The Difference Between a Cryptocurrency Exchange and a Broker

Cryptocurrency trading is two-way depending on your know-how of the crypto space. It can be through an exchange where you personally do the buying and selling or through brokers.

What is a cryptocurrency broker?

A broker is a third party in cryptocurrency trading who does most of the work on behalf of the individual buyer or trader. Essentially, as the trader, you have no direct right to the asset you purchase except the purchasing power. The broker owns the cryptocurrency.

Brokers offer platforms where individual crypto buyers and traders can access services such as cryptocurrency futures, crypto options as well as crypto contracts for difference (CFDs).

Gaining or losing is pegged on the price changes of the cryptocurrency. The trades can speculate on the price fluctuation of the digital assets through CFDs.

Crypto futures refer to an agreement between the trader and the broker, that the trader would sell or buy their crypto at an agreed price in the future upon the expiry of the contract between the two parties.

Crypto options are where a trader has the option of terminating the contract and agrees to lose the premium which is a security fund in case of contract withdrawal.

The online crypto broker offers the above products at a specified fee. Don't make the mistake of going for a broker you know nothing about. Your selection should be guided by authentic details concerning the broker.

Choose a crypto broker based on these factors:

  • 1. The security of the broker
    Make sure that the broker operates legally and in compliance with the financial regulatory measures. Moreover, their trading platform should be well secured almost free from fraudsters.
  • 2. Ease of access
    A good broker platform should be accessible from any mobile app or laptop such that you don't need to be in the office to trade. It should be available anytime you need it too.
  • 3. Ease of use
    Go for an online broker that is not complicated to use. Even though the broker does most of the things, you should be able to access the platform, buy and sell cryptos with much ease.

What is a cryptocurrency exchange?

A cryptocurrency exchange is an online platform that acts as a marketplace for people to buy, sell or trade digital assets.

The fundamental feature that differentiates a cryptocurrency exchange and a crypto broker is what you buy or trade. With the former, you have a platform that allows you to buy the actual cryptocurrency. That way, if you use a crypto exchange you will buy or sell Bitcoin, Ethereum, or other crypto assets. In any case, you own the cryptocurrencies.

If you are looking at crypto brokers vs. exchanges from this aspect, then note that the broker only allows you to speculate on assets' prices. You do not own the underlying crypto asset.

An outstanding feature of exchanges is that it allows traders access to multiple digital assets, with users able to easily buy and store crypto in their preferred wallet.

Before you decide on using a given exchange platform, consider the following:

  • 1. How do cryptocurrencies work?

    Don't rush to trading cryptocurrencies without the basic knowledge of how cryptocurrencies trading works. Information is readily available where you can learn about cryptocurrencies as well as the exchanges. Delve into the crypto space when you are well informed about cryptocurrencies. Take your time and research the best-ranked exchanges, their features, and terms of operation. Similarly, learn about the trading strategies and make a sober decision.

    Delve into the crypto space when you are well informed about cryptocurrencies. Take your time and research the best-ranked exchanges, their features, and terms of operation. Similarly, learn about the trading strategies and make a sober decision.

  • 2. Accepted currencies

    Crypto can be exchanged with other cryptos as well as fiat currency. Notably, not all cryptos are tradable with other cryptos commonly known as trading pairs. You should therefore find out which cryptos the exchange you choose accepts and if it allows for crypto/fiat trading.

  • 3. Availability of the exchange

    A good exchange might be limited to certain geographical regions thus limiting your access to it. Do some research on the exchanges within your area. Moreover, check on the exchanges that are allowed to trade within your area since some are banned from operating in certain countries.

    Another key feature to look for is 24/7 accessibility. Trading of crypto is an all-day activity. Make sure you get a cryptocurrency exchange platform that is supported on any electronic device. This ensures ease of access when need be.

  • 4. Trading APIs

    Most traders look for crypto exchanges that are APIs enabled. APIs enable automated crypto trading. Users can get market prices, place orders through their personalized trading bots among other automated services making trading more convenient and faster.

  • 5. Regulatory compliance

    A reputable exchange should comply with all set regulations and strict adherence to the financial regulation measures. Compliance translates to security to your cryptos. Check to see that the exchange you intend to trade with is compliant and transparent with its information and operational guidelines. An exchange that hides information from its users is highly questionable – keep away from such services.

Crypto exchange or crypto broker: Which one should you choose?

Whether to choose an exchange versus a broker depends on how well you know cryptocurrencies. For beginners in the crypto industry, brokers' services would be great as they help you make sound investment decisions. However for renowned crypto traders, exchanges are the best since they have mastered the price fluctuation, hence can incur minimal losses.

If you are looking to dig up some more information on which platform would suit you, check out this great article on the best cryptocurrency exchange for beginners.

The following factors will help settle on exchange or broker:

  • Supported coins- check if the platform allows the coins you wish to trade
  • Crypto ownership-do you want to stake your cryptos with partial ownership or total ownership
Cryptocurrency exchange Crypto broker
Trader has total ownership of the coins Cryptos owned by the broker
Priced as per market price Broker sets the price
Less regulated Strictly regulated
The trader decides on how long to trade Trading period is contract based

How to use Swapzone cryptocurrency exchange aggregator

  1. Visit Swapzone official homepage
  2. Select your preferred pair of cryptocurrencies for swapping
  3. Key in the amount to swap
  4. Enter your preferred recipient address for the funds
  5. Create an exchange order upon which you'll get a notification of the address to deposit in
  6. Transfer funds to the address above. The software calculates the equivalent amount and then You'll get a confirmation
  7. You get your cryptocurrency

Conclusion

The choice of a crypto broker or crypto exchange is yours. Exchanges offer more types of cryptos that are more long-term but operate mostly in a regulatory grey area. On the other hand, reputable brokers are highly regulated, with fewer demands on technical know-how for a beginner. You can choose between the two, but if you want an instant exchange of crypto, then have a look at Swapzone.