If you’re new to the realm of cryptocurrency, cryptocurrency exchanges like Kraken, CoinEgg, Gemini crypto, Poloniex exchange, and Binance exchange may sound like something out of a horror movie. But in reality, they are digital marketplaces where users can buy and trade cryptocurrencies.
To invest in cryptocurrencies like Bitcoin or Ether, you first need to create an account on a specialized trading platform that exchanges traditional currency for digital assets.
Some cryptocurrency trading platforms, like Coinbase, date back to when Bitcoin was first created. At that time, fewer regulations surrounded how crypto could be bought and sold. Other companies, like Robinhood and PayPal, are more well-known for additional services but have only recently begun allowing customers to trade crypto on their existing accounts.
Choosing a suitable crypto exchange is essential for several reasons. Here’s what we recommend evaluating before making your choice for the best crypto trading platform.
What are crypto exchanges?
A cryptocurrency exchange is a marketplace where you can trade digital assets like Bitcoin, Ether, FTX crypto, Coin dcx, and Litecoin. In addition, you can use crypto coin exchanges to buy or sell cryptocurrencies for other cryptocurrencies or Fiat currencies like the US dollar. Exchanges set prices for their crypto coins based on current market conditions. You may also convert your crypto back into fiat currency on an exchange before withdrawing it to your regular bank account.
There’s no such thing as the best crypto exchange for everyone. Instead, what works well for one person might not be ideal for another. It all depends on your interests in cryptocurrency and which exchanges help you achieve your goals. For instance, you want to invest in a particular crypto or expand your understanding of blockchain exchange technology. If you’re looking for the best platform for crypto trading in India, you’ll need to find an exchange that meets your specific needs.
Benefits of crypto exchanges
There are many reasons why you might want to use a crypto exchange. Here are some of the benefits:
Convenience
You can buy and sell cryptocurrency anytime, anywhere. All you need is an internet connection. Crypto exchanges make buying and selling cryptocurrencies much more convenient than if you were to do it directly with another person.
Speed
Exchanges can help you buy or sell cryptocurrency quickly. In most cases, the process only takes a few minutes. Certain exchanges also offer features like stop-loss orders that can automatically sell your coins if the price falls below a certain level, helping you avoid losses.
Fees
Most exchanges charge transaction fees, generally a tiny percentage of the total transaction. Some also charge withdrawal fees when you want to convert crypto into fiat currency and withdraw it to your bank account.
Anonymity
Some people value anonymity and prefer to remain anonymous when buying or selling cryptocurrency. Exchanges can help you buy and sell crypto without revealing your identity.
Limits
Certain exchanges limit how much crypto you can buy or sell in a day. These limits can prevent you from becoming overexposed to a particular asset.
How Can You Be Sure a Cryptocurrency Exchange Is Legitimate?
Most governments in the world do not currently regulate cryptocurrency exchanges. This lack of regulation makes it easier for exchanges to engage in fraudulent activities, like embezzlement and market manipulation.
That’s why it’s essential to research before choosing an exchange. Here are some things to look for:
Reputation
Try to find an exchange with a good reputation. You can read online reviews and check sites like Bitcoin Market Journal to get an idea of what other users think of a particular exchange.
Regulation
As mentioned, most cryptocurrency exchanges are not currently regulated by governments. However, some exchanges are based in countries with more relaxed regulations, like Malta and Estonia. These exchanges may be a good option if you want greater regulatory certainty.
5 Important Factors while choosing crypto exchanges
Jurisdiction
Depending on where you live, you may not be able to use certain exchanges to buy or sell crypto because of state and national regulations. For example, China has banned its citizens from accessing any crypto exchange.
In the United States, cryptocurrency exchanges are subject to many state and federal regulations. For example, New York requires all exchanges to obtain a BitLicense before operating within the state. Additionally, only licensed companies can offer certain approved coins in New York. New York’s digital currency regulations are stricter than most other states, but many states have some form of law or are taking steps to do so.
In most cases, you can find out which countries an exchange is available in by checking its website or terms of service. This information may also include other accessibility factors, like what national currencies are accepted.
Ease of Use
Different exchanges have different levels of complexity. Some, like Coinbase, are geared toward first-time buyers and offer an easy-to-use interface. Others, like Binance, are more complex and cater to experienced traders with features like margin trading.
