What is a crypto broker?

What is a crypto broker?

A crypto broker is a platform or service where you can buy, sell, or trade cryptocurrencies. Crypto brokers act as intermediaries between buyers and sellers of cryptocurrencies. Just like DEGIRO does for traditional stocks, Finst does for the cryptocurrency market. Instead of buying crypto directly from an exchange, a crypto broker facilitates the transaction, often by holding crypto in stock or by purchasing it on your behalf from an exchange.

Crypto brokers usually offer a more user-friendly experience than exchanges, making it easier for beginners to buy Bitcoin and enter the world of crypto.

Key Takeaways

• A crypto broker is a platform that acts as an intermediary when buying and selling cryptocurrencies such as Bitcoin, Ethereum, and Solana, often focusing on ease of use.
• Brokers typically charge a small fee on top of the market price as compensation for their services.
• Unlike exchanges, when using brokers, you trade directly with the platform, not with other users.
• There are different types of brokers: full-service, discount, and OTC brokers.

How do crypto brokers work?

Crypto brokers provide access to the crypto market at a slightly higher price than the market value, which includes a fee for the coin or token. When you buy cryptocurrency via a broker, you're paying a slightly higher price to cover the broker's service costs.

Example:
Suppose you want to buy 0.1 Bitcoin (BTC) and it is currently worth €1000. You would typically pay around €1020. That small fee of €20 is how brokers make money. This varies by broker, but usually stays below 2%. At Finst, it’s just 0.15%, which is extremely cheap.

Some brokers also offer leveraged trading, allowing you to borrow money to increase your position, although this comes with higher risk. Depending on the platform, they may also offer financial products like crypto derivatives (futures or options contracts).

What is the difference between a crypto broker and a crypto exchange?

The key difference between a crypto broker and a crypto exchange is how and with whom you trade.

• A crypto broker buys or sells crypto directly to or from you. You're not trading with other users, like on an exchange, but with the broker itself. The price is set by the broker and usually includes a small spread or fixed fee. Some brokers use aggregated order books (like Finst) and base their prices on multiple external exchanges to give you a better deal. Brokers are typically user-friendly and ideal for beginners who want to buy or sell crypto quickly and easily.

• A crypto exchange is a trading platform where users trade cryptocurrencies with one another. Prices are determined by supply and demand. You place buy or sell orders and wait for another user to accept them. Exchanges are often cheaper but require more knowledge of order books, trading pairs, and charts. That’s why they’re more popular among experienced traders.

Types of crypto brokers

1. Full-Service Brokers: These brokers offer a wide range of services, including access to the crypto market, educational articles, financial advice, and tools to manage your portfolio. They may also offer access to other types of investments such as stocks or commodities.

2. Discount Brokers: Discount brokers focus on providing the essential service of market access without extra features. They charge lower fees but usually offer fewer additional services.

3. OTC Brokers: OTC (Over-the-Counter) brokers are mostly for individuals with high capital or large investment firms. They handle large crypto purchases outside the regular market to prevent price spikes from a single transaction. They often offer personalized service and prices are agreed directly between buyer and broker.

Why would you use a crypto broker?

There are several reasons to choose a crypto broker over an exchange or other ways of buying cryptocurrencies:

1. Ease of use: Many crypto brokers offer user-friendly platforms designed for beginners. They make buying crypto as simple as a few clicks, making it much easier than navigating a complex exchange platform.

2. Customer support: Brokers often provide customer support to guide users through the buying process or answer questions. Exchanges, on the other hand, usually offer less assistance.

3. Leverage and Derivatives: Some brokers allow traders to use leverage or trade derivatives, although this is not always available on standard exchanges. This can enable larger trades with less capital, but also carries greater risk.

4. Regulation: Depending on the region, many crypto brokers are regulated by financial authorities. This can provide additional security and peace of mind, especially for those concerned about the safety of their investments. However, it is your responsibility to check the regulatory status of the broker you choose.

What should you look for when choosing a crypto broker?

Want to buy crypto? Then you’ll need to consider several factors when selecting a crypto broker:

• Fees: Compare the fees charged by different brokers, including any hidden costs. Some brokers charge a percentage as a commission, while others add a fixed fee or a spread to the transaction price. Compare broker fees here.

• Security: Make sure the broker has strong security measures. Look for brokers that use advanced protection to safeguard you and your assets. See how we at Finst ensure top-level safety for our users.

• Reputation: Check online reviews and other user experiences to gauge the broker's reputation. Reliable brokers have strong ratings and positive user feedback.

• Available cryptocurrencies: Ensure the broker offers the cryptocurrencies you’re interested in. Some brokers offer a wide selection, while others only support the most popular coins. All crypto brokers offer Bitcoin, but some also offer altcoins such as Ethereum, Solana, and Ripple.

• User-friendliness: You as a user should be able to navigate the platform easily. Make sure it provides the tools and features you need for your trading strategy.

Final thoughts

A crypto broker serves as a gateway into the world of cryptocurrencies, offering a convenient and often user-friendly way to buy, sell, and trade digital assets. Whether you're a newcomer looking for an easy entry point or an experienced trader seeking additional services, crypto brokers can be a valuable part of your investment strategy.

However, it’s essential to do thorough research before choosing a broker, as fees, security, and features can vary significantly between platforms. Make the choice that suits you, so you know what to expect and avoid unpleasant surprises.