How To Choose Crypto Exchange
Trading and investing in digital forms of assets like Bitcoin and Ether can be hard work for some people, especially beginners. The existence of hundreds of cryptocurrency exchanges worldwide is also not making things simpler for crypto enthusiasts. Moreover, experienced crypto traders also face some challenges. At times, they get stressed about finding new markets. So, how can you select from a large and increasing number of exchanges without having a headache? It is simple if you know what to do.
In this post, we will show you how to choose a cryptocurrency exchange like a professional. It contains helpful tips for beginners and experts. Continue reading!
What is a Cryptocurrency Exchange?
A platform that allows you to buy and sell cryptocurrencies is called a cryptocurrency exchange (or a crypto exchange). It is a digital market that connects buyers and sellers of digital coins and cryptocurrency assets. On a crypto exchange, you can use fiat money like EUR and USD to buy Bitcoin, Ether, or any other cryptocurrency at the current market price. Moreover, you can make fiat-to-crypto, crypto-to-fiat, and crypto-to-crypto transactions on most exchanges.
Types of Exchange
There are three main types of cryptocurrency exchanges: centralized, decentralised, and hybrid.
Centralised Crypto Exchanges (CEX)
A centralised exchange (CEX) is a company that has an online platform for buyers and sellers of cryptocurrencies to meet and do business. Thus, it plays the role of a middleman. In other words, you will have to trust the company to handle your cryptocurrency and help you find buyers or sellers when you register an account on their platform. You can make conversions between a traditional currency, such as the euro, and a cryptocurrency, such as Bitcoin. It can even be between different cryptocurrencies.
The best features of centralised crypto exchanges (CEXs) are their simplicity of use, excellent user interfaces, quick response to customers, high liquidity, and high trading volumes. Many of them allow you to start buying and selling cryptocurrencies after creating an account using their websites or mobile apps.
Many CEXs will require you to verify your identity in compliance with the Know-Your-Customer (KYC) rule and anti-money laundering (AML) regulations after opening your account. Notwithstanding, some will allow you to complete your registration with just your email address.
A CEX, like many other digital platforms, is vulnerable to cyberattack. That is why most leading crypto exchanges continuously provide enhanced security and safety measures and offer insurance to their customers. Examples of popular centralised crypto exchanges are Coinbase and Binance.
Decentralised Crypto Exchanges (DEX)
A decentralised exchange (DEX) is quite similar to a CEX, except that it does not play the role of a middleman but rather facilitates peer-to-peer transactions. It is a platform for buyers and sellers to search for each other and carry out their transactions by themselves.
Decentralised crypto exchanges (DEXs) follow the original philosophy upon which the cryptocurrency industry was founded, that is, no form of central control or intermediary. They use smart contracts and decentralised applications to automate trades and transactions. In addition, DEXs are more difficult to hack than CEXs.
However, users may lose access to their investments if they are careless with their private keys. Also, DEXs are not popularly used and do not have high trading volumes. Examples of decentralised crypto exchanges are Binance DEX, Tokenlon, IDEX, PancakeSwap, and DDEX.
Hybrid Crypto Exchanges
Hybrid crypto exchanges combine the main features of centralised and decentralised exchanges. They use blockchain technology and smart contracts to provide the high liquidity and large trading volumes commonly found at centralised exchanges, as well as the level of safety and security available at decentralised exchanges. Examples of them are Stoxum and Eidoo.
Key Factors That Can Help You Choose an Exchange
Before you choose a crypto exchange, take some time to find out whether it has certain factors in place. You need to ensure that it will offer you an enjoyable experience when trading or investing in cryptocurrencies. What are these key factors? They range from the trading features to the fees.
Trading features
An important step to take in choosing an exchange is to find out the features it offers. They should be in line with your needs. For instance, all crypto exchange platforms have trading engines that come with price charts and other analytical tools for professionals, but not all of them have their own wallets. So, if you need a dedicated digital or mobile wallet for your crypto trading and investment, use a crypto exchange that offers this feature.