The level of complexity you’re comfortable with is entirely up to you. If you’re just starting with cryptocurrency, you may want to stick to a more user friendly exchange. Then, as you gain experience, you can move on to an exchange with more features. Best crypto exchanges will have a user-friendly platform and an easy process for buying and selling cryptocurrencies.
Asset Choices
The assets an exchange offers also vary. Some only offer Bitcoin, while others have hundreds of different cryptocurrencies available. If you want to invest in a specific coin, make sure the exchange you choose provides that crypto. Otherwise, you’ll need to use a different exchange or convert your coins to another platform.
Coinbase, for example, offers more than 50 digital currencies, while Binance US only provides around 30.
Cryptocurrency exchanges charge fees for their services. Your specific fee depends on your exchange, but most exchanges charge a percentage of the total transaction value. For example, Binance wallet charges a 0.1% fee on all trades.
Be sure to compare the fees charged by different exchanges before choosing one to use. Some exchanges also offer discounts for specific payment methods or high-volume traders.
Payment Methods
Different exchanges accept different payment methods. The most common are bank transfers, credit/debit card payments, and cryptocurrency deposits. In addition, some exchanges only allow one payment method, while others offer multiple options.
If you want to buy crypto with fiat currency, make sure the exchange you choose accepts your preferred payment method.
Security
Unlike banks and other institutions, a central organization does not support cryptocurrency. Therefore, your holdings are unprotected as compared to the traditional investments. Some exchanges, such as Coinbase and Gemini exchange, attempt to protect their client’s assets by storing them in FDIC-insured bank accounts; however, this insurance does not cover cryptocurrencies. The most secure crypto exchange stores all client assets in cold wallets, which are not connected to the internet and, therefore, cannot be hacked.
Some exchanges have insurance policies to protect the cryptocurrencies that users hold within the exchange from hacking or fraud. For example, Coinbase has an insurance policy worth $255 million. That means if any amount of cryptocurrency up to $255 million was taken in a hack, account holders would be protected by Coinbase’s reserves. Others, like Kraken, rely on their security practices to protect clients rather than using insurance policies.
No matter how long you plan on keeping your cryptocurrency assets in exchange, that doesn’t change the fact that safety should be Exchange’s top priority. For example, you should look into how much of its assets the exchange stores offline in hard storage. As blockchain technology becomes more widespread and latches onto more industries, asset security will only become a more significant concern since there will be exponentially more risk for potential theft.
In 2020, there were 28 attacks on crypto exchanges, the largest of which resulted in more than $200 million in cryptocurrency assets stolen from Singapore-based KuCoin. To protect your crypto assets, research how much of an exchange’s holdings are kept offline in cold storage. Keep in mind that exchanges need to keep some digital currency online to facilitate trades but storing the majority offline makes it much harder for hackers to access. For example, Coinbase holds 98% of customer funds offline, while only 2% is actively traded. That security measure, combined with insurance policy coverage up to $255 million, offers evidence that your crypto assets would be covered in the case of a hack.
Another way to increase online security is by using two-factor authentication, which you might already be familiar with from other crypto exchanges. However, this means that in addition to your username and password, you’ll have to verify your identity each time you log in using an additional method. For example, codes received via text message.
It’s usually wiser to go with more extensive exchanges with more customers and, therefore, more reputable. It may be riskier with newer or smaller exchanges since their security measures and offerings aren’t fully explained on their websites. Size and reputation matters here. Coinbase recently went public on the NASDAQ stock exchange. While there are some benefits and drawbacks, you can now check a company’s financials to get an idea of its health. It is vital when considering whether to use or invest in their services.
Customer Support
When it comes time to make a trade, you’ll want to know that there’s someone there to help if you encounter any trouble. The best exchanges have customer support available 24/7 and offer more than one method of contact, such as phone lines, email addresses, and social media accounts. Some will even provide live chat.
Conclusion
Cryptocurrency exchanges are online platforms where you can buy, sell, or trade cryptocurrencies or government-issued currencies. They’re usually decentralized, so they’re not subject to government regulation. While this might sound ideal, it also comes with some risks.
When choosing a crypto exchange, be sure to consider the factors mentioned above. No matter which exchange you choose, take the necessary precautions to keep your digital assets safe. It includes enabling two-factor authentication and storing most of your holdings offline in cold storage. The best crypto exchanges will be the one that fits your needs and trading style. With the suitable exchange and the appropriate safety measures in place, you’ll be on your way to becoming a pro cryptocurrency trader in no time.
