to learn more about the crypto exchanges that were selected check out Binance and Coinbase Pro, and if you like to check out the best crypto brokerages in the market in 2021 check out PrimeXBT and Coinbase.