Exchanges and brokers offer different services and fee structures. Whether you want to use an exchange or a broker depends on your personal circumstances, so it’s important to research any exchange or broker carefully before engaging with them.
Considerations When Choosing an Exchange
- Supported cryptocurrencies: Make sure to look at the supported cryptocurrencies. Some exchanges offer a handful of cryptocurrencies whereas others offer hundreds.
- Deposit methods: What is your desired method of purchase? Some exchanges require deposits by bank transfer, some accept credit cards while others only accept cryptocurrency transfers.
- Exchange rate: Some exchanges only support a limited number of fiat currencies (e.g. AUD)—meaning you may have to exchange your fiat to a more commonly traded fiat such as USD. Conversion fees could be a costly factor to consider when selecting an exchange.
- Prices / spread: Not all exchanges sell cryptocurrencies for the same prices at the same time. The difference between buy and sell price (or spread) may be shorter on some exchanges and larger on others.
- Trading fees: Pay attention to the fee structure. Exchanges can differ widely in their fees and costs. Some exchanges charge much higher transaction fees, and some charge additional fees for credit card deposits. In some cases you may even incur international transaction fees from your credit card provider or banking institution. These fees should be considered when deciding between exchanges.
- Withdrawal fees: Be on the lookout for withdrawal fees as most exchanges will charge you for withdrawing your cryptocurrency, this is typically a fixed fee.
- Trading pairs: Each exchange will have a different currency they support. For example, some only let you buy a cryptocurrency with BTC or ETH, whilst others might only let you buy via AUD or USD.
- Reputation: Is the exchange you want to use reputable and does it let you easily transfer your cryptocurrency out of the exchange?
Considerations When Choosing a Broker
- Level of support: Brokers can provide various services from market research to consultations and even 24/7 on-demand assistance.
- Assets offered: Are you only interested in cryptocurrency or do want exposure to other assets? Some brokers specialise in cryptocurrency trading while others have access to other markets such as stocks and precious metals.
- Minimum trade size: Most brokers have a minimum trade size, meaning they’ll only execute requested trades if they are greater than a certain level. Most brokers’ minimum trade sizes are a few thousand dollars.
- Fees: Fees can vary depending on the broker and tier of service. Expect to pay a higher % in transaction fees relative to exchanges.
- Hidden costs: Are there any annual or monthly account maintenance fees to hold your assets?
- Reputation: In cases where you may be trusting the broker with custody of your cryptocurrencies, strongly consider looking into a broker’s history and online reviews when doing your research and due diligence. Be sure to consider the risks of custodian storage of your cryptocurrency (we cover this further in future modules).