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Your first step into the cryptocurrency world will most likely occur through an exchange or brokerage.
Both these services act as an onboarding ramp for the average person to buy cryptocurrency.
The main distinction between the two is that on a brokerage you’re purchasing directly from a company, whereas exchanges, on the other hand, allow you to transact with other customers directly.
A broker experience is typically catered towards beginners, and what we recommend to almost all of our readers.
Coinbase is the best option for beginners, due to it’s an extremely simple and intuitive interface and competitive fees.
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If we had to summarize the best exchanges and brokerages for Q4 of 2020, they would be:
- Coinbase (Best Beginner Brokerage)
- Coinmama (Best Card Brokerage)
- eToro (Best Social Trading Brokerage)
- Kraken (Best Beginner Cryptocurrency Exchange)
- Coinbase Pro (Best Beginner Exchange)
- Gemini (Lowest Fee Exchange)
Keep reading to learn about brokerages, which we’ll cover in the first part of this guide. The second part of this guide will cover exchanges, the different types, and your best options for choosing one.
What are cryptocurrency brokerages?
Cryptocurrency brokerages are without a doubt the best way for beginners to get involved in cryptocurrency.
Brokers help facilitate the exchange of fiat and cryptocurrency by buying up large amounts of cryptocurrency or the financial asset they offer. Rather than allow users to trade with each other through complicated order books, they simplify the process through a guided user interface.
Why use a cryptocurrency brokerage?
Cryptocurrency brokerages are great, especially for beginners as they are the fastest, simplest, and most trusted way to get your first cryptocurrency.
It’s true, cryptocurrency brokerages will come with a slightly higher fee, due to the extra services they offer, but the fee is very worth the convenience crypto newbies receive.
Below, we’re going to list the cryptocurrency brokerages that we reccomend the most to all of our readers.
Best Cryptocurrency Brokerages
Based out of San Francisco, California, Coinbase is considered by many to be the most beginner-friendly exchange. It accomplishes this through its beautiful yet simple user interface.Coinbase is a brokerage, meaning that instead of buying Bitcoin and other cryptocurrencies from other users, you are buying directly from Coinbase.
As far as fees go, Coinbase charges 1.49% on bank purchases and 3.99% on credit and debit purchases. Due to the lower fees involved, it’s recommended to use your bank account when making large purchases.
Coinbase’s fees are on the lower end compared to other brokerages mentioned later in this guide.
Coinmama is another beginner-friendly cryptocurrency brokerage that focuses on credit and debit card purchases.
They offer instant delivery and sell Bitcoin, Ethereum, Ripple, Litecoin, and more to 40 US States, and most countries.
Coinmama doesn’t provide its users with a wallet on the exchange. Instead, users are asked to provide a wallet address to send the purchased cryptocurrency to.
As long as you have your own wallet, this shouldn’t be an issue!
Coinmama’s fees are slightly higher than Coinbase at 5% when a credit or debit card is used.
Recently, Coinmama has made it possible to sell Bitcoin back to your bank account. This feature is only available in European countries, but it’s likely it will be available to more as time goes on.
eToro is an interesting option when it comes to cryptocurrency brokers. What sets eToro apart is their social trading and copy trading features, allowing you to view the most successful traders on the platform, and mimic their trades as part of your trading strategy.
eToro only supports deposits via bank account, so if you were planning to use a card that won’t be possible. For fees, eToro charges differently depending on the coin. Expect a .75% fee when trading Bitcoin.
What are Cryptocurrency Exchanges?
Cryptocurrency exchanges use order books and other matching engines to allowing users to trade cryptocurrency amongst themselves. Due to the way trading goes down on exchanges, the fees are much lower as the company is providing a less intensive service.
Why use a Cryptocurrency Exchange?
We recommend anyone to use a cryptocurrency exchange if they want to take on more of a challenge when it comes to cryptocurrency investing. Most exchanges user interfaces are not very intuitive and can take some getting used to. That being said, if you can feel comfortable using a P2P exchange, every cryptocurrency investor should seek to use an exchange, simply due to the advantage they give on fees.
Below, we’ll list some of our favorite cryptocurrency exchanges, and ones that members of the Bitpremier team itself use.
Best Cryptocurrency Exchanges
Kraken is another popular exchange based in the United States that’s been around since 2011.
