20 September 2021
Cryptocurrency is becoming increasingly popular and is gradually entering the mainstream market. The sheer magnitude of the Cryptocurrency market is intimidating since it has hit the global trend with significant profit possibilities. As the industry develops and thousands of digital currencies are being launched every month, more people may wonder what platform they should use to start their Crypto journey. If you want to start trading or investing in Cryptocurrencies, it's critical to select the appropriate exchange for your needs.
Cryptocurrency Exchange is a platform that enables users to buy and sell Cryptocurrency. It serves as a bridge that connects two parties (buyer and seller), enabling them to perform a successful transaction securely. Of course, this is only true if the Crypto exchange is reliable and has all of the requisite measures to ensure the safety of the user's funds. On the other hand, the volatility of Cryptocurrencies acts like a see-saw since it offers opportunities for substantial profits and also increases risk. Thus, finding the right digital currency exchange can have a huge effect on your Cryptocurrency Investments' success, and therefore, there are numerous factors to examine across exchanges.
In this blog, we have laid out 8 Factors To Consider While Choosing A Cryptocurrency Exchange
1. Do Your Research
One of the most crucial components of engagement in the Crypto realm, not just in terms of exchanges but also in terms of the entire Crypto space, is doing your own research (DYOR). First-hand research plays an important role in Investment. You must thoroughly study and review Cryptocurrency and Exchanges before investing. It helps you gain perspective, strategize and mitigate risks. You can research the Crypto exchanges through their websites, review sites, social media platforms, such as blogs, videos, podcasts, and so on.
2. Trading Platform, P2P Exchange, and Broker
Before choosing a Cryptocurrency exchange, you should understand the three basic types of Cryptocurrency exchanges.
- Trading Platform - This Cryptocurrency exchange is a very common marketplace and involves buying and selling of Cryptos. The platform is the only thing that each user interacts with, wherein each transaction also comes with a charge, such as Coinbase and Binance.
- P2P Exchange - Instead of a predetermined market price, each seller sets their own exchange rate on direct trading exchanges. It involves relying on both parties to agree to each transaction. P2P exchanges aid in the reduction of network congestion, such as Cointal.
- Broker - It works in the same way as forex brokers. These brokers set the rates for Cryptocurrencies, and buyers can purchase them through platforms like AvaTrade.
3. Authenticity, Legitimacy, and Security
In today's technologically advanced world, adding an extra layer of security is a crucial practice. Platform hacking and theft are prevalent, and because the stakes are so high with trading platforms, extreme caution is advised. The early example of Mt. Gox, as well as the most recent hack of Coincheck serve as serious warnings to evaluate the exchange's security protocol. As a result, it's crucial to do your homework and make sure you're using a legitimate and secure platform.
To begin, check for the physical address linked with the exchange. If there is no address provided, you should not use the exchange. This is due to a number of factors, including the fact that transparency is widely interpreted as a sign of legitimacy, and knowing where the exchange is headquartered, will help understand the often complex legal repercussions of your investments. You must also examine whether the exchange provides cold storage asset reserves, custodial storage services, and two-factor authentication (2FA), such as Google Authenticator and Authy.
4. User Interface and User Experience
One of the most important variables for a Cryptocurrency investor is the user interface and functions, even though it is subjective as per the user. Whether you're a veteran Cryptocurrency trader or a newbie, an intuitive interface and a pleasant user experience help users make more educated and efficient decisions on the exchange. Furthermore, the value of an exchange is mainly determined by its user base. Exchanges can increase their user base and transactions by improving their user experience. Thus, exchanges with a decent user interface and user experience witness the biggest rise in transaction volume.
5. Insurance Funds
You must also see if the exchange of interest is covered by an insurance fund. Several exchanges have funds set aside to compensate customers in certain situations. At the same time, some exchanges are insured by the Federal Deposit Insurance Corporation (FDIC), which can ensure a certain amount of money held by U.S. users.
6. Purchasing Method
Different Crypto exchanges have different payment options. Thus, the way you buy Cryptocurrency differs depending on the platform you're using. Some exchanges require bank transfers, while others allow PayPal, debit and credit cards, and some accept Cryptocurrency for purchases. If you do not have any Cryptocurrencies before joining an exchange, you must find a platform that accepts fiat currency in order to participate in the market. It's also crucial to keep track of how long purchases take to process. Some platforms handle transactions almost instantaneously, while others may take days or weeks to complete.
7. Supported Tokens
Most exchanges trade and support a limited number of Cryptocurrencies, rather than all of them. As a result, you must verify that the exchange or exchanges you choose, supports the Cryptocurrency tokens that you want to buy. You must also monitor the platform since these exchange rates are influenced by measures like 24-hour volume and market cap.
Also Read, Top 10 Cryptocurrency Exchange In India
8. Fees Structure
Several exchanges have distinct fee structures, which is essential to consider while picking a Cryptocurrency exchange. The fees and the currency pairs offered are two significant characteristics that define different exchanges. Most exchanges charge a fee for transactions, such as charges based on the quantity of the transaction, level of activity, or it may be unrelated to either of those variables in some situations. For instance, some exchanges have discounted rates while others just charge a transaction fee on sales and don't charge for purchases.
Learn about the fees and how they might affect your investment. For example, if you are an active trader who makes several transactions every day, you might want to seek an exchange with a reduced per-transaction cost.
Top 10 Cryptocurrency Exchanges
When choosing a Cryptocurrency exchange, it is critical to evaluate various factors to find the balance for smooth functioning. Additionally, it's important to remember that you're not restricted to using just one Cryptocurrency exchange. Don't be hesitant to sign up on multiple exchanges and take advantage of them all. Strive to be informed about all of your possibilities and consider how you might identify an exchange that is both safe and profitable in the long run.
Disclaimer: The author’s views and opinions are for informational purposes only and do not constitute financial, investment, or other advice.