So you want to choose a crypto exchange but don’t know where to start? Our guide will show you everything you need to get started in choosing a cryptocurrency exchange.
What is a cryptocurrency exchange?
A crypto exchange is a platform where you can trade cryptocurrencies. dollar (USD). If you want to buy cryptocurrency like Bitcoin (BTC), you can do so using a regular currency like the U.S. dollar (USD) on an exchange. Dollar. Trading one cryptocurrency for another is also an option, such as exchanging Bitcoin for Ethereum.
The prices of cryptocurrencies on exchanges reflect the current market prices. You can also convert cryptocurrencies back into the U.S. You can cash out your investment in dollars or another currency by exchanging it on an exchange, or you can withdraw your portfolio, including any profits, to your regular bank account.
How to choose a cryptocurrency exchange
1) Level of expertise
Crypto exchanges are designed to accommodate users with varying levels of experience. Since you are reading this, I assume that you are a beginner. The majority of large cryptocurrency exchanges, like Binance and Coinbase, are built for people who are new to the industry. These platforms have simple, minimalist interfaces and easy processes. Exchanges aren’t bad— they understand that most new investors just want to get in, buy some crypto, and leave.
If you want to trade more complex products such as margins or spot trades, there are some platforms that offer this. Before signing up for an exchange, investigate what kind of extra features the exchange offers.
2) Fees
A cryptocurrency exchange will make money by being attached to some of the financial momentum that is flowing through it. These fees include:
- Transaction fees —?the primary source of revenue for exchanges. They are typically charged on both fiat-crypto trades as well as crypto-crypto trades.
- Deposit/Withdrawal fees —?some exchanges charge fees for deposits and/or withdrawals. Deposit fees vary based on the type of deposit but are less common than withdrawal fees since exchanges want to incentivize users to fund their account.
Think about how the fees would affect your investing, depending on your approach. Are you looking to make a lot of transactions every day? If you’re looking to save on fees, you might want to consider using a service that charges lower fees per transaction. If you don’t plan on making transactions often, these fees won’t be as big of a problem and you should focus on other features like security.
3) Security
Some people argue that it is better for an exchange to be difficult to sign up for. If an exchange is not trustworthy, it is easy to generate an account.
KYC
This means providing your name, Social Security number, physical address, and date of birth Most exchanges require you to provide some personal information, like your name, Social Security number, address, and date of birth, in order to verify your identity. This process is called “know your customer” or KYC. If your digital assets are stolen and you don’t have KYC, it will be much harder to track down and get your money back.
If you don’t want to input your personal information, there are various centralised exchanges that allow you to trade crypto without a KYC verification process. The safest option for exchanges with no KYC requirements is detailed in our guide here.
Two factor authentication
If a platform has two factor authentication, it’s an indicator that the company takes security seriously. The extra security that 2FA offers is unbeatable, even though it can be annoying for users when logging in. Password managers prevent password breaches by immediately neutralizing risks associated with compromised passwords. If a password is hacked, guessed, or even phished, the intruder will not have access. A password is only useful if it is approved at the second factor.
Federal Deposit Insurance Corporation (for US users)
The FDIC is a US government agency that insures deposits in US banks. The organization was established during the great depression to help rebuild public trust in the banking system. Many exchanges permit the Federal Deposit Insurance Corporation (FDIC) to insure deposits of up to $250,000 per person.
4) Available cryptocurrencies
Not all exchanges will support all coins, so you need to make sure that the coins you want to trade are available. It’s important to make sure that the exchange you choose supports the coins you want to trade. The size of the exchange does not always dictate the number of coins offered. You definitely don’t want to sign up to an exchange only to find out they don’t offer the coin you want.
Gemini is an example of a popular and successful exchange. This platform only offers 63 digital currencies for its users. Binance coin holders can only hold a maximum of 60 coins at any one time if they are based in the US. This is because Binance only allows US users to hold a limited number of coins. This is not a problem if you only invest in large cryptocurrencies like BTC and ETH, but if you are looking for less well-known altcoins, you may want to look elsewhere.
5) Special features
Each exchange has its own unique perks and advantages that might be more appealing to some users than others. There are two special features that may persuade you to use one app over the other.
Native currencies
Some crypto exchanges offer native currencies. They are useful because they offer discounts on trading fees. Binance’s native currency, BNB, is a great example of a native token.
Stablecoins
Some exchanges offer their own stablecoins which can give you discounts and lower trading fees if you pay using their stablecoin.
A stablecoin is a digital currency that is pegged to a reserve asset that is not subject to large fluctuations, such as the U.S. dollar or gold. Stablecoins are designed to be less volatile than Bitcoin and other unpegged cryptocurrencies.
Interest
In addition to stablecoins, exchanges such as BlockFi and Gemini offer their users the opportunity to earn compound interest on their crypto holdings. Compound interest savings accounts allow users to earn interest not only on their original deposit, but also on the interest that has accumulated over a specified period. Although compound interest has been around for centuries in traditional finance, it is only now available on certain crypto exchanges.
6) Reputation
What’s the reputation of the crypto exchange? I hope that this thing has a good reputation, just like Taylor Swift.
How long has the crypto exchange been operating? Are they trustworthy?
Although trust is normally built up over time, it is possible to identify trustworthy companies beforehand.
