Best Platforms To Invest In Bitcoin: Your Ultimate Guide

Bitcoin has evolved from an obscure digital token used by a small group of people to a payment method and store of value that millions believe is the currency of the future. There are several platforms and exchanges that allow you to invest in Bitcoin, each with its own pros and cons. Here are some of the most popular platforms:

- Coinbase: One of the largest selections of cryptocurrencies in the US with a deep bench of available cryptocurrencies. Coinbase isn't the cheapest place to buy and sell cryptocurrencies, but it is one of the most versatile.

- Gemini Exchange: Offers a nice range of cryptocurrencies and a simple-to-use app experience. Popular with beginner investors, Gemini prides itself on its security and is available in all 50 US states.

- Robinhood: You can buy and sell Bitcoin, other cryptocurrencies, stocks, and options with no transaction fee. Plus, outside of the platforms that are solely made for cryptocurrency, Robinhood has one of the best crypto selections out there.

- eToro: The versatile trading platform is a standout, as is the CopyTrader feature that allows you to copy your favourite investors. It has a broad range of products for investors who want to manage all their assets in one place.

- Cash App: One of the most user-friendly ways for beginners to trade Bitcoin. There's no separate account needed -- if you use the Cash App to send money, you're already equipped to buy Bitcoin and stocks.

Crypto exchange vs. broker

There are two main ways to purchase or sell your Bitcoin: through a broker or a crypto exchange. Here are some of the key differences between the two to help you decide which one is the better option for you.

Crypto brokers are individuals or firms that act as financial intermediaries for people who wish to exchange their cryptocurrency for a different one or for money. They usually charge a premium for the use of their platform. Crypto brokers can be platforms, businesses, or individuals. Crypto brokers are regulated by financial authorities and are considered safer for larger amounts of money. However, they often charge higher fees than crypto exchanges. Examples of crypto brokers include Bitpanda and eToro.

A crypto exchange is a platform that allows users to buy, sell, and trade cryptocurrencies directly with other users without a third party. Crypto exchanges offer a wider variety of cryptocurrencies and generally do not regulate the number of crypto and fiat currencies that can be traded. They are also usually more user-friendly and accessible than brokers. Examples of crypto exchanges include Coinbase, Kraken, Crypto.com, and Binance.

Main Differences

When using a crypto exchange, a person can only use the currency they have to exchange it for whatever they want and then exchange that for whatever they want. Crypto brokers, on the other hand, allow their users to use whatever the broker's account has available for deposits and trades, skipping the steps of having to do multiple trades. Crypto exchanges are generally better for smaller amounts of money, while crypto brokers are often better for larger amounts as they are considered safer.

Your choice between a crypto broker and a crypto exchange depends on your needs and preferences. If you are looking to trade a wide range of cryptocurrencies and want more control over your trades, a crypto exchange may be more suitable. On the other hand, if you value safety and convenience, especially for larger amounts of money, a crypto broker may be the better option. Additionally, crypto brokers are generally better for beginners, while crypto exchanges are more suitable for experienced traders.

Crypto exchange fees

There are also other, less common fees that some crypto exchanges may charge. These include:

• Account maintenance fees
• Inactivity fees
• Margin trading fees
• Special trading feature fees

The fees charged by an exchange will depend on several factors, including the type of exchange (centralized or decentralized), trading volume and frequency, user location and regulatory environment, and the type of cryptocurrency being traded.

Crypto exchange security

Distributed Key Schemes

Crypto exchanges often employ distributed key schemes, where private keys are split into different components, ensuring no single entity has complete control over the main wallet. While this enhances security by distributing access, it also introduces potential vulnerabilities. For instance, a malicious key holder could manipulate key components, preventing the exchange from accessing funds.

Two-Factor Authentication

Two-factor authentication is a standard security measure recommended by many crypto exchanges, including HitBTC. This adds an extra layer of protection, requiring users to provide something they know (a password) and something they have (a code sent to their phone or email). This makes it harder for unauthorized individuals to access accounts.

Cold Storage

Cold storage, or storing cryptocurrencies offline in cold wallets, is considered a more secure option than hot wallets, which are connected to the internet. By keeping the majority of funds in cold storage, exchanges reduce the potential impact of hacking attempts, as these funds are more challenging to access.

Advanced Encryption and Whitelisting

HitBTC, one of the oldest crypto exchanges, utilizes advanced encryption technology and encourages users to whitelist withdrawals. Encryption ensures that data is secure and unreadable to unauthorized individuals, while whitelisting allows users to pre-approve specific withdrawal addresses, reducing the risk of funds being sent to incorrect or malicious addresses.

Regulatory Compliance

Reputable crypto exchanges also prioritize regulatory compliance, adhering to Know Your Customer (KYC) and Anti-Money Laundering (AML) standards. This helps to prevent fraud, ensure user funds are protected, and maintain the exchange's legitimacy.

Insurance and User Funds Protection

Some exchanges, like Gemini, offer insurance for user funds held in hot wallets. This provides an additional layer of protection in the event of a security breach. Additionally, exchanges like Coinbase store U.S. dollar balances in Federal Deposit Insurance Corporation (FDIC)-insured bank accounts, safeguarding user funds.

