What should you look for in a crypto exchange?


After all the cryptocurrency hype, you might be getting ready to make your first crypto investment. Easier said than done. As interest in the concept of digital currencies has increased, so has the number of exchanges that make trading possible. So, where should you begin?

Here is a breakdown of features you can look for when selecting a cryptocurrency exchange.

Cryptocurrency selection

Likely, the first question you will need to answer is what cryptocurrency you are hoping to invest in. If it is Bitcoin, Ether, or another common name, you will likely have your choice of the lot. However. If you are interested in some of the lesser-known altcoins, you might need to do some digging. The number of currencies you will be able to trade will vary widely. So, as a new trader, it might make sense to keep things simple.

However, as a more experienced trader, you will likely want more than a Bitcoin Exchange. With more research, there might be lesser-known coins that you believe will rise in value 100 or 1000 times. Finding an exchange that supports these trading pairs may limit your choices.

Location availability

Each country has a different set of rules and regulations surrounding the use of cryptocurrency. Carefully consulting these regulations can help you determine which exchanges are legal for you to use. Depending on your country, this may greatly limit your choices already.

On the other hand, an exchange may operate out of a country other than the one you live in. While it might not be illegal to use this exchange, there may be regulations around using digital currencies that are different from your own country. Be conscious of these different rules, as they may impact how much you can invest or sell at a time.

Liquidity & volume

The more trades a crypto exchange conducts, the greater its liquidity. This means that the exchange can fulfill your order almost immediately, even if it is on the smaller side. Without liquidity, you may find yourself stuck in an unfavorable trading position. Signing up for a commonly used exchange will ensure the exchange can locate another transacting party in a few seconds. If you are looking to trade smaller altcoins, you may not have the choice to use a larger exchange and the liquidity that comes with it.

Fees

The second consideration you will want to make is the fees. With little regulation, maker and taker fees may vary from 0.1% to 4% or more on a transaction. In some cases, the exchange may charge a flat rate based on the amount you are transacting. Although there is no magic number, anything from the 0.2-0.3% mark for maker and taker fees is competitive. That said, paying more for an exchange that is easy to use or offers other beneficial features will likely be worth the added cost.

On some exchanges, making withdrawals or deposits may also result in a fee. So it is important to take this into account as well.

Funding options

When making your first crypto purchase, you will need to add some fiat currency to get started. Different platforms will provide different funding options, including debit or credit card, bank wire, or eTransfer. It is important to confirm which options are available to you and if you are comfortable using one of these methods.

Customer service

Crypto exchanges, especially the larger names, have gained a reputation for having less than stellar customer service. Customer service is typically a concern for new investors since you may need additional hand-holding to ensure the process goes smoothly. In general, poor customer service is an indicator of future frustrations since if anything were to go wrong with your account, you would want to have a representative that can assist. Therefore, if you come across an exchange that offers 24/7 customer support and glowing reviews to support this claim, you should view the platform in high regard.

Security protocols

The government does not regulate cryptocurrency, making it open to different risks than your traditional investments. When choosing a platform, select one that puts precautions into place to ensure the safety of your personal and financial information. Two-factor authentication (2FA) can verify that only approved devices are logging into the account, and the presence of HTTPS ahead of the website URL can suggest the site is secure.

As you invest more, another feature that may be important to consider is controlling your own private keys. While some exchanges will hold onto this information to simplify this process, having control over these keys will allow you to transfer funds into a secure offline wallet, away from the hands of hackers.

Positive trader reviews

Like any other online service, it is important to read the reviews. While one angry customer who had a bad experience might not make or break your decision, a hoard of customers who had poor experiences might. Customer reviews are typically accurate and can give you insights into how the platform’s customer service team treats its customers. Good reviews are also a powerful testament to the company’s reputation, which can help indicate if the platform is a good place to store your funds.

Option to use a mobile app

Although cryptocurrency might be the digital payment option of the future, that doesn’t mean they necessarily have the technology to back it. For investors on the go, a mobile app can help guarantee you can act on price increases and decreases as they happen. Even if you aren’t planning on making ad hoc decisions, a difficult-to-use mobile experience can be frustrating.

Anonymity

Anonymity might sound counterintuitive after mentioning that 2FA can be a helpful security feature, but hear this one out. For some traders keeping your personal information secure is of utmost importance, especially if they have had a credit card stolen in the past. A decentralized exchange can cut out the middleman and connect the user directly to the buyer or seller.

Selecting your exchange

With so many criteria for choosing the perfect exchange, it is no wonder that this decision is difficult. Rather than overwhelm yourself, you might decide to pick the top three criteria that are the most important to your investment strategy and use that as your guide to picking your crypto exchange.

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