It is best to find a crypto exchange through referrals from friends or family.
Look to answer the following questions:
- Does the exchange have a reputation as a secure and reliable platform?
- Where does it excel and where does it fall short?
- Would they recommend the crypto exchange to friends and family? Their grandma? Or would they only recommend them to their worst enemies?
7) Does it have any geographical restrictions?
Only individuals from certain countries are allowed to open an account and trade on some exchanges due to regulatory requirements.
Some cryptocurrency exchanges do not allow United States citizens to use their platforms.
Choose an exchange that is not restricted to citizens or residents of your country.
Each exchange may have a separate website for each country it serves.
8) Does it allow you to trade crypto with fiat?
When deciding what type of account to open, you should think about the kinds of transactions you’ll most often need to make. Crypto exchanges offer:
- Fiat-to-crypto trading
- Crypto-to-crypto trading
- Both fiat-to-crypto and crypto-to-crypto trading
The crypto exchange will only accept certain fiat currencies for deposit. You will need to check which ones before buying crypto.
If you’re looking to buy BTC using USD, you’ll need to find a cryptocurrency exchange that allows you to purchase digital coins using American dollars.
If you want to exchange your BTC for another cryptocurrency, like ETH, you will need to find a trading platform that offers crypto-to-crypto trades.
9) Is their trading platform easy to use?
If you’re new to cryptocurrencies, it can be difficult to learn how to buy and sell them.
It is important to consider usability, or “user-friendliness”, when choosing a new trading platform as a poor user experience could lead to mistakes or enough frustration to cause the trader to give up altogether.
If you’re new to cryptocurrency, try to find a crypto exchange with a user interface that’s easy to understand from the start.
The majority of well-known crypto exchanges have visually straightforward layouts that work for both desktop and mobile applications, and usually don’t offer a lot of features.
This is a good thing for beginners as cryptocurrency is usually a unstable asset class, so it is best to stay away from active trading and/or complicated order structures at first.
Additionally, choose exchanges that have a good reputation for easy-to-use support features, in case you need help navigating the platform.
As you become more experienced and skillful, you may want additional features, such as advanced order types, candlestick charts, and the ability to trade using leverage with margin.
Do not completely ignore platforms with certain capabilities, but give more importance to simplicity when first starting out.
Other exchanges’ trading platforms can be explored as you gain more trading experience.
10) How is their customer support?
If you have an issue with a particular transaction or your account in general, will you be able to contact the customer support of the crypto exchange?
Will they be able to resolve your issue promptly?
Evaluating a crypto exchange’s customer service allows you to understand how much the company values its customers and how well it is funded.
If a company provides excellent customer service, it is a sign that the company is reputable, even though excellent customer service is not inexpensive.
Here are some things to look for:
- What customer support channels are available? Phone? Email? Live chat?
- Is customer support available 24/7 or only during specific hours?
- Is there an online support portal where you can submit a support ticket?
- Does the exchange provide a support section on their website that offer answers to frequently asked questions?
It is advisable to contact customer support for a crypto exchange before creating an account to get a sense of how responsive they are.
Then ask yourself the following questions:
- How fast was the response?
- Did an actual person reply? Or was it an automated reply?
- Were they able to answer your question to your satisfaction?
You want a prompt response by a competent human.
11) What are their deposit and withdrawal methods?
What are the available methods for depositing and withdrawing money on the exchange?
Examples of deposit methods or “funding methods” include:
- Bank transfer
- Wire transfer
- A debit card or credit card
- PayPal, Neteller, Skrill, and other online payment services
- Cryptocurrency transfer
Choose an exchange that has deposit and withdrawal methods that you are comfortable with.
The more ways an exchange has for you to deposit money, the more likely it is to be convenient for you to funding your account.
Although it may be more convenient to have more options to choose from when funding your account, remember to consider the pros and cons of each method of deposit and withdrawal.
Though methods with faster processing times generally have higher fees, you can often use a credit card for quicker transactions. Some methods of payment are slower than others, but have lower fees, such as bank transfer.
12) What are their deposit and withdrawal processing times?
Remember to check the amount of time it takes for different deposit and withdrawal methods to be processed.
The time it takes for your deposit to be processed depends on your bank. Generally, it takes between 1-5 business days for the deposit to be completed.
If you don’t want to miss out on a trading opportunity, you need to make sure your funds arrive quickly to be deposited into your crypto exchange account.
When will my withdrawal be processed?
Make sure you know how long it will take to get your money out of the account before you open it. Waiting for weeks to get your money after withdrawing it from your bank account or crypto wallet is frustrating.
There is no use in buying and selling cryptocurrency if it takes a long time to withdraw the money you make or if you can’t withdraw the money at all.
13) Are there any deposit or withdrawal limits?
What is the maximum amount you are allowed to deposit into your account?
There are limits that can be applied to each transaction or that are based on time, like daily or weekly limits. There are limits on how much you can spend when you use a credit card, which are lower than the limits for bank or wire transfers.
It is important to ensure that you are not exceeding the maximum amount you are allowed to deposit into your account.
Is there a limit to how much you can take out of your account at one time?
Some exchanges set a limit on how much you can withdraw at one time. This can be frustrating if you want to withdraw a large amount because you can only withdraw a limited amount each day.
Make sure you check to see if there are any limits on how much you can take out of your account.
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