The stock market is to stocks as crypto exchanges are to cryptocurrencies. A cryptocurrency exchange is a place where you can buy and sell cryptocurrencies at regulated pricing. Unlike the stock market, crypto exchanges aren't centralized or regulated.
When choosing a crypto exchange, the trader must make sure that they are picking an exchange that gives them the best chance of success. In this article, we'll be looking at six questions you have to tick off before settling on an exchange:
What are people saying about it?
Although crypto is still a new industry, some exchanges have already made a name as the best places to trade. If you’re dealing with a much newer exchange, you can look up the reviews, so you know what to expect. For instance, this complete review of Bitcoin Pro gives the details of what to expect when you download the application.
Is it secure?
Since crypto is convertible to cash, you have to be concerned about the security of your account. All exchanges have their way of protecting users’ accounts. However, the most common method offered by exchanges is two-factor authentication (2FA). If the exchange you plan on using doesn't offer 2FA, they may not be up to date security-wise.
Can you convert your crypto to fiat?
For all the good that crypto promises, it's still not useful for most day to day transactions. That means that traders will have to convert their monies from fiat to crypto and back when it's needed.
Most exchanges offer some kind of conversion, typically based on whether they are geographically available in that region or not. You should check to see if they work with any of your banks and convert to your currency.
How does asset pricing compare?
Interestingly, one of the perks of the unregulated crypto market is that the prices aren't uniform. The price of some altcoins on certain exchanges differs significantly from those on others. This discrepancy might be due to location. Chinese exchanges can sometimes pump more, causing a rise in price. It can be beneficial to those who trade altcoins.
Price discrepancies may also be a factor of low volume in the market, which isn't a good sign.
What assets do they have?
Popular assets like Ethereum (ETH), Bitcoin (BTC), Litecoin (LTC), and Ripple (XRP) are usually available on all exchanges. However, the availability of the other smaller, lesser-known crypto assets varies from exchange to exchange.
Depending on your needs, you may either want an exchange with an extensive list of assets or one with specific assets that you’re interested in trading.
What fees do they charge?
All exchanges charge fees on trades. Usually, the fees are a percentage of the trade amount. The exact percentage changes depending on the exchange. These fees are particularly crucial to small-time traders who rely on small margins to make profits.
The trading fee may also vary based on the amount being traded. Some exchanges also charge withdrawal fees for when you want to change your crypto back to fiat.
It's crucial to do your own research before settling on any exchange. If it’s a new exchange without a lot of customer reviews, make sure to do a deep dive into their history until you’re convinced. With the tips you’ve received in this article, you’re well on your way to choosing an exchange that’s the best fit for you.