The difference between a cryptocurrency broker and an exchange

What are the different types of crypto trading platforms?

When entering the world of crypto trading there are basically two different types of trading platforms available to investors: brokers and exchanges. Both platforms offer you access to the crypto market but differ in their offering, service and structure. Brokers, including neobrokers, allow you to buy and sell cryptocurrencies at fixed prices and are ideal for beginners. Exchanges (crypto exchanges), on the other hand, offer more flexible trading opportunities and are aimed more at experienced traders who want to benefit from direct market prices.

What is a crypto broker or neobroker?

Crypto brokers generally offer a selected range of cryptocurrencies and digital assets. This is often based on the popularity and market capitalisation of the assets to provide users with a solid basis for investment. Neobrokers are a modern form of broker that often offer lower fees and an app-based, intuitive user experience, making them particularly attractive to beginners.

Brokers enable the purchase and sale of cryptocurrencies at fixed prices and often charge a fee or premium. Brokers are particularly attractive to beginners as they offer simple, user-friendly platforms, often complemented by market analysis and educational resources. In addition to trading in fiat money (e.g. euros, dollars), many brokers also enable exchanges between different cryptocurrencies.

What is a crypto exchange?

In contrast to brokers, crypto exchanges are trading platforms where buyers and sellers of cryptocurrencies can trade directly with each other. These exchanges set market prices based on supply and demand, allowing users to trade at these fluctuating prices. 

Crypto exchanges often offer a wide range of cryptocurrencies, allowing users to be more flexible in their trading strategies. Exchanges can represent a higher barrier to entry for trading beginners due to the more complex user interfaces and trading mechanisms.

Trading platforms for cryptocurrencies: differences between crypto brokers and exchanges 

Crypto brokers vs. crypto exchanges - what’s best for your trading strategy? Selecting a suitable trading platform can have a significant long-term impact on your trading experience. Our analysis will help you compare the advantages and disadvantages of both options, helping you decide on the crypto trading platform that best suits your personal trading goals and preferences. 

Security

The security of your assets is the top priority in crypto trading. Both brokers and exchanges use various security measures to protect your cryptocurrencies. The security functions of trading platforms for cryptocurrencies can include, among other things:

• Two-factor authentication (2FA): Additional security layer through SMS or authentication apps

• Cold storage: Offline storage to help protect against hacks

• Encryption: Protection of your data and transactions

• Security audits: Regular external assessments

• Insurance cover: Protection against security incidents

Brokers usually take a managed approach to security, similar to banking practices. They offer features such as regular security audits, security certificates and the option to transfer cryptocurrencies to external wallets. These measures ensure high protection, but are determined mainly by the provider. With exchanges, on the other hand, the responsibility often lies more with the user. These platforms offer more control over individual security settings, which increases complexity. 

Before using them, you should carefully compare the security features of various cryptocurrency trading platforms in order to protect your crypto assets in the best possible way.

Diversity of assets

Depending on the crypto trading platform, you can have access to different cryptocurrencies and markets, which allows you to build a diversified portfolio and react flexibly to market movements.

Crypto brokers usually offer a curated selection of coins and tokens, often based on their popularity and market capitalisation. This manageable selection can help beginners focus on the most important assets and simultaneously offer the opportunity to use fiat currencies such as the Euro. Exchanges, on the other hand, generally offer access to a wider range of cryptocurrencies, including smaller, more speculative coins and tokens. This greater choice allows experienced traders , in particular, to create specialised portfolios and benefit from a variety of trading options and complex strategies to react more quickly to market changes.

Your decision between a broker or neobroker with a comparatively limited selection of assets and an exchange with a broader range of assets depends heavily on your individual trading objectives, your level of knowledge and your risk appetite. For this reason, it makes sense to choose a provider that meets your needs in order to successfully implement your trading strategy.

Mobile trading

Due to its high volatility, or the possibility of rate fluctuations, the crypto market is very fast-moving andthe ability to trade anywhere and at any time is not just a convenience, but an absolute necessity for the modern trader. Consequently, many providers therefore also allow cryptocurrencies to be bought and sold via an app, on a smartphone, or tablet.

Broker apps are usually characterised by simple user interfaces and offer quick access to functions such as market analyses, real-time rates and portfolio management. In addition, many apps integrate educational resources and news feeds. Exchanges also offer mobile apps with more advanced features such as charting tools, different order types and access to more complex trading options such as margin trading or futures markets. These are ideal for experienced traders who want to react flexibly to market changes.

