For example, in 2016, the crypto exchange Bitfinex was hacked and $72 million worth of Bitcoin was stolen from customers. Therefore, if you choose the service of a broker, you do not need to study the cryptocurrency market on your own and follow all changes. When we buy Bitcoin, for example, we enter into a CFD with the broker, agreeing that if its value rises, the profit will be ours. Most of the exchanges provide just basic functions, which could be enough for an average user.

The deeper their liquidity, the more efficient CEXs perform, even in extreme market conditions. The compromise for this convenience is that traders give up their private keys to the exchange. This is why a Binance/Coinbase account is equivalent to a custodial wallet, with CEX receiving fees when trades happen. Our list considers crypto exchanges, platforms and online brokers that offer crypto, as well as cash and payment apps that let you buy and sell Bitcoin, Ethereum and other digital assets. The principles of crypto brokers are different from those of crypto exchanges. Brokers let clients trade cryptos as CFDs, meaning there are not many crypto assets available.

While that might sound like you’ll have to wait to fill your orders, it depends on the order type you use. Normally, exchanges will ensure that buying and selling at market price is smooth, thanks to agreements with market makers. And since it’s the market defining the price on exchanges, traders can better capitalize on opportunities compared to when using brokers. For instance, users will be charged a fee every time they buy, sell or swap crypto. Besides investigating which payment methods are offered by a crypto exchange, you should also find out which crypto exchange can be used in your location. You can buy currency through them and hold it for longer periods and sell when you hit the targeted asset value.

  • Using cryptocurrency exchange is a traditional way to trade crypto and especially useful for lower amounts of money.
  • As such, the BTC/USD spread is as low as 0.1 pips in R Trader, which is one of the tightest in the industry.
  • Withdrawal fees are in flux, depending on the asset and the blockchain network being used to transfer funds.
  • A crypto broker will then help negotiate the price and settle the OTC trade.
  • Considering the fact that they handle transactions that might have huge sums, this makes them a highly desirable target for cybercriminals.

Cryptocurrency broker is based on indirect trading, acting as an intermediary between the market and traders. In other words, just like a stockbroker, Robinhood uses Citadel Securities to execute users’ trades. Whether Citadel Securities or Credit Suisse Securities, these market makers cover traders’ ask/bid spreads to ensure each trade is executed near-instantly and at the best available prices. Crypto brokers offer a wider range of investment products than exchanges. In addition to spot trading, they also offer traditional financial products such as CFDs, options, and futures.

There are many exchanges to choose from — some with a longer track record than others. When comparing exchanges, investors can look at fees, cryptocurrency selection, advanced trading options and customer service offerings. Whenever choosing a crypto exchange, it is important to know that you can only trade cryptocurrencies and other digital assets through this exchange. Most brokers offer multiple investment options, and crypto exchanges are starting to do it too. A staking transaction involves investors donating a particular cryptocurrency asset to a blockchain project in return for some rewards.

Let’s compare a crypto exchange vs a broker in our comparison table so it’s understandable that each of the solutions suits a different person and user case. The biggest advantage of an exchange is a wide range of cryptocurrencies that can be traded on their platform. Keep in mind that there is a physical delivery of the traded asset on the spot exchange, while in margin trading done with a broker, just the underlying asset is traded, not the physical one. An exchange then acts as an intermediary, who enables the trade and charges a fee for this service. During the bull run, when millions of people want to enter, the exchange might simply refuse new account services due to enormous interest and insufficient capacities. A centralized crypto exchange takes full responsibility for the client’s funds.

What is a crypto broker?

As already mentioned, we exchange CFD contracts when using a crypto broker. Every time we purchase, let’s say, a Bitcoin, we enter into a Contract for Difference with the broker, agreeing that if the value rises, we take the profit. On the other hand, we will lose that price difference if the BTC’s worth drops.

When FTX went bankrupt, the broker Digital Surge lost $33 million of its client’s funds because they were stored on FTX. While it seems they will survive the fallout, traders still have their funds locked with uncertainty about when they’ll regain access. There are both similarities and differences when comparing the source of income between a cryptocurrency exchange vs a broker. Both profits from the fees, but they have slightly different approaches to their clients.

For example, you might trade a CFD on the price of Bitcoin without actually owning any Bitcoin yourself. If you have ever looked into buying cryptocurrency, you may have noticed that there are two main ways to do so. Moreover, exchanges are often used by holders who are interested in long-term and medium-term deals.

Please note that an investment in crypto assets carries risks in addition to the opportunities described above. Before you consider trading cryptocurrencies on an exchange, there are a number of factors that you should consider. For example, a broker might charge a $10 commission fee for every trade that you make.

Numerous crypto exchanges introduce assets that may reduce trading costs. Instead of directly trading Bitcoin, altcoins, or any other crypto asset, contracts for difference are used instead. Contracts for difference, also known as CFDs, are agreements between a buyer and a seller over a difference in the valuation of a particular asset. The difference in the value of the underlying asset at the time of contract completion and the time of trade finalization is the subject of the contract. Trading rate fluctuations and investing are the two most common ways crypto brokerages offer to increase profits. Yet the most popular approach is trading based on price volatility.

Best Crypto Exchanges and Apps

Crypto exchanges are advancing and offering other trading instruments, such as futures trading. Note that CFD may be similar to a contract agreement, yet there is a significant difference. When dealing with a CFD, the seller does not have to hold a specific asset. That being said, it is difficult for the buyer to demand it from the seller.

Pros and Cons of Using a Crypto Exchange

Crypto brokerage enables indirect trading by moderating between customers and the market. A crypto exchange also serves as an intermediary, but exclusively between traders. Cryptocurrency brokers and crypto exchanges are fundamentally different from one another in that exchanges provide a significantly wider scope of cryptocurrencies and other digital assets. You can usually transfer funds either from your crypto wallet or from your debit/credit card instantly, thanks to the ease of digital transactions. If you want to make a deposit, you can do so either with fiat money or with cryptocurrency. On the other hand, a cryptocurrency exchange is a platform that allows buyers and sellers of cryptocurrencies to trade directly with each other, without the need for an intermediary.