What Is an Intermediary/Middleman?
An intermediary or middleman refers to financial institutions such as crypto exchanges, investment banks, financial advisors, credit unions, mutual funds, and investment trusts.
Intermediaries’ Cost Advantages
One of the significant benefits of utilizing an intermediary is the potential for lower costs.
However, it is important to note that many platforms may add a margin to generate profits.
Exchanges can often achieve economies of scale, leading to lower transaction fees.
Additionally, selling cryptocurrencies quickly without experiencing price slippage can be more straightforward.
However, there can be downsides to relying on intermediaries.
Decentralized exchanges and peer-to-peer alternatives can offer increased anonymity and, at times, reduced fees.
Centralized Exchange Risks
Another concern is the possibility of outages.
Some centralized exchanges have suspended withdrawals abruptly due to police investigations, leaving investors unable to access their funds.
Certain platforms have also gained a negative reputation for going offline during significant price movements of cryptocurrencies like Bitcoin.
It is crucial for traders to conduct their own research before engaging with a middleman and to select platforms with strong user reviews and a solid reputation built over years of experience.
This is especially important considering that less reputable companies may inflate trading volumes to appear larger than they actually are.