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What is the Difference Between a Bitcoin Broker and an Exchange?

Benson Toti

When it comes to getting to grips with trading, it seems that there is a lot for a beginner to take on. Even those more advanced with making trades and analysing markets may find that they are still learning, and even those who are well seasoned on the stock markets will still find new nuggets of information from time to time. One of the most repeated lessons is the difference between a Bitcoin broker and an exchange. Understanding this is critical to any trader – beginner or expert.

What is an Exchange?

The exchange – such as Coinbase – in a trade often acts as the adjudicator between the trade buyer and trade seller to ensure the trade is fair. But, given how trades, especially those concerned with cryptocurrencies and forex, are occurring in different time zones and even tropics, it can be difficult to adjudicate. That’s why exchanges are now platforms where the trades take place or trading terminals. Exchanges are often done blind to the person buying/selling.

What is a Broker?

At these trading terminals, there need to be members who are able to add intermediaries and customers and to take responsibility for ensuring the trade goes off successfully. These are known as brokers – and they help ensure the trade is completed. As buyers and sellers cannot themselves execute a trade in the exchange, they need a broker to do it to broker the deal. In terms of cryptocurrency, a broker is a platform on which users can trade coins in a safe and regulated environment. Platforms, such as eToro, a Bitcoin broker, work to allow traders to speculate on crypto prices, without actually owning the coins.

Should I Choose a Broker?

There are many benefits to the broker in a trade. Firstly, they are more knowledgeable in market trends, in what is bullish and bearish and how to model based on recent market data. The broker can offer valuable insight to assist you in trading and can disseminate knowledge and information on how to make the successful trade. In the world of cryptocurrency, a brokerage allows an investor to trade cryptocurrencies without owning coins. This means they’re working within a framework that is more likely to be safe and regulated.

Should I Trade on an Exchange?

Exchanges allow you to trade with almost any capital investment – whether this is in your currency or with cryptocurrency – such as Bitcoin (BTC) or Ethereum (ETH) or delving into forex. Exchanges offer freedom from other aspects of the trading world, which can be beneficial for those who wish to go it solo. Using leveraged funds, you can gain better insight into how the markets work.

The broker and the exchange are both key aspects of trading and should both be understood as how they work both independently and when amalgamated. Both possess strengths and limitations that even the more advanced trader may still have to weigh up before embarking on a trade.

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