Cryptocurrency, and in particular Bitcoin, has become a very popular investment over the last few years. As it is relatively new, at least in the mainstream, most traditional investing platforms do not offer this service. As a result, a swathe of new companies has sprung up offering their services to buy cryptocurrencies. So if you can’t use your traditional Hargreaves Lansdown investment account, how do you pick which platform to use?
Firstly, it’s important to understand the different types of platforms. They can be broken down into two main categories:
- Cryptocurrency exchanges
- Cryptocurrency trading platforms
The exchanges allow you to buy the actual cryptocurrency. This means the asset stays in your name or wallet.
On the other hand, trading platforms hold the asset for you while you buy and sell. Therefore, the asset (ie, crypto coins) stay in their name rather than yours.
With so many news stories about platforms and exchanges being hacked, most investors want the option to move their cryptocurrency to whichever platform they choose. Crucially, this can only be done on an exchange.
If you are looking to buy and hold for the long term and want to store your Bitcoin safely away from a platform, then you’ll need to use an exchange. On the other hand, if you plan to buy and sell Bitcoin frequently, then a platform may be easier.