Your first question shouldn’t be:
Bitcoin or Ethereum?
But it most definitely should be:
Brokerage or exchange?
How you make your first cryptocurrency investment is just as important as the actual crypto you acquire. While exchanges and brokerages do share some similarities, their operational differences could have a significant influence on how you make your first crypto investment. Keep reading to discover the differences between a brokerage and an exchange and find out which one is best for your investing style.
Using a Crypto Exchange
Sign Up Process
Joining an exchange to trade is often as simple as creating an account on the exchange’s website. If using a centralised exchange, like Kraken or Binance, you’ll have to go through a Know Your Customer (KYC) process. KYC is a secure way to verify your identity and helps reduce fraudulent activity on the trading platform.
There may be no KYC steps in place if using a decentralised exchange. While this could be beneficial for maintaining the anonymity of the investor, there are some downsides. Practically anyone can trade on a decentralised exchange, which may make them a more attractive option for those looking to enact suspicious or illegal trades.
On-Ramping & Off-Ramping
If you don’t already have cryptocurrency ready to trade, on-ramping may be a bit challenging at an exchange.
While some of the larger exchanges allow investors to purchase crypto with fiat currency (e.g. via credit card or bank transfer), there may be strict limits on what you can purchase in your first trade. Some may only let you purchase Bitcoin or Ethereum first. If you aren’t interested in investing in these cryptocurrencies, you would then have to find a trading pair and continue to swap pairs until you have the coin you desire. In the end, you’ll likely be left with a lot of unnecessary fees.
Off-ramping can be just as tedious. You’ll need to find a trading pair once again and continue to swap pairs into a cryptocurrency allowing for fiat withdrawals into your bank account.
Exchanges attract hundreds of thousands of investors daily. Some are beginner investors just looking for a way into crypto. Others are seasoned traders making complicated spot and limit trades.
Most exchanges don’t have the internal infrastructure to manage every investor query, so they use information hubs and chatbots as a customer service workaround.
While these tools can help in resolving simple inquiries, investors will be hard-pressed to find an actual person to talk to on the other side of the screen. You’re really on your own when trading on an exchange.
Using a Crypto Brokerage
Sign Up Process
Signing up with a broker is a very simple process. Outside of submitting the standard KYC documents, brokerages like Caleb & Brown, offer additional onboarding support. You’ll receive a free consultation to discuss security best practices, and support in choosing a wallet that works best for your investing situation.
They understand that making your first investment isn’t as simple as a bank transfer. This is why their brokers and product specialists are available to call to answer any questions you have during sign up and for the lifetime of your investing journey.
On-Ramping & Off-Ramping
A brokerage like Caleb & Brown will often have a deep liquidity pool and direct access to the market. This means your first crypto order will likely have no limits on the volume or type of coins traded. Simply put, you can use your fiat currency to acquire any cryptocurrency supported by the brokerage. And brokerages usually have access to 100s of cryptocurrencies across varying exchanges.
Your personal broker works with a team of expert traders to enact any requests you have. With a team behind every action you make, Caleb & Brown is in the unique position to offer unlimited pairing to its customers. You’ll never have to worry about being hit with ridiculously high transaction fees whenever you want to trade one digital asset for another.
When you’re ready to exit the market, it’s simple. Just withdraw whatever amount you like, and the fiat equivalent will go into your bank account. No need to swap your crypto to a coin that allows for fiat withdrawals.
The major difference between brokerage and exchange is the level of customer service you’ll receive. Brokerages pride themselves on building relationships and simplifying the investment process for their clients. Got a question? Give your broker a call, anytime. Need help enacting a complex trade? Your broker will happily guide you through the process. This level of service can be a difference-maker for those new to crypto, as well as the more seasoned investor looking to make complex trades.
Simplify The Way You Invest
Which one is better? Brokerage or exchange? While each has its benefits and drawbacks, it really depends on how you like to invest. If you want to fly solo and know your way around all the fees that might surprise a beginner investor, maybe an exchange is right for you. If you prefer having one flat transaction fee, and ongoing human support to help you enact trades, then Caleb & Brown might be right for you.
Trusted by over 20,000 clients in over 100 countries, Caleb & Brown has the experience needed to help you execute a swift and simple market entry. Join now for free and receive a complimentary consultation to discover all the ways you can invest in crypto.