Cryptocurrency exchanges are platforms where one can sell, buy, or exchange cryptocurrencies for traditional currencies, like Euro or US dollars, as well as other digital currency.
For cryptocurrency enthusiasts who want to professionally trade and access fancy tools, they’ll likely need an exchange platform that requires account opening and identity verification. However, some platforms don’t require an account, which is ideal for individuals whose goal is only occasional, straightforward trade.
Cryptocurrency exchanges are, no doubt, the gateway to cryptocurrencies. However, passing through it comes with a lot of considerations and potential pitfalls. At present, there are over 200 digital currency exchanges. So, both newbies and experienced traders have their work cut out for them to make the right choice. One can learn more here about the best cryptocurrency exchanges.
In this article, you can take a look at some tips to find the best cryptocurrency exchanges to try this year, considering critical questions such as fees and security, among others.
#1 Make Sure They Legally Operate In Your Country
First off, you want to be sure that the exchange platform you’ll be using is not only available but also legally operates in your country.
There’s a regulatory fog around cryptocurrencies in different areas of the world, and it’s why some exchanges don’t work in all jurisdictions. For instance, US citizens may find that there are many exchange platforms out there that don’t accept them as customers. Regulations can vary between states in the US. Thus, it would be best to find out a little information about the regulatory position in your location when it comes to cryptocurrencies.
#2 Find Out About Their Trading Volume
Exchanges having higher trading volumes generally also have higher liquidity. Of course, higher liquidity is a good thing since it means they more likely can fill your order quickly. An exchange that offers futures trading has typically higher trading volumes, with more and more people jumping into futures as the most popular derivatives product for them to get exposure to cryptocurrency’s wild volatility.
Some exchange platforms receive plenty of listing requests, which results in a higher stringency in terms of approval requirements. It will result in the limitation of some of the smaller projects, with most of them being only listed on smaller exchanges that have lower trading volumes. That’s how low liquidity can become an issue.
#3 Check Their Reliability Or Reputation
Another thing that you have to consider when finding the best cryptocurrency exchanges is reputation. The best way to do it is to read online reviews from well-known industry websites and individual users.
Online forums, like Reddit and BitcoinTalk, are good places to start asking questions you might have about a specific exchange.
#4 Learn About Their Security, Anonymity, And Support Policies
With hacks and losses totaling into billions last year alone, security should be one of your top priorities when finding the best cryptocurrency exchanges for this year.
Centralized exchanges support higher volume and higher liquidity, but that makes them a good target for hacks and phishing scams. After all, a hacker can expect tremendous rewards if they gain access to an individual’s funds. Also, once they try to trade or liquidate their newly-acquired cryptocurrency, they now have wide-ranging options to choose from.
Decentralized exchanges, on the other hand, emphasize both security and anonymity by allowing users to sign up without having to reveal their personal information and generate a private recovery seed. Since they operate in a decentralized way, they cut out highly vulnerable intermediaries associated with the centralized exchanges. Instead, they directly connect users for placing and filling orders.
The downside with decentralized exchanges is that liquidity isn’t at its highest on these platforms, so you really have to weigh all factors carefully.
#5 Check The Fees And Rates
Most cryptocurrency exchanges charge taker and maker fees. The general rule of thumb is that the larger trades are the ones that attract lower fees as a transaction proportion. However, some exchanges are simply more expensive than others, making it crucial to spend time checking the fees on different platforms.
Another thing that’s worth checking is the exchange rates between different platforms. Similar to the fees, some cryptocurrency exchanges offer better rates than others.
#6 Find Out About The Available Payment Methods
It’s also important to know what payment methods are available when using an exchange. Are both credit and debit cards available? How about wire transfer? Is PayPal an option? The availability of a wide range of payment options means more convenience for users.
Remember that when buying cryptocurrencies using a credit card, identity verification will be required. The transaction also entails a premium price because of the higher risk of fraud. Credit card transactions also come with higher fees for transactions and processing. Purchasing crypto via wire transfer, on the other hand, takes significantly longer since banks will take time to process it.
The bottom line is that each payment method has advantages and disadvantages, so it’s best to have many options at your disposal to find the best solution.
Picking the best cryptocurrency exchange for your specific needs can be a time-consuming and difficult process. By following the tips above, you’ll have the chance to at least make the work lighter while ensuring that you end up with a platform that deserves your hard-earned money.
Also, remember that you aren’t limited to using just one crypto exchange. So, don’t hesitate to try as many as you can and compare their performances.