Everyone from enthusiastic investors to enterprising millennials, from financial institutions to multinational companies are jubilant to understand more about the Blockchain-based cryptocurrency, sometimes called as Bitcoins (but it is a type of cryptocurrency only!). More importantly, people trying to explore the knowledge related to currencies, exchanges, services, and products, to earn the speculative profits associated with Bitcoins. What is a cryptocurrency exchange? However, above all you need to know about choosing the best cryptocurrency exchange platform so that your funds will be secured, you can trade easily with nominal fees and many more. In this article, let us know about the factors that you must consider while choosing the best cryptocurrency platform.
How To Choose Cryptocurrency Exchange Platform?
Unlike the traditional stock markets, where the profile of the company is associated with the share value in the market; in crypto space, cryptocurrency exchanges hold the important place to keep your funds secure, tradable, and earn the profits. Following are the few factors which must be considered before choosing the best cryptocurrency exchange platform:
Security (Check the Locks!)
Mt. Gox crypto exchange hack, Binance hack, and many more hacks are prevalent in the crypto industry but they are avoidable if the exchange is reputed or certain precautionary measures are taken from users side. Before choosing any platform, it is essential to research the legitimacy and security protocols of exchange. Cryptocurrency follows the decentralized model but the majority of exchanges are centralized controlled by their team. You can check the protocols by simply visiting to the website of exchange and check the details like 90% of client funds are stored in cold storage, the facility of transferring crypto funds to hardware wallet directly, multi-signature authorization for purpose of withdrawals, accessibility of account by two-factor authentication, having the SSL Site Security Certificates, these conditions are the bare minimum which must be present.
Supported Cryptocurrencies and Tokens (Check the CoinS!)