A Crypto Broker or a Crypto Exchange – Which One Should You Choose?

Cryptocurrency brokers and exchanges – comparison of the features

In order to compare the pros and cons of cryptocurrency brokers and cryptocurrency exchanges better, we used the current leaders of respective TU ratings. RoboForex is the leader of the brokers’ rating, and Binance top the rating of the exchanges. They are not only the best, but also typical representatives of their segments. Therefore, it is rational to compare their features and possibilities in order to understand the difference using specific situations.

Crypto brokers or crypto exchanges – choice of trading instruments

Cryptocurrency brokers offer indirect cryptocurrency trading; fiat pairs (for example EUR/GBP, EUR/USD, USD/JPY, etc.) account for the lion’s share of their trading volume. Often, they also provide access to trading shares of large companies, for example RoboForex allows you to trade Apple, Amazon, Facebook, Netflix shares. Another trading option offered by crypto brokers is trading indices. These are the instruments formed by groups of securities, which show the change of their value. The most popular index is the industrial index Dow Jones.

RoboForex and other top brokers offer access to trading commodities (sugar, wheat), precious metals (gold, silver) and energies (oil, coal). Some of the segments are more liquid than the others. Success of trading largely depends on the actual market and trader’s strategy. In addition to cryptocurrencies, an objectively good broker provides access to trading practically anything that has value in the global financial market.

The situation with cryptocurrency exchanges is different. Many register at the exchanges to buy cryptocurrency and sell it later at a better exchange rate. It is a popular type of investment in cryptocurrencies. However, the real capabilities of crypto exchanges are much wider. For example, Binance offers conversion, a simple exchange of one cryptocurrency for another at the rate of the exchange. There is a classic and advanced direct crypto-crypto and crypto-fiat pairs trading.

In addition to traditional spot trading, Binance offers margin trading with leverage (by the way, many forex brokers also provide leverage, while for cryptocurrency that is a rather rare option). Binance, just like many top crypto exchanges, also offers P2P trading – cryptocurrency exchange between the platform users on their own conditions. The exchanges also sometimes offer derivatives trading. In particular, Binance offers quarterly and perpetual futures with settlements in USDT and BUSD (USD-M type) and with settlements in cryptocurrencies (COIN-M type).

Therefore, while cryptocurrency exchanges work strictly with cryptocurrencies and their derivatives, they offer a wide cryptocurrency-related choice of instruments. Note that many crypto exchanges support currency accounts, which means that you can withdraw both cryptocurrency and fiat money.

Cryptocurrency brokers and exchanges – comparison of commissions and fees

The absolute majority of top cryptocurrency exchanges charge a fee for trading cryptocurrency as a percent from the value of the trade. For example, in spot trading at the first trading level, Binance charges 0.1% fee for taker and maker. This means that regardless of the type of trade, you will pay 0.1% of its value to the exchange, thus providing the exchange with a profit from your trading.

There is also a withdrawal fee; it is a fixed amount and does not depend on the withdrawal amount. For example, you withdraw Bitcoin and you pay a fixed fee of 0.0000048 BTC to the exchange no matter how much you withdraw. Often, the withdrawal fee depends on the asset, sometimes on the withdrawal change and even the network that you are using. Cryptocurrency exchanges clarify all this information in the Commissions and Fees section (the name may differ, but there is always such a section on the website).

A withdrawal fee in the majority of cases is the only type of non-trading fee charged by an exchange. There are no exchanges on our top list that charge a deposit fee (third-party services that you use, however, may charge their own fees).

Cryptocurrency brokers may also charge trading fees in the form of a percentage of the value of trade, but usually it is different. Most likely, spread is deducted from the client’s profit from a trade; it is the difference between the highest buy price and lowest sell price expressed in points (pips). Spread may be fixed (rarely) or floating; it usually depends on the plan. For example, for Prime and ECN Spread plans, RoboForex offers a spread from 0 pips, ProCent and Pro – from 1.3 pips.

As an additional fee, a broker may charge a fixed fee (as a rule in US dollars) per each lot (for example $4). Notably, during leveraged trading, the fee is calculated based on the total amount together with leverage (for example, with leverage at 1:300, if your rate is $10, with leverage it will be $3,000, and the fee is deducted from this amount). Some brokers put the percentage from the trade and spread as one fee.

On average, cryptocurrency exchanges have lower fees than cryptocurrency brokers. For brokers, a lot is determined by the company policy, tariff plan, chosen assets, condition of the market. For the exchanges, trading fees are easily understood even by a beginner, because they are fixed and constitute a percentage of the value of the trade. All companies charge non-trading fees (for example withdrawal fee).

Cryptocurrency brokers and exchanges – deposit and withdrawal methods

Cryptocurrency brokers offer many deposit and withdrawal options. RoboForex, just like other top brokers of the segment, offers deposit/withdrawal via Visa and MC debit/credit cards, wire transfers through SEPA, as well as electronic transfers through Skrill, Neteller, AdvCash, Perfect Money and Kasaar24.

Top cryptocurrency exchanges also support deposit/withdrawal with debit/credit cards and wire transfers. The Luno Malaysia crypto exchange also accepts credit card and bank transfers. The majority of platforms also accept transfers from practically any electronic and cryptocurrency wallet (you have to be careful, though, because transfers are performed inside one network, for example BTC network is used for Bitcoin, TRC20 for TRON) and you have to specify the network when you are requesting a transfer).