Functionality
Every crypto exchange has its own unique combination of different digital currencies, languages, and geographical coverage or target market. Therefore, it is helpful to find out whether the exchange you want to use has the functionality necessary to perform the task that meets your needs.
Tradable coins
With cryptocurrency's growing popularity, there are currently more than 10,000 of them to select from. There is no single exchange that provides all digital coins. For example, as of July 2022, while Binance has over 600 coins listed on its platform, Kraken has more than 100. So, ensure you use a platform that has the coins you want. Decide whether you would like a simpler menu that includes Bitcoin, Ether, and a number of popular cryptocurrencies; or something more complicated, which has top DeFi tokens and can power smart contracts.
Security
It is necessary to be sure that the crypto exchange you want to use has enough security. You should not risk your cryptocurrency investment on a platform that can easily be hacked. Therefore, find out whether it offers strong security features such as two-factor authentication and biometric login via its mobile app. For example, Crypto.com has biometric security features.
User experience (UX)
You will enjoy navigating the exchange if you pay attention to design and user experience. A platform with a straightforward or intuitive design is your best option if you have just started trading. For experienced users, a platform with a sophisticated interface is advised. You can also read online reviews of their customer service. Make sure its support team will be there to answer you if something goes wrong.
Liquidity
Try to find an exchange that has sufficient liquidity, which means one that can allow you to easily turn your cash into coins and vice versa with a low markup. Moreover, you would want to know that your purchase order is completed swiftly and at a price that is quite close to the one you see listed on your screen when the value of a coin you want to buy has reached extreme heights.
Controls
Ensure you check the availability of security controls and financial audits at the stock exchange you want to choose. You can look for this information on its website or call customer service to ask. Besides, when exchanges complete Service Organisation Control reports (SOC) 1 and 2 exams, they may issue press releases, as Coinbase did with auditor Grant Thornton in 2020.
Tax reporting
In the United Kingdom, the United States, Italy, and some other countries, gains from cryptocurrency trading are subject to taxation. You can search for "crypto taxes" on the exchange's website or get in touch with customer care to find out whether and when tax forms will be delivered to you. Ensure you do this if tax reporting is vital to you while looking for a new exchange.
Insurance policy
Nowadays, a lot of exchanges have commercial crime insurance, which usually protects against cyber fraud, damage, dishonesty, theft, and robbery. It is crucial to understand what insurance covers because exchanges provide a large range of insurance options. You may find this information in the user agreement you receive upon sign-up as well as in the FAQ sections of certain websites for cryptocurrency exchanges.
Fees
There is no uniform pricing for crypto exchanges. A platform could charge you a high fee for a fiat money deposit but less if you store cryptocurrencies. So, when choosing a crypto exchange, compare all the fees and pick the one that is most affordable for you. (For examples of the pricing of some leading crypto exchanges, see our answer to the question, "Which crypto exchange has the lowest fees?" in the FAQs section below).
FAQ
The right way to choose a crypto exchange is to compare the options legally allowed for use in your location. Your goal should be to find the one that can meet your needs better than the others when examined based on the following factors: trading features, functionality, number and variety of listed coins, platform/app security, user experience and customer support, the sufficiency of liquidity, controls and financial audits, tax reporting, availability of insurance, and the affordability of its fees.
According to a recent report by BrokerChooser, Coinbase is the safest crypto exchange. However, you can also get a relatively high level of safety and security from other leading exchanges, including Binance, Coinmama, and Kraken.
It is advisable to find out the law concerning the use of the crypto exchange you would like to trade on in your country. In that way, you will avoid certain technical or legal problems. Meanwhile, note that Algeria, Bangladesh, China, Egypt, Iraq, Morocco, Nepal, Qatar, and Tunisia have placed absolute bans on trading crypto.
It is not 100% safe to store your cryptocurrency on an exchange or use their custodial wallets. Such online platforms are considered less secure because cybercriminals may hack the site and steal your valuables. Hence, we recommend using offline wallets or non-custodial wallets, which provide maximum safety as they allow you to have full control over your private keys and your crypto.