Worldwide availability

Cryptocurrency trading has no borders and connects traders from all over the world. The accessibility of this global marketplace can present specific challenges for users of crypto brokers and crypto exchanges. These difficulties can vary depending on the location and relate to aspects such as the availability of services, the technical infrastructure, the regulatory framework and the use of local payment methods.

When choosing a suitable broker or exchange, you should, take a close look at the options available in your country. The key questions in the search for the right provider are:

• Which trading platforms for cryptocurrencies are authorised in my country? Not all brokers and exchanges are licensed to offer services in your country.

• Which cryptocurrencies and assets are available? Depending on the platform and location, the available cryptocurrencies and trading pairs may differ, meaning that there may be no access to certain coins and tokens.

• Are there any restrictions on the trading functions? Functions such as margin trading, futures or staking may be limited or unavailable in some regions

The regulatory framework for cryptocurrencies also varies worldwide and directly influences the use of crypto brokers and exchanges. While countries such as China have imposed strict restrictions on crypto trading, crypto-friendly countries such as Malta and Switzerland promote trading with clear regulations. In Austria, the automatic transfer of the crypto tax by brokers since 2024 facilitates tax returns. The choice of the best crypto trading platform for you therefore depends heavily on the laws of your own country, as these can influence the possibilities for trading cryptocurrencies.

Choosing the right crypto trading platform: crypto broker or crypto exchange?

When comparing crypto brokers and crypto exchanges, the choice of a suitable trading platform depends on your personal goals and needs. Your considerations when choosing a crypto trading platform should focus primarily on security, market access, mobile buy and sell options and global accessibility. The right platform should support your trading strategy and meet the regulatory requirements of your location.

Brokers often mean greater user-friendliness and offer you additional services that can be particularly helpful for beginners. They enable trading at fixed prices. Exchanges offer direct trading between users at market prices and usually allow access to a wide range of cryptocurrencies. For experienced traders who want the best of both worlds, Bitpanda Fusion is the ideal choice: the crypto trading platform offers maximum flexibility and state-of-the-art tools for your trading strategy.

Advanced trading strategies

Now you are familiar with the differences between brokers and exchanges, you might want to explore more advanced strategies to maximise your potential returns. Experienced traders use tools like market orders and limit orders to mitigate risk and strategies such as candlestick pattern analysis to identify potential upward price movements, allowing them to amplify their gains. Bitpanda Fusion is an advanced trading platform that offers traders a way to keep pace with the dynamic crypto market. The platform incorporates advanced technology for efficient order execution and managing high-volume trades, helping traders achieve optimal outcomes.

It’s important to remember that these advanced trading methods come with risk and require a full comprehension of market conditions, leverage, and risk management strategies to avoid significant losses.

FAQ: Frequently asked questions about crypto trading platforms

Here, you will find the answers to the most frequently asked questions about crypto brokers and exchanges.

What’s the difference between a crypto broker and an exchange?

In contrast to a crypto broker, a crypto exchange provides a trading platform for buyers and sellers who want to trade cryptocurrencies into other digital currencies or fiat currencies with each other – and not with a broker – at current market prices.

What advantages do crypto brokers offer for beginners?

For beginners, crypto brokers offer an easy and accessible way to get into crypto trading, as they often offer user-friendly interfaces and additional support services such as market analyses or educational resources.

What fees are charged by crypto brokers and exchanges?

Crypto brokers usually charge premiums on the purchase price or fees for transactions. Exchanges often charge trading fees per trade, which can vary depending on the volume. The exact fees for your cryptocurrency trading depend on the provider. When comparing brokers and exchanges as trading platforms for cryptocurrencies, it can also be worthwhile for you as an investor to consider the level of fees.

How secure are the mobile apps of crypto trading platforms?

Most mobile crypto trading apps offer strong security measures such as two-factor authentication (2FA) and encryption. However, security depends heavily on the provider, which is why you should check the platform's ratings and security features before using it.

Can I take out crypto savings plans with brokers and exchanges?

Yes, many crypto brokers and some exchanges offer crypto savings plans. These enable investors to regularly invest small amounts in coins and tokens and build up a portfolio over the long term. Such savings plans are particularly suitable for long-term strategies.

How do I choose the best crypto trading platform?

When choosing the best crypto trading platform, you should consider factors such as fees, security, ease of use, the selection of cryptocurrencies and additional services such as educational resources. A comparison of the various providers can help you find the platform that best suits your needs.

Other topics relating to cryptocurrencies

If you are interested in topics relating to cryptocurrencies and blockchain technology, the Bitpanda Academy is exactly the right place to go. In numerous articles and videos, we address various topics from the crypto and financial sector and offer lessons for beginners, advanced users and experts.