A cryptocurrency exchange is a digital marketplace where buyers and sellers can trade cryptocurrency using various accepted fiat currencies. With the increasing cryptocurrency investments, various cryptocurrency exchanges have consequently mushroomed. These exchanges strive to offer the best deals for their users within the confinement of regulatory bodies.
According to CoinMarketCap Data, 320 Exchanges are currently in operation which provides trading support to atleast one cryptocurrency pair.
There are so many detailed reviews of CEX.IO, Binance, Bitfinex, Coinbase, Kraken, and other popular cryptocurrency exchanges, but which one is the most appropriate?
With all this variety of cryptocurrency exchanges, it is important for potential investors to choose the platform that perfectly suits their preference.
Factors to Consider for choosing a cryptocurrency exchange
Security
In today’s digital age, information privacy and security is essential. The best cryptocurrency exchange ensures that the traded coins are safe. A good exchange should be less susceptible to hacking and theft. Examples of security solutions to look out for include:
Authenticity
There are tons of illegitimate cryptocurrency exchange platforms on the internet that aim at hoodwinking traders online in a bid to defraud them of their hard earned money. A good exchange should be authentic that offers genuine services. Conducting due diligence and doing prior research are important in evaluating the genuine exchanges.
Two-Factor Authentication
This feature provides an extra layer of security to the users’ information. Apart from the usual password, this feature requires something that only the specific user possesses, that is, a piece of information only they should know or immediately have at hand.
Cold storage
This is currently considered the safest way to store coins. This means that the users’ coins are stored offline beyond the reach of malicious hackers.
Encrypted email
This ensures that every transaction is approved by the user via the email he or she provided when signing up. Upon clicking on the link sent to the user, it signals consent.
Email and phone support
This feature aims at verifying the identity of the user. Sometimes email verification is not enough, therefore a code is sent to the user’s phone number which he or she should provide to access information.
24/7 wallet monitoring
This is a service that alerts the user whenever a change is made to the linked credit card. It gives the user an opportunity to detect incidences of fraud and mitigate them before they escalate.
Supported coins and tokens
Many cryptocurrency exchanges only support a handful of coins, majorly Bitcoin and Ethereum. Thus, exchanges vary significantly in the tokens they provide. Investors therefore should make sure that the exchange they intend to use support the cryptocurrency they wish to invest in. An exchange that incorporates a variety of coins to trade in is a better option because it provides the user with a diverse scope of altcoins to choose from. Examples of these altcoins include Ether, Litecoin, Monero, Ripple and Dash.
Type of exchange platform
There are three main types of cryptocurrency exchanges:
- Trading platform. Where traders place buy or sell orders through the platform.
- Peer-to-peer exchanges. Where traders interact directly without a third party.
- Broker. These platforms set prices for buyers to purchase cryptocurrencies through them.
It is therefore upon the investor to choose the most preferred platform.
Liquidity
Liquidity means the ability to convert coins to cash readily on demand. Before choosing a cryptocurrency exchange, investors should do a brief research on its history to discover how financially viable the exchange is. Liquidity also refers to the ease of trading coins on the exchange platform. High liquidity means there is a large number of buyers and sellers, which translates to better prices and fast transaction rates. The more liquid the cryptocurrency exchange is, the most preferable it is.
Trading Fees
Every investor would want a means of saving as much of their earnings as they can. Thus the most appropriate exchange offers lower trading fees comparatively. Different exchanges have variant fees structures which is critical when choosing a cryptocurrency exchange. Most of these exchanges charge a percentage on the total value of a transaction as fees.
Low transaction fees on trading coins would ensure that the users’ profit margins are within range. Some exchanges offer discounted fees and exclusive coupons in an attempt to lure customers and ensure customers incur lower fees when trading.
Reliability
A suitable exchange should have a history of reliability. A research on the ratings and reviews by people who have used the various exchanges should give the aspiring user a hint on how reliable the highlighted exchange is. Fewer online complaints and higher ratings consequently mean that the exchange is reliable.
User Interface
For the average investor, one of the key aspects of choosing an appropriate exchange is the ease of using the particular platform. The best user interface should be aesthetically appealing, understandable, and easy-to-navigate.
Exchanges with user-friendly interfaces translate to increased subscription on the platform, and eventually a significant increase in the transaction volume. Therefore, when choosing a cryptocurrency exchange, ensure that the user interface is clear – it makes investing a walk in the park.
Customer Support
Investors are bound to seek clarification on issues that arise in the process of investing in cryptocurrency. A reliable customer support helps users to make informed investment decisions. Therefore, the cryptocurrency exchange should have a responsive customer support system.
In cases where users ask recurrent questions, the platform should have a section for frequently asked questions (FAQs) which would help in saving a lot of time. An exchange with a dedicated means of addressing users’ concerns is recommended.
Summary
Choosing a cryptocurrency exchange is one of the preliminary steps before investing in the crypto world. Therefore a careful analysis should be exercised before deciding on a particular exchange. The potential investor needs to strike a balance between the various factors outlined above and should not choose an exchange based on a single factor.
Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.
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