Popular opinion has it that Coinmama and Coinbase are the easiest exchanges to use, especially for beginners. They have easy-to-use interfaces that make them convenient to navigate. Their options are quite clear and their converter apps, which are for the estimation of the values of cryptos on the market, are very simple to use. Hence, trading is easy on these platforms.
Kraken, followed by Binance, are the crypto exchanges with the lowest fees. Their prices are among the most competitive in the industry. As of July 2022, the following are the fees at some leading crypto exchanges:
- Crypto.com — 0% to 2.99%, which varies by type of transaction
- Binance — 0.1% to 5%, which depends on the payment method.
- Coinbase — 1% flat fee on all crypto transactions.
- eToro – 1% fee for buying/selling crypto.
- Kraken — 0.9% to 2%, which varies by type of transaction
There are a few ways to avoid paying high fees on your crypto transactions. One option is to use decentralised exchanges, which allow peer-to-peer crypto trading by cutting out middlemen so that they can offer low fees. Alternatively, you can find centralised exchanges that charge lower fees, such as FTX in the United States. A third option is to sign up for “pro” accounts with exchanges like Coinbase (that is, Coinbase Pro) to pay lower fees than standard customers.
All cryptocurrency exchanges charge a variety of fees. Even the branded “zero-fee” crypto exchanges charge fees for certain services, which could be transparent on their website or hidden. Examples of exchanges with little or no fees for certain transactions include Binance (best overall trading platform with no deposit fees) and Crypto.com (best for zero fee stablecoin conversions).
Recommended Cryptocurrency Exchanges and Brokers
As of July 2022, the following are the best-performing crypto exchanges and brokers to choose from:
Binance
Binance is the largest crypto exchange in the world by trading volume. It has over 600 cryptocurrencies. Users can get up to 8% cashback for eligible purchases made with their Visa debit card.
eToro
eToro is the best broker for all kinds of investors. You will find this platform very helpful if you are interested in both cryptocurrency and conventional financial products.
Gemini
Gemini is a regulated crypto exchange for beginners and experts. It offers insurance, KYC, and two-step authentication for security. Gemini is SOC 1 and SOC 2 compliant, which demonstrates its high standard of financial operations. The company passed its audit examinations with Deloitte and Touche LLP in 2021.
Kraken
Kraken is an excellent crypto exchange. Beginners and experienced investors enjoy using this platform. It provides 24/7 customer support. Kraken saves 95% of all deposits in offline cold storage to safeguard your cryptocurrencies and non-fungible tokens (NFTs).
Coinbase
Are you looking for a very fast way to buy cryptocurrencies using fiat money? Try Coinbase. It offers a gateway exchange that is beginner-friendly and suitable for everyone. Coinbase charges no monthly or annual fee. Also, it offers a Visa debit card for fiat and crypto payments.
Coinmama
If you want to trade in a limited number of cryptocurrencies with high safety, Coinmama will meet your expectations. It is a worldwide crypto marketplace with an easy-to-use user interface. Coinmama allows its customers to use any third-party wallet to store their crypto keys and control their accounts.
Crypto.com
On Crypto.com, you can buy and sell over 250 cryptocurrencies. It is one of the fastest and most secure platforms for crypto transactions in the world. Crypto.com allows users to deposit NFTs and swap more than 300 tokens across multiple blockchains.
Alternative Ways to Buy and Sell Cryptocurrencies
There are a few other ways you can buy and sell cryptocurrencies if you are unable to open an account with an exchange. The first alternative is to use a local peer-to-peer (P2P) trading platform like Local Bitcoins, which will connect you with people in your area for offline transactions. Or you can try to use a Bitcoin ATM finder so that you can make your transactions with a crypto debit or credit card. Moreover, you can also find offices where you can buy or sell crypto using popular P2P sites like Bestexchange.
The Bottom Line
The success of your crypto trading and investing can depend on what cryptocurrency exchange you are using. You could be paying too much on fees or getting low-quality services because you are not using the most suitable crypto marketplace. Hence, having shown you how to choose a world-class crypto exchange, we expect you to make a good choice from any of the platforms we have reviewed in this article.
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