Before choosing where to buy your cryptocurrency, you’ll want to make sure you understand some key points. You’ll want to consider your security, your services, and where your cryptocurrency will be stored.
You’ll also want to consider how quickly you can buy and sell, how much commission you’ll pay, and the number of coins available to trade. While the list below is not exhaustive, it covers the top things you’ll want to consider when choosing a cryptocurrency exchange.
Exchange fees and insurance policy
If you are new to trading, you should probably start using a beginner-friendly exchange and trading with small amounts until you are confident enough to move to a more advanced one. There are two things that you should consider when choosing the right exchange: fees and insurance.
In the cryptocurrency world, the insurance provided by an exchange is the ability to be able to withdraw your money if the exchange becomes insolvent. This is not to be confused with the ability to deposit and withdraw fiat money.
The latter is something that almost all exchanges provide. Insurance policies in this context are also known as “cold storage,” which is a phrase referring to the offline storage of cryptocurrency funds.
Transparency
Blockchain technology is all about trust and transparency. By facilitating transactions on a completely decentralized system, records of transactions are recorded, and not governed or manipulated by a central body. With that being said, it’s important for exchanges to mirror this core aspect of the blockchain – giving users complete control over their crypto. A lot of exchanges are not transparent with their operations, and that can be a red flag.
When you’re looking at an exchange, be sure to review its website and see if it’s clear and transparent – providing information on how the exchange works and who is behind it, like Etoro or Coinbase. If it’s not transparent and the website doesn’t offer a lot of information, then you might want to avoid using that exchange or proceed with caution.
Reputation
You can’t just go pick any old crypto exchange and start trading on it. You have to be careful with the operations of the exchange you choose. Reputation is everything. It’s the way you’ll know if you’re going to trust the company with your hard-earned money or not.
Take all the time you need to research the company and its history. Did it just start up a few months ago? Or has it been in business for many years? What about the people behind it? Have they been in the business for a long time? Can you trust the exchange enough to hold on to your crypto until you want to cash out?
Reputation is one of the most important factors when choosing a cryptocurrency exchange. If you trade on a platform that is not well-known or reputable, you’re not likely to trade with any confidence knowing that you may be scammed.
In the cryptocurrency world, this is even more important, as there is no government to protect you if you’re scammed. These are the most reputable crypto exchanges, but there are also many new and smaller exchanges that can be just as secure to trade on.
Security
Many people are trading cryptocurrencies, but not all of them are trading on exchanges that are secure. In fact, some people don’t even realize that exchanges can steal their money or fall victim to a hack! The sad truth is that cryptocurrency exchanges are prime targets for hackers because they are largely unregulated, and the amounts of money stored in them can be staggering.
In fact, Coinbase, an exchange that is considered to be one of the most trustworthy, recently lost $1.8 million to hackers. The most trustworthy exchanges will be insured so that in the event of a hack, customers can be compensated for their losses.
One of the most important factors when choosing a cryptocurrency exchange platform is security. You want to make sure that you are protected from hackers and that your funds are safe. Check the security features of the exchange. Does the exchange have cold storage? Does it have 2-factor authentication? Is the exchange regularly audited and in compliance with the latest standards?
The number of coins you can trade
The number of coins you can trade is an important factor when choosing a crypto exchange. The more coins you have, the more choice you will have. There are different exchanges for different coins. For example, if you want to trade bitcoin, you can use a bitcoin exchange, but if you want to trade ripple, you will need to use a ripple exchange. If you want to trade all the different coins, you will need to use several exchanges.
There are hundreds of different crypto coins out there. Some coins will never make it to the top, while others will be used to buy your coffee in the future. If you’re planning to put your money in crypto, you have to think about the long term. If that’s the case, you should be looking for an exchange that supports the most popular coins. That way, you can diversify your portfolio.
Should be legit
There are a lot of companies that are starting out in the crypto market. But there are only a few that are legit. These crypto companies have a history of good customer service and have no hidden policies that you may not know about until after you have invested in them.
It is important to choose a legit crypto exchange to trade on because you do not want to end up with a company that you cannot get your money out of.
Sufficient liquidity
Finding a crypto exchange that has a wide variety of coins available for trade is an important factor when choosing a cryptocurrency exchange. The more popular the coins are, the more tradable they are. When choosing a crypto exchange, the first thing to check is that it has sufficient liquidity in the coins you want to trade in.
Liquidity is the degree to which an asset can be quickly bought or sold in the market without affecting the rate. Having sufficient liquidity is important because it ensures that you can easily sell your coins when you want to.
For example, if an exchange has many USDT-BTC trades and many ETH-BTC trades but very few ETH-XRP trades, then it is likely that users of that exchange prefer to use the USDT-BTC trading pair. This means that there are fewer people using the ETH-XRP trading pair and that the ETH-XRP trading pair is likely to become less liquid and less tradable in the future.