Getting started with trading cryptocurrencies can be very exhausting for newbie investors and even experienced crypto traders, but a reliable crypto exchange can greatly ease this process.
Crypto exchanges are businesses that serve as secure storage and trading platforms for crypto assets and facilitate transactions between buyers and sellers by connecting them. But with so many options in the market, how can users carefully select a good crypto exchange?
This article will guide us through the essentials of what everyone must consider when selecting a centralized (not decentralized) cryptocurrency exchange.
Things To Consider When Choosing A Cryptocurrency Exchange
Security and Reliability
First and foremost, security. No one wants to lose money, which means if you have to choose a cryptocurrency exchange, you definitely want to use a highly secured platform.
There are several tips on how to choose a secure crypto exchange, one way is to check if the platform offers two-factor authentication. Another way is to check if they have done any security audit recently and lastly, stay away from exchanges with a notable history of cyberattacks or theft.
Two-Factor Authentication (2FA)
With 2FA, you’ll typically receive a code on your mobile device or via email. This code needs to be entered along with your password when you log in to the exchange or before you can make a withdrawal. This acts as an extra layer of security against phishing scams or crypto theft.
Exchanges that store most of their users’ funds in cold storage (i.e., offline wallets) are generally considered safer because they are less susceptible to online attacks.
Regulation and Compliance
You should check if the exchange you are choosing complies with relevant regulations in your country or region. Regulatory laws can offer additional security and legal protection.
Other additional security measures to look out for include whitelisting, KYC policies, multi-sig, etc. In addition to these security options, some cryptocurrency exchanges provide an additional layer of protection through biometric login and facial recognition.
Another important factor to consider when choosing a crypto exchange is the user experience. Look for exchanges that offer an easy-to-navigate platform. Features such as real-time charts, order history, and a straightforward order placement process can make your trading experience more enjoyable and efficient.
Keep in mind that different crypto exchanges may not have all cryptocurrencies or trading pairs available.
So, if you have a specific cryptocurrency or trading pair in mind for buying or trading, be sure to verify that the exchange offers it. Sometimes, exchanges may choose at any time to list or delist a trading pair or cryptocurrency.
A good place to start is Coinbase, which is one of the most popular exchanges for beginners.
Liquidity and Trading Volume
Liquidity is also an important factor when considering exchanges; it refers to how easily cryptos or trading pairs can be purchased or sold at a stable price on a specific market. Exchanges with higher liquidity typically have more active traders and a tighter spread between buy and sell prices. This makes it easier to execute large orders without causing high price fluctuations.
When you check the exchange’s trading volume for your preferred cryptocurrencies or trading pairs, the higher the trading volume, the higher the liquidity, and vice versa.
Trading on crypto exchanges often involves fees, which can grossly affect your overall returns. These fees may include trading fees, withdrawal and deposit fees, maker and taker fees, gas fees, spread fees, etc.
Be sure to understand the fee structure of the exchange you choose.
Deposit and Withdrawal Fees
It is important to keep an eye out for the fees connected to depositing or withdrawing funds from an exchange. These fees can fluctuate depending on the crypto exchange.
According to Bybit,
“Crypto trading fees are collected by a crypto exchange when a user trades crypto, completes a transaction, or invests in a crypto-related financial instrument.”
Compare the trading fees of various exchanges and be sure to find exchanges with fair trading fees. Some exchanges offer tiered fee structures that become more favorable as your trading volume increases. You should consider an exchange with a lower per-transaction fee if you plan on being highly active (i.e., making transactions every day).
Another crucial point to consider is the difference between crypto-to-crypto exchanges and those involving fiat. Some exchanges allow you to deposit funds with regular fiat currencies like USD or EUR, while others exclusively accept cryptocurrency deposits.
When choosing an exchange, make sure it aligns with your preferred payment method.
Some exchanges also have restrictions on users from certain countries or regions. So, make sure the exchange you are choosing is accessible from your location.
When you’re looking for a reliable crypto exchange, make sure to choose one that provides rapid and responsive customer support across multiple channels, such as live chat, email, or phone.
Additionally, check online reviews and forums to gauge the exchange’s reputation for customer service.
If you prefer trading on the go, consider whether the exchange offers a mobile app; not all crypto exchanges do. Mobile apps can provide convenience and flexibility for you as a trader who wants to monitor your portfolio and execute trades from your smartphone.
Ultimately, when choosing a cryptocurrency exchange, getting it right depends on your individual needs, either as a newbie investor or a crypto trader.
With the right exchange, you can continue on your cryptocurrency journey with confidence and security.
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If you're new to the crypto space, seek financial advice from a professional and don’t invest what you cannot afford to lose. This article is for educational purposes and is not financial advice.