When investing in cryptocurrency, two primary platforms cater to investors and traders: brokerages and exchanges. Each has unique features and benefits designed to meet different user preferences and needs. To help you make an informed decision on which platform suits you best, here are some key differences.
What is a Cryptocurrency Brokerage?
A brokerage acts as an intermediary, selling cryptocurrencies directly to the buyer. Unlike exchanges, where prices are subject to market dynamics, brokerages sell at a predetermined rate.
Advantages of Brokerages:
Personalised service: brokerages are designed with simplicity in mind, making them ideal for beginners and those who prefer a straightforward experience.
Price certainty: you're informed of the exact rate before purchase, offering transparency and eliminating surprises. Brokerages also have several avenues of liquidity that very few exchange order books can match, meaning there is less slippage on trades, giving you more certainty on price.
Speedy transactions: brokerages can expedite purchases since there's no wait time for a corresponding seller. Brokerages will always make a market for a trade.
Safety net: some users feel brokerages offer an added layer of security by acting as a buffer between them and the broader market.
What is a Cryptocurrency Exchange?
Exchanges are centralised platforms where buyers and sellers interact directly. The price of the cryptocurrency fluctuates based on supply and demand.
Advantages of Exchanges:
Flexible Trading: exchanges empower users with tools to place varied orders like limit, market or stop orders, granting a higher degree of control.
Wider Range of Assets: exchanges will usually offer more tradable assets than a brokerage. However, always remember that just because there is a market, it doesn’t mean there will be liquidity! Brokerages typically focus on more established cryptocurrencies over the hot new thing.
Advanced Tools: catering primarily to seasoned traders, exchanges offer detailed charts, analytics and other sophisticated trading tools.
Potential for better rates: given the live, competitive bidding on exchanges, savvy traders might find opportunities for better rates. Exchanges might have tiered trading fees based on the volume traded over a given period.
Both brokerages and exchanges have their place in the crypto ecosystem. It's about aligning with a platform that resonates with your trading style, experience level and goals. LondonLink encourages all potential investors and traders to research, prioritise security and stay informed to make the most out of the exciting world of cryptocurrencies.