The Difference Between a Cryptocurrency Broker and an Exchange

There are two main ways of cryptocurrency trading: the use of a crypto exchange or the service of a cryptocurrency broker. Both methods have advantages and disadvantages. To make the right choice, it is necessary to explore the peculiarities of each of them and determine your own requirements and expectations from trading.  

Although the cryptocurrency market is not a novelty for the world, there are still a lot of traders, including both newbies and experienced ones, who do not understand the difference between a cryptocurrency broker and an exchange. 

First, it is necessary to determine a significant difference in the very essence and purposes of both methods. 

Thus, it should be mentioned that cryptocurrency exchanges are very similar to regular exchange platforms. So, this way of cryptocurrency trading would be simple for those traders who have already worked with the exchange market. All quality cryptocurrency exchanges, such as Emirex, offer users two methods of purchasing the digital currency: to buy  a cryptocurrency for fiat and to exchange one currency for another (for example, BTC for ETH). 

So, cryptocurrency exchanges function as intermediaries. They arrange the deal and charge a fee for the service.

Meanwhile, a cryptocurrency broker is an intermediary between investors and the market. When you cooperate with a broker, you deposit funds in an intermediary’s account, and then, he/she decides what to do with your finances to bring you profits. 

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. Your cryptocurrency broker will propose the best deals for you.

There are several main characteristics that differentiate the service of a cryptocurrency exchange from the support of a broker:

• Registration and identification system

• Account replenishment and withdrawal

• Trading procedure

• Security system 

• Earnings 

Registration and Identification System 

The majority of exchanges provide quite a simple registration procedure. Traders just need to put in their email and create a password. Those platforms that work with fiat require a verification process as well. Exchanges ask for your picture with your ID, video call, pass KYC, etc. 

Brokers offer easy registration as well, but almost all of them need you to pass an identification procedure. It is important for them because their activity is regulated by authorized bodies.  

Account Replenishment and Withdrawal 

A lot of exchanges do not accept fiat for cryptocurrency trading, and those that use it, usually, charge a large commission. The commission is necessary regardless of the payment method.

Meanwhile, brokers offer you more options for replenishment and withdrawal (credit and debit cards, bank account, payment systems, etc.), and, generally, commissions are not charged at all.   

Trading Procedure 

Exchanges are great platforms for small volume trading. Moreover, exchanges are often used by holders who are interested in long-term and medium-term deals.

Broker maintenance is appropriate for large volume trading. It is quite popular among speculative traders who prefer to get profits in a short time. 

Security System 

Of course, the risk of a hacker attack is present in both trading methods. However, a broker activity is more reliable today than an exchange service because brokers are regulated by authorities.

In case of hacking and theft of funds, traders who work with brokers can expect to be compensated.

Earnings 

Exchanges engage traders with the diversity of digital currency pairs. However, such access to every proposition on the market requires traders to pay large commissions. 

From their side, brokers provide lower commissions, but they trade large sums; so, in case of an unsuccessful deal, there is a risk of losing too much. 

All in all, both methods are beneficial. It is just necessary to determine your individual interests on the cryptocurrency market.