Trading cryptocurrencies is difficult. Using a cryptocurrency exchange may make your life much simpler. But, with so many options, including many that have only been around for a few years, choosing the best one for trading requires caution.
However, although exchanges have made trading cryptocurrency considerably easier, there have also been some major issues, ranging from high-profile security breaches to trading costs that dwarf what investors could spend to trade conventional assets.
As a result, you cannot just accept every trade you come across when exploring the web. Here are seven important criteria to consider while selecting a bitcoin exchange :
1. Determine how many coins you may exchange.
With the rise in popularity of cryptocurrency, there are now up to 10,000 distinct currencies to select from. Because no exchange provides every digital asset, make sure yours does. Consider if you are primarily interested in bitcoin, ether, and the handful of top Defi tokens that power smart contracts, or whether you want a simpler or more sophisticated menu.
Large, well-known exchanges like Coinbase trust wallet and Kraken are excellent places to start since they provide a diverse range of currencies and tokens that can suit most investors, from novices to active traders. Coinbase supports around 450 currencies, whereas Kraken supports over 160 coins, including so-called meme coins like Dogecoin and Shiba Inu coins.
There are exchanges, sometimes headquartered abroad, that allow you to trade hundreds of unusual currencies for the crypto enthusiast.
One word of caution: These don't necessarily adhere to US rules or provide the same degree of investor protection as US stock trading site.
2. The cryptocurrency exchange sites' fees
Every transaction on a crypto exchange is subject to a fee. Before committing to a crypto exchange, it is critical to investigate the costs that are imposed. Fees and billing methods vary from platform to platform since they are established internally. However, in most situations, exchanges charge a portion of each deal.
There are also withdrawal fees and constraints associated with utilizing a trading platform, so traders should consider them before deciding to join up with the crypto exchanges.
3. The platform's security
Hundreds of billions of dollars are constantly exchanged on cryptocurrency platforms. As a result, they are a target for cybercriminals. At least four successful assaults occurred in the first half of 2018, resulting in a loss of more than $750 million. As a result, before selecting to use any crypto exchange, carefully consider how to safeguard exchange of interest.
Most crypto exchanges provide basic safeguards such as two-factor authentication, which is typically accomplished through the use of apps such as Google Authenticator or Authy to create a line of defense against phishing scams or other crypto theft. However, you should keep an eye out for any additional measures. For example, Crypto.com's Exchange mobile app supports biometric login, which uses your smartphone's facial and fingerprint recognition to verify your identity.
To increase security and deter imposters, major exchanges like Kraken and Gemini require you to provide U.S. government-issued identification, such as a passport or driver's license, when opening a new account. They also have additional layers of codes that must be authenticated when you buy or sell, change funding levels, or make major account changes that require a master password, such as freezing your account.
4. The cryptocurrency exchange's reputation
The reputation of a Platform is also a crucial point to consider. In the recent past, crypto exchanges have been hacked or participated in exit scams, incurring losses for consumers. It is consequently recommended that the reputation of the crypto exchange be considered before selecting.
You should search for a well-established exchange, with at least a five-year track record, and that also takes efforts to show it genuinely holds the assets it claims to hold on your behalf.
5. Volume ( Check for appropriate liquidity )
It's critical to pick an exchange that has liquidity (the ability to quickly convert your cash into coins or vice versa) without charging a high markup. This is particularly true in the realm of digital assets, where prices shift quickly. When the price of a coin you want to acquire is skyrocketing, you'll want to know that your buy order is being completed fast and at a price near to the one shown on your screen. (The same goes if you're attempting to sell as one falls back to earth.)
The fastest approach to determine this is to examine an exchange's trade volume: the bigger the volume, the better. CoinMarketCap, a cryptocurrency statistics website, provides the 24-hour trade volume for hundreds of exchanges. Coinbase and Kraken have lately shown the largest trading volume.
6. Cryptocurrency Prices
Because cryptos are decentralized currencies, their values vary from exchange to exchange. This might be due to differences in location and volume, among other things. Before selecting a crypto exchange, users should verify the pricing and make sure they are comfortable with them.
7. Think about the controls.
The New York Stock Exchange, for example, is heavily regulated. Crypto exchanges, on the other hand, are the Wild West. One explanation is that, although the NYSE has been operating for hundreds of years, cryptocurrency has only been around for a little over a decade. Another issue is that Washington is still debating how to best govern the crypto realm, with authorities like the Securities and Exchange Commission and the Commodity Futures Trading Commission competing for supremacy.
It's preferable to search for an exchange that already has security measures and financial audits in place until the dust settles in Washington. At the absolute least, every exchange with whom you operate should be able to demonstrate that it has audited Service Organization Control reports. SOC 1 certifies that the exchange's financial operations and reporting controls are properly planned and functioning, while SOC 2 certifies that the technological systems that power an exchange's security, processing integrity, network availability, and confidentiality controls are in good working order.
Unfortunately, these reports aren't always simple to discover on the websites of exchanges. When exchanges pass SOC 1 and 2 audits, they may issue press statements, as Coinbase did with auditor Grant Thornton in 2020 and Gemini did with Deloitte in 2021. However, if you can't locate proof of these complaints online, it's worth contacting customer support.
You should proceed with care while investing in cryptocurrency, just as you would with any new venture. Every step counts and should be carefully examined, from a thorough introduction to the crypto world to registering an account on a crypto exchange platform to ensuring the safety of your cash.