What is the difference between brokerages and exchanges?

A brokerage is an online service that allows users to buy and sell assets such as stocks, shares or cryptocurrencies with their local currency. Brokerages charge users a fee for using their platform and can offer additional services such as staking and liquidity pools.

Exchanges on the other hand are designed for high-frequency trading, when a trader tries to predict the direction of an asset’s price and buys and sells on shorter time frames to profit from price movements. Similar to brokerages, exchanges charge commission fees on buy and sell orders to make money.

For beginners looking to buy a small amount of crypto and keep it for the long term, brokers are likely the best option. Trading successfully on exchanges requires specialist knowledge of technical indicators, market psychology and risk management and can result in loss of assets if trades go badly.

Although trading for the long term via brokers carries its own risks if prices fall, losing the underlying asset through bad trades will not happen, so it is deemed less risky.