User Education and Awareness

Exchanges should also focus on educating users about potential security threats and best practices. This includes raising awareness about social engineering scams, phishing attempts, and the importance of secure passwords and two-factor authentication.

In summary, while crypto exchange security has improved, ongoing threats from hackers and malicious actors persist. To protect their investments, users should carefully select crypto exchanges with robust security measures, regulatory compliance, and a strong track record of safeguarding user funds.

Crypto exchange selection

With so many crypto exchange options available, it can be challenging to decide which one to use. Here are some factors to consider when choosing a crypto exchange:

• Fees: Crypto exchanges typically charge trading fees, withdrawal fees, and sometimes deposit fees. It's important to understand the fee structure of each exchange before making a decision. Some exchanges, like Robinhood, offer commission-free trading, while others, like Coinbase, charge a spread markup and transaction fees.
• Cryptocurrency selection: The number of cryptocurrencies offered varies widely among exchanges. If you're interested in trading a specific cryptocurrency or want access to a wide range of options, look for an exchange with a large selection. Crypto.com, for example, offers over 350 cryptocurrencies, while Fidelity Crypto only offers two.
• Advanced trading options: Some exchanges cater to advanced traders by offering features like crypto derivatives, margin trading, and customisable alerts. For example, Gemini offers a platform called ActiveTrader with advanced features for active traders.
• Customer service: The quality of customer service can vary significantly between exchanges. Some exchanges, like Coinbase, are known for their user-friendly interface and robust support, while others, like Kraken, have been criticised for poor customer service.
• Security and insurance: The safety of your funds is a critical consideration when choosing an exchange. Look for exchanges that store the majority of their users' funds in cold storage and provide insurance to protect against theft. It's also essential to enable two-factor authentication and other security measures on your account.
• Regulation and compliance: Crypto exchanges are subject to varying degrees of regulation and compliance with financial authorities. The collapse of FTX in 2022 highlighted the risks of investing in unregulated exchanges. When choosing an exchange, consider the level of regulatory oversight and compliance with securities laws.
• User experience: The user interface and overall user experience can vary significantly between exchanges. Some exchanges, like Coinbase and Robinhood, are known for their user-friendly platforms, while others may be more challenging to navigate.
• Staking and rewards programs: Some exchanges offer rewards programs that allow users to earn interest or other perks by staking their crypto assets. For example, Coinbase offers staking rewards of up to 12% APY. However, it's important to note that some exchanges have had issues with their rewards programs, such as freezing withdrawals due to liquidity issues.
• Payment methods: Consider the payment methods accepted by the exchange. Most exchanges support wire transfers, while others may also allow credit card, debit card, or ACH transfers. The payment method can impact the fees you pay for deposits and withdrawals.

When selecting a crypto exchange, it's important to research and compare multiple options based on these factors. It's also a good idea to read reviews and feedback from other users to get a sense of their experiences with the exchange. Remember that crypto investing carries significant risks, so approach it with caution and only invest what you can afford to lose.

Crypto exchange user experience

The user experience of crypto exchanges varies depending on the platform. Here are some of the best crypto exchanges in terms of user experience:

Coinbase

Coinbase is one of the most popular and user-friendly crypto exchanges. It offers a wide range of cryptocurrencies, including Bitcoin, Ethereum, Litecoin, and over 30 others. Coinbase provides a high level of security and trustworthiness and is available in over 100 countries. However, it charges high fees unless users opt for Coinbase Pro. It also does not allow users to control their private keys in the wallet and can be slow to adopt popular new cryptocurrencies.

Gemini

Gemini is another popular platform for investing in crypto, known for its ease of use. It offers a mobile app with a simple and intuitive interface, making it a good choice for beginners. Gemini supports most major cryptocurrencies and pays competitive interest rates on assets. It also has strong security measures in place, such as two-factor authentication and device approval. However, it has limited payment and deposit methods, and customer service can be mixed.

Crypto.com

Crypto.com is a fast-growing crypto exchange that offers a user-friendly mobile app. It provides access to a wide range of cryptocurrencies, with over 90 tokens and coins available worldwide and 50 in the United States. The app allows users to buy, sell, trade, and earn interest on their crypto. However, it is only available on mobile and does not have a desktop platform. Customer support is also limited.

Kraken

Kraken is a well-established crypto exchange with a good selection of coins and tokens. It offers advanced trading features such as margin trading and crypto derivatives. The platform provides a high level of security and is trusted by many users. However, it is not as easy to use as some other platforms and has been reported to have poor customer service.

Robinhood

Robinhood is a traditional stock brokerage platform that also offers crypto trading. It stands out for its simplicity and ease of use, making it a good choice for beginners. Robinhood allows users to buy, sell, and hold Bitcoin, Ethereum, and other cryptocurrencies with no commissions. However, it has limited crypto-to-crypto trading options and does not support as many tokens and coins as dedicated crypto exchanges.

Frequently asked questions