• Thu. Apr 18th, 2024

How to Choose a Cryptocurrency Exchange – Everything to Know

May 9, 2023

Cryptocurrencies have taken the entire world by a storm and after the bull-run they experienced in 2020, it is not surprising that people all over the world are taking an interest in them. As they become more and more mainstream, many would want to know how to buy, sell or trade cryptocurrencies. After all, who doesn’t want to make some profits? If you are interested in doing any of these things, then what you need to look for is a cryptocurrency exchange because this is exactly what they are created for; buying, selling, and trading cryptocurrencies. 

If you don’t have access to a cryptocurrency exchange, buying and selling digital assets is going to be immensely difficult for you. Some alternatives have been introduced, but crypto exchanges still remain the most popular way of purchasing a wide array of cryptocurrencies. A quick search will tell you that there are hundreds of crypto exchanges that exist nowadays. Initially, there were only a handful of names in the space, but they have increased tenfold, in accordance with the popularity of the digital currencies themselves. But, even so, it is essential to remember that this doesn’t mean that any cryptocurrency exchange is a good one.

No two exchanges have been created equal and if you talk to an experienced or seasoned crypto trader about the first time they bought Bitcoin, they are probably going to tell you stories of how they ended up wasting a huge amount of time and money in dealing with buggy, expensive and downright incompetent exchanges in the beginning. It takes time to learn how to distinguish the good from the bad, but this doesn’t mean that you have to go through the whole experience firsthand. You can learn from the mistakes of others and figure out how to choose the right crypto exchange for you.

Rather than jumping on any random cryptocurrency exchange and signing up for their services, you need to consider a bunch of factors in order to determine if it is a good choice or not. There are a number of factors that can have an impact on your final decision and you shouldn’t ignore them at any cost. It can take some time and effort to find the best cryptocurrency exchange for you, but you will discover eventually that it is certainly worth the effort because you will be able to have a smooth experience when you wish to buy, sell or trade any cryptocurrency. 

One easy way for you to sift through the many cryptocurrency exchanges that exist in the market is to simply read the customer reviews that can be found online. There are plenty of such reviews that can be found, but it should be noted that some of these can be paid as well, which does make this option a bit risky. Moreover, you also need to be able to distinguish between crypto-to-fiat and crypto-to-crypto exchanges. The former exchange allows you to purchase and sell the cryptocurrency of your choice with pounds, dollars, yen, euros, and other currencies, while the latter only lists cryptocurrency pairs.

Moving onto the actual process of choosing an exchange, you should bear in mind that your mileage can be different. You may be after an exchange that offers specific trading pairs, altcoins, and additional features, such as over-the-counter (OTC) deals or margin trading. Once you have found an exchange that can fulfill your basic requirements, you need to consider the following factors in order to ensure it lives up to all your expectations:

Security

Perhaps, the most important factor that you need to assess when you are searching for a crypto exchange is security. The crypto space has had its share of breaches that have resulted in heavy losses for people and you certainly don’t want to suffer from the same fate. If an exchange doesn’t provide adequate security, there is a possibility that your funds can be stolen, which means any other advantages it offers will be utterly worthless. No one wants to lose their hard-earned money, so it is best to start with security when you are looking for a reliable cryptocurrency exchange. 

Technology

Assessing the technology of the cryptocurrency exchange can actually help you in knowing exactly how secure and updated it is. You need to ensure that its web address begins with HTTPS because that is an indication of security and you need to avoid all exchanges that have HTTP connections. In addition, you should ensure that the exchange of your choice uses two-factor authentication, which means a username and password, along with a piece of information you have, for login purposes. 

The exchange should use cold storage for all customer deposits in order to keep them offline. You will also get additional security guarantees if the exchange sends email and SMS alerts and there are auditing programs in place that monitor all activity 24/7. 

Legal aspects 

It is also a good idea for you to choose a crypto exchange that operates in your own country, as this can make it easier to comply with the regulatory requirements. However, you can use an exchange that operates in a different country, but make sure they support the country you are in. You should also make an effort to see if the exchange you are considering insures its funds because that will ensure that if your funds are lost, you will still be reimbursed.

Transparency 

Before finalizing a cryptocurrency exchange, you should check whether it reveals its headquarter address, information about the owners and details of the members of its team. It should also be transparent in other ways like publishing its cold storage address or helping in checking the reserves through audit information.

Liquidity 

The liquidity of a cryptocurrency exchange depends on its trading volume. With liquidity, it is easier to make transactions, as they complete faster and you don’t have to worry about price volatility. Moreover, you should also check whether an exchange offers ‘locked-in’ pricing because this will guarantee you the price when you are making a transaction, in case it is not settled right away. You should also note that liquidity can vary for trading pairs. For instance, it can be high in the case of BTC/EUR, but lower for BTC/GBP. 

Fees 

You should do a comparison of all the fees charged by various exchanges. They should be less than 1% per transaction and often fall in the case of higher trading volumes. It is also smart to check the withdrawal fees, as some exchanges are known to have unreasonably high withdrawal fees. Deposit fees also require some attention. Some exchanges allow users to buy crypto with a debit or credit card, but these come with a higher fee.

User Experience

An important thing to check in a cryptocurrency exchange is if the user interface is easy to use and simple, both on a desktop PC and a mobile device. It should be easy to navigate and shouldn’t have a learning curve because this can make it difficult for you to buy, sell, or trade crypto.

Keeping these factors in mind when you are going through the numerous options will make it easy to choose a trustworthy and reliable cryptocurrency exchange.

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