Cryptocurrency exchanges facilitate the buying, selling, and trading of cryptocurrencies. Without access to a cryptocurrency exchange, the ability to purchase or sell digital assets is restricted. However, it is important to note that not all cryptocurrency exchanges are reliable. Experienced crypto OGs or traders often recount their initial Bitcoin purchase experiences, which involved wasting substantial amounts of money and time due to dealing with inefficient, faulty, or expensive exchanges. Learning to distinguish between trustworthy and subpar exchanges takes time, but this article will assist you in making the right choice from the start.
This guide will provide you with the necessary information to select the most suitable cryptocurrency exchange for your needs.
What to consider when choosing a crypto exchange
Before engaging in any recommended exchange, it is essential to take into account various factors. These factors encompass exchange security, liquidity, fees, historical performance, available markets, and user experience. The process of finding the most suitable cryptocurrency exchange may require a significant amount of time and effort, yet the outcome is undoubtedly worthwhile.
Moreover, it is crucial to differentiate between crypto-to-crypto and crypto-to-fiat exchanges. Crypto-to-crypto exchanges exclusively offer cryptocurrency pairs for trading, whereas fiat-to-crypto exchanges facilitate the purchase and sale of cryptocurrencies using major currencies such as dollars, euros, pounds, yen, and others.
How to pick the best cryptocurrency exchange?
When selecting an exchange, it is essential to consider that outcomes may differ. It is advisable to opt for an exchange that accommodates specific altcoins, trading pairs, and supplementary features like margin trading or over-the-counter (OTC) deals.
Furthermore, after identifying an exchange that fulfills your fundamental criteria, it is important to assess these additional factors.
1. Security:
Security is the paramount aspect of an exchange. If an exchange lacks security measures, there is a risk of funds being stolen, rendering any other benefits it offers meaningless. To avoid losing your money, it is important to consider the following factors.
2. Technology:
Ensure that the exchange’s web address begins with HTTPS and avoid HTTP connections.
For enhanced login security, opt for exchanges that employ two-factor authentication, requiring both a username and password along with a unique piece of information known only to you.
Customer deposits should be stored offline in “cold storage” to minimize vulnerability.
Exchange customers can benefit from auditing programs that monitor exchange activity around the clock, as well as SMS and email alerts, which provide additional security guarantees.
For maximum security, it may be advisable to whitelist your IP address or withdrawal wallet addresses.
3. Legal aspects:
It is advisable to use an exchange located in the same country as you, as this can facilitate compliance with regulatory changes. However, it is also possible to use exchanges in other countries, keeping in mind that some exchanges may only support a restricted number of countries.
Certain exchanges may offer insurance for funds, providing potential reimbursement in the event of fund loss.
4. Transparency:
Does the exchange disclose information about its owners, headquarters address, and team members?
Transparent exchanges also make their cold storage address public or provide means to verify their reserves, such as through audit information.
Regardless, it is crucial not to keep funds on a cryptocurrency exchange longer than necessary. Most exchanges are attractive targets for hackers due to the concentration of digital assets they hold. Storing the majority of your Bitcoin in private wallets is a safer approach.
When learning how to choose a crypto exchange, there are several important considerations to keep in mind. These include:
1. Liquidity: The trading volume of an exchange determines its liquidity. Higher liquidity allows for faster and easier transactions, without being affected by price volatility. It is also beneficial to choose an exchange that offers “locked-in” pricing, ensuring that the price at the time of your transaction is guaranteed, even if it doesn’t settle immediately. Please note that liquidity can vary for different trading pairs. For example, it may be high for BTC/EUR but low for BTC/GBP. You can check the exchanges with the highest trading volumes to assess liquidity.
2. Fees: It is crucial to compare the fees charged by different exchanges. Typically, these fees are less than 1% per transaction and may decrease as your trading volume increases. Additionally, be cautious of withdrawal fees, as some exchanges impose unreasonably high charges for specific altcoins. Also, consider deposit fees, as certain exchanges may charge a 5% or higher fee for convenient cryptocurrency purchases using a credit or debit card.
3. User experience: If anonymity is a priority, avoid exchanges that require excessive personal information. Evaluate whether the user interface is simple and user-friendly on both desktop and mobile devices. Furthermore, it is useful to research feedback from other users regarding the benefits, drawbacks, and quality of support offered by a specific exchange. Community forums like Bitcoin Reddit or Bitcoin Forum can provide valuable insights in this regard.
Recommended cryptocurrency exchanges and brokers
Most exchanges vary in the aforementioned aspects. Certain platforms cater to novice users, while others target affluent and experienced traders. However, a few of the top-notch cryptocurrency platforms are as follows:
1. Binance — the worlds largest cryptocurrency exchange with a wide selection of cryptocurrencies.
2. Coinbase — a beginner-friendly gateway exchange which offers one of the fastest ways to buy cryptocurrencies.
3. eToro — an ideal broker for a starting investor who is interested in cryptocurrencies as well as traditional financial instruments.
4. Kraken — an excellent cryptocurrency exchange for both beginners and experienced traders.
5. BC Bitcoin — another quality brokerage service for new crypto investors who might want to invest larger sums of money.
6. Bitfinex — an exchange for seasoned and institutional investors.
7. HitBTC — a crypto-to-crypto exchange with the largest selection of altcoins.
8. Bitstamp — a fiat-to-crypto exchange where you can buy Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple (XRP), and Bitcoin Cash (BCH) cryptocurrencies.
9. Bittrex — an all-around cryptocurrency exchange with many altcoin markets.
10. KuCoin — a beginner-friendly crypto exchange for small-cap coins and tokens.
11. Poloniex — a convenient crypto assets exchange with more than 60 assets to trade.
12. BitMex — a contracts trading platform which lets you trade cryptocurrency futures and perpetual contracts.
Alternative way to buy and sell cryptocurrencies
If you are unable to open an exchange account or if access to cryptocurrency trading is restricted for any reason, there are alternative methods available. One option is to utilize services such as Local Bitcoins, which allow you to connect with individuals in your local area to purchase Bitcoins or other cryptocurrencies offline. Another alternative is to use a Bitcoin ATM, and you can find a map of Bitcoin ATMs at Bitcoinatmmap.com.
It is important to note that the development of Bitcoin and its infrastructure is still ongoing, so changes can occur rapidly. There are already discussions about numerous decentralized exchanges, and many cryptocurrency experts believe that these exchanges will revolutionize traditional exchanges.
Furthermore, regulations may be implemented, and new technologies or challenges may arise. Therefore, it is crucial to stay updated with the latest news and developments. Since the best Bitcoin or cryptocurrency exchange varies for each individual, it is essential to conduct your own research and prioritize your safety throughout the process.