In terms of trading fees, Kraken’s are very fair and scale based on your 30-day trading volume. If you’re a maker, they range from .16% all the way to 0%. Taker fees on Kraken range from .26%-.1%.
For funding options, Kraken offers deposits in USD (FedWire), EUR (SEPA), and CAD(Wire & EFT). Like most other options, if you own cryptocurrency already, they allow for several cryptocurrency assets to be deposited on the exchange.
A unique feature of Kraken is that it allows for margin trading with up to 5x leverage. When margin trading on Kraken, eligible accounts can borrow up to $500,000 to go long or short on a cryptocurrency.
Gemini is an exchange based in New York, US that allows for the trading of USD against Bitcoin, Ethereum, Litecoin, Zcash, and more. For fees on Gemini’s brokerage service, expect 1.49% fees on buys and sells for orders over $200. Gemini’s brokerage service is an intuitive way for beginners to purchase cryptocurrency.
If you feel comfortable using their exchange feature, have your account switched to ActiveTrader mode. On this mode, fees scale base off your trading volume and are between .35% and 0% depending on if you are a maker or taker.
Coinbase Pro is Coinbases cryptocurrency exchange, and one of the lowest fee ways for anyone to trade cryptocurrency. The exchange features several trading pairs, like BTC/USD, BTC/ETH, and many other altcoins and fiat currencies. There will be something for everyone on Coinbase Pro.
As we said above, as long as you can handle the complex interface of a P2P exchange, this will likely be the best way for anyone to buy, sell, and trade cryptocurrency.
Frequently Asked Questions
Do Cryptocurrency Exchanges and Brokerages Track Tax I Owe?
Absolutely! While the IRS hasn’t been very clear on their guidelines for cryptocurrency tax law, they are treating them like normal cryptocurrency at the moment. If you’d like to learn about your different cryptocurrency tax software options, check out our guide!
Here’s an informative slideshow created by the IRS handling cryptocurrency.
How Do I Deposit Into an Exchange?
Depending on what type of exchange you are trying to deposit into, this will differ. If the exchange is a fiat exchange, you must link a payment method such as a bank account, credit card, or debit card.
If it’s a crypto to crypto exchange, you will find a tab or page on the exchange titled wallets, deposits or something of the sort. Click that, and from there you will see a deposit address for every cryptocurrency available on the exchange.
How Do I Withdrawl from an Exchange?
Similarly to deposits, this will vary depending on the type of exchange. Most fiat exchanges allow users to withdraw sold cryptocurrency back into their bank accounts. It is somewhat rare to find an exchange that allows withdrawals to a credit or debit card.
For crypto to crypto exchanges, you can most likely withdrawal from the wallet tab mentioned earlier. You will need to provide another wallets deposit address in order to send the transaction.
Lastly, some exchanges will have limits on withdrawals, that can be improved by verifying your identity.
To recap, cryptocurrency brokerages are the beginner-friendly intuitive options that we recommend to almost all of our readers. Cryptocurrency exchanges are more complex trading engines that offer a fast pace, lower fee trading experience.
Most cryptocurrency exchanges and brokers will serve their intended purpose in letting users buy cryptocurrency listed on the exchange.
The main differences are the exchange fees, customer support, the number of supported coins, and supported countries. To ensure you have access to as many cryptocurrencies as possible, it may be wise to sign up for each exchange.
You should consider a number of things when determining the best Bitcoin/cryptocurrency exchange for you:
- How safe is the website and server? Secure exchanges are better.
- How is the liquidity? The higher the exchange’s volume, the better.
- What are the exchanges fees? The lower the better.
- How is the exchanges customer support?
- What trading pairs are available?
- How many different payment options does it have?
- Is the exchange beginner friendly?
Now that you have a better idea of the distinction between cryptocurrency exchanges and cryptocurrency brokerages, which one are you going to use? Feel free to let us know in the comments below, as well as any other questions you have when it comes to cryptocurrency investing.
- Author Details
Austin Tuwiner Administrator
Austin is the owner of Bitpremier, and got involved in Bitcoin in 2012. After working as a cryptocurrency journalist and and at several blockchain startups, he decided to start Bitpremier and educate the world on Bitcoin.
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