6 Things to Consider When Choosing a Cryptocurrency Exchange
Crypto Mania has not gone anywhere. Everyone, from enterprising millennials to major financial institutions, is scrambling to learn more about the capabilities of this incredible technology. More importantly, they want to know how they can cash in on the craze. That means choosing a cryptocurrency exchange.
As cryptocurrency grows and widespread adoption increases, more people will find themselves asking what platform they should use to begin buying and selling these assets. There are dozens of features to examine across exchanges and users have varying levels of cryptocurrency and investment knowledge.
Here are six things to consider when choosing a cryptocurrency exchange, regardless of experience:
1. Authenticity and security.
It is imperative to do research and guarantee you are choosing a legitimate and secure platform. The early example of Mt. Gox and the most recent hacking of Coincheck serve as serious warnings to prospective cryptocurrency investors to look into the exchange’s security protocol.
One of the biggest issues in the cryptocurrency industry today centers on pump-and-dump schemes. Exchanges are responsible for preventing this fraud. And, that’s where they get help from tokens. e responsibility t is on the exchanges with the help of the tokens, to prevent this fraud.
2. Method of purchase.
The method of purchasing cryptocurrency varies between platforms. Some exchanges require deposits by bank transfer, some use PayPal, some accept credit and debit cards, and some solely use cryptocurrency for purchases.
If you do not have any cryptocurrency before joining an exchange, it is essential that you choose a platform that accepts fiat currency so that you may enter the market. It is also important to note how long purchases take to complete. Some platforms process transactions nearly instantly while others can take days or weeks.
3. Supported tokens.
Most exchanges support Bitcoin and Ethereum, but investors in cryptocurrency know that is just the tip of the iceberg. There is a significant variation in supported cryptocurrencies across different exchanges; some platforms, like Binance, trade a long list of altcoins, whereas Coinbase trades only four major cryptocurrencies.
You can further balance your bets with “stable coins,” often used by traders to hedge against the volatility common in the cryptocurrency markets. For example, TrueUSD is a USD-backed cryptocurrency that is directly collateralized across a network of bank. It uses custodial accounts to give token-holders legal protection and direct banking, so that the company never directly touches the funds. Additionally, the custodian accounts enable regular auditing and deliver complete legal protection.
By being backed by the US Dollar, TrueUSD offers a common, stable currency across digital exchanges. Since Tether, the incumbent USD stable coin, was subpoenaed by the SEC, a new alternative is badly needed.
Regardless of your risk appetite, make sure you choose an exchange or exchanges that support all of the cryptocurrency tokens that you want to purchase. Metrics, including 24-hour volume and market cap, influence these exchange rates and should be monitored.
4. Trading platform, P2P exchange, or broker.
There are three main types of cryptocurrency exchanges, so you need to know what they are before choosing a cryptocurrency exchange.
Trading platforms are the most common and include Binance and Coinbase. They are marketplaces where users can place buy or sell orders for cryptocurrency. Each user only interacts with the platform. Additionally, there is a fee for each transaction.
P2P exchanges, such as Cointal, connect buyers and sellers to interact directly, relying on both parties to agree to any given transaction. P2P exchanges help mitigate network congestion and maintain a secure, trustless system for the exchange of cryptocurrencies.
Cointal is the first multi-currency P2P exchange. Cointal’s CEO Mohammed Imad explains, “Dealing on a P2P basis helps alleviate any issues and problems that can arise from traditional exchanges.”
Cryptocurrency brokers, like AvaTrade, operate similarly to forex brokers. These brokers set prices and buyers can purchase the cryptocurrencies through the platform.
5. Fee structure.
Transaction fees and fee structures differ across various exchanges, which is critical when choosing a cryptocurrency exchange. Some exchanges offer discounted fees. This occurs when an exchanges own token is used to complete transactions. Also, it can relates to how many tokens are held. Others only charge a transaction fee on sales, permitting purchases free of fee.
6. User interface and user experience.
For the average cryptocurrency investor, one of the most important aspects is the user interface and functionalities. Whether you are a seasoned cryptocurrency trader or buying bitcoin for the first time, an intuitive interface and good user experience aids user actions on the exchange to be more informed and more efficient. User experience is subjective and different people will enjoy different interfaces.
However, the exchanges with the “best” user experiences will see the largest growth in transaction volume in the coming years. As an exchange’s value is largely tied to its user numbers, exchanges are able to boost their user numbers and transactions via their user experience. Kucoin has demonstrated this level of growth, since they offer users free tokens in exchange for using their exchange.
Weighing All Factors
When choosing a cryptocurrency exchange, it is important to balance a number of different considerations. Exchanges are all different and different ways of building security precautions, regulating users, building their network, and building a user experience.
Overall, try to be knowledgeable of all your options and think about how you can spot the exchange that will be safe for now and biggest in the long-run. Finally, do not be afraid to sign-up for a number of different exchanges and use them all.