Cryptocurrency brokers and exchanges – account opening

Regardless of whether you simply want to buy cryptocurrency, plan to actively trade or invest, you need to open an account on the platform, which you’ve chosen. There are no critical differences between crypto brokers and crypto exchanges in terms of this aspect. In both cases you need to register on the official website of the company and then verify your personal information – submit scanned copies of identification documents (additional actions may be required, for example Binance requests a selfie with documents). Verification can take up to several days and once you’ve passed it you will be granted full access to the features of the platform. Some brokers and exchanges allow you to trade without verification, but with lower limits and limited features.

Regulation

In the vast majority of cases, cryptocurrency brokers are regulated by international organizations that have the right to control the operation of financial companies. This is due to the fact that the operation of the brokers without regulation is essentially illegal. For example, RoboForex is regulated by IFSC Belize (International Financial Services Commission of Belize), license number 000138/210. This means that the IFSC controls the financial operation of the broker and makes sure that the broker observes international financial laws.

As for the cryptocurrency exchanges, unfortunately, not all exchanges are regulated. This is due to the legal specifics of the exchanges, as in many regions they only need to register as a financial organization, but they don’t report to anybody. This kind of practice does not mean that you cannot trust an exchange without the regulator, but you need to understand that such an exchange can close at any moment and you will never be able to recover your money. In this situation, you have to stick to the market leaders. Everything depends on your choice and whether it is the correct one. For example, Binance, a recognized global giant, also does not have any license, but the exchange has been operating successfully for many years.

Education

There are no differences in terms of this feature between cryptocurrency brokers and cryptocurrency exchanges that have to do with the specifics of their work. Everything depends on the particular company. For example, RoboForex offers an extensive FAQ and a number of guides for beginners on crypto trading. There are also detailed video tutorials and the broker regularly holds seminars and webinars, although they are rarely about cryptocurrencies specifically. They are mostly about Forex, stock markets, etc.

Binance cryptocurrency also doesn’t leave its users one on one with the crypto market. The exchange offers detailed guides on trading the most popular cryptocurrencies, including the guide for trading BNB, the platform’s coin. The exchange has a rather simple educational system, although that is not a regular occurrence among the exchanges. Some crypto exchanges have their own Academies with video tutorials and detailed course plans for traders of different levels.

In the majority of cases, the education offered by the broker is more comprehensive than the education offered by the exchanges. This is primarily due to the fact that the brokers offer not only cryptocurrencies, but also many other financial instruments.

Passive income

Let’s start with similarities. Many cryptocurrency exchanges and crypto brokers offer passive income in the form of referrals. A trader receives a personal link and publishes it on third-party sources. The user, who registers at the exchange using this referral link, becomes a partner (referral) of the trader and brings him profit in the form of a percentage of his trading fees.

Many brokers offer investment programs, and they can be of any kind – from investment in the projects of third parties (the broker may act as an intermediary and guarantor) to copy trading services. For example RoboForex has the CopyFX service that allows you to copy trades of other (successful) traders or their trading strategies.

The exchanges do not offer such services; they have their own investment options, staking (available at the majority of the exchanges) and lending being the most popular ones. Staking is investing in third-party blockchain projects at an interest. Lending is investing cryptocurrency in the structural projects of the platform itself, for example financing other users. In particular, Binance offers these investment options. Some exchanges also offer other investment options to the users (for example mining).

Account opening

Algorithm of opening an account with a cryptocurrency broker (using the example of RoboForex)

Step 1. On the official website of the broker, click “Open an Account” and follow the instructions. You need to provide your real email and phone number, as the confirmation will be sent to them.

How to start trading on Roboforex

Step 2. Select the type of trading account (real, demo or other). The system generates the password automatically (you will be able to change it later).

Step 3. Choose the trading platform you intend to use, account currency, leverage and provide your address.

How to start trading on Roboforex

Step 4. Save the changes. Download and launch the trading platform, select RoboForex server and start trading.

Note!

that in order to complete registration, you need to verify your account. Click “Verification” and follow the instructions.

Algorithm of opening an account with a cryptocurrency broker (using the example of Binance)

Step 1. Click on the Register button in the top right corner of the official website of the exchange and follow the instructions on the screen. Use your real email and phone number.

How to start trading on Binance

Step 2. Confirmation of registration will be sent to your email and phone; follow the instructions in the message. In the upper part of the screen, you will see the message “Verify Your Account”, click “Verify”.

How to start trading on Binance

Step 3. Choose the verification type and follow the instructions on the screen (you will need to send scanned copies of your identification documents). You will not be able to trade without verification.

How to start trading on Binance

Step 4. Verification takes up to 10 days. As soon as the exchange verifies your information, you will receive a notification and full access to the features of the platform.

Cryptocurrency brokers and exchanges – which one do I choose?

If you want to trade a large number of cryptocurrencies with continuous extension of their available pool, cryptocurrency exchange is for you. The exchange has a generally simpler system of commissions and fees and the fees for trading cryptocurrency is lower. Many crypto exchanges offer different methods of reducing the fees and also investment solutions for passive income (like staking). Therefore, they may also be of interest to investors.

If you want to trade other assets (fiat money, commodities, metals, etc.) in addition to cryptocurrency, you will need a cryptocurrency broker, as the exchange simply does not offer these options. Brokers offer more instruments, as cryptocurrency trading is only done via CFDs and you earn money on pure speculation, without even buying the cryptocurrencies. Top brokers also offer investment options, and as a rule, there are more of them than the crypto exchanges have. For example, brokers offer copy trading services.

How to choose a cryptocurrency broker

How to choose a cryptocurrency exchange