Crypto Investment: Exchange vs. Broker

Cryptocurrency is Real Hot Right Now

Cryptocurrency investment has never been a hotter topic than it is right now. This is largely because Bitcoin has finally broken out of its long-time trading range and skyrocketed to $50,000 and beyond. The spike in value has undoubtedly made millionaires of many, and has even reportedly — maybe — netted more profits for Tesla than the company’s own electric cars have. For the moment, Bitcoin is a shooting star, and hopeful investors all around the world are looking for the right moment to get involved.

Purchasing Cryptocurrency

This means that the crypto world is welcoming a lot of first-time investors, and will likely continue to do so moving forward. And if you happen to be one of those new investors, one of the first things you’re bound to notice is that there are two main avenues through which you can buy into cryptos: exchanges and brokerages. So, what’s the difference?

We’ll start with basic definitions. An exchange is an intermediary where buyers and sellers deal with one another. This applies to any investment environment, not just for cryptocurrency. When you buy Bitcoin through an exchange, it is as if you are paying another investor who wishes to sell it (though the exchange makes it more as if you’re simply buying cryptocurrency from a service). By contrast, the idea of a brokerage account is that an investor can deposit funds and use them to facilitate trades. With cryptocurrency this also means that those trades can be diversified, such that a cash deposit with a broker can enable investment in multiple different currencies.

With those basic differences established, the natural question is which option is better for cryptocurrency investment? But the truth is that there isn’t really an objectively better option. Both methods enable you to trade in crypto markets and attempt to profit. And between crypto exchange licensing and brokers often existing within established investment firms, both have secure and trustworthy options. There is, however, some difference in trading style that comes into play.

Exchange Pros and Cons

Generally, investment through cryptocurrency exchanges is viewed as the preferred method for those in the “HODL” camp. If that’s an unfamiliar term, we’ll quickly note that crypto hodlers are those who buy digital currencies with the intent to “hold” them for a long time (“hodl” simply being a sort of internet slang for “hold”). Exchanges are simple and easy for hodlers to use as they set about collecting cryptocurrency and then — typically — moving it into wallets to stash for the long term.

Broker Pros and Cons

By contrast, some view the broker route as being slightly more conducive to regular trading. Brokers facilitate trades quicker and make the process of handling different cryptocurrencies all at once more seamless.

In the end though, which method you use for crypto investment is largely just a matter of personal preference. Your trading style and goals will certainly facto into the decision, but both options allow you to try your hand at crypto investment. Just remember to be responsible and make careful decisions if you do choose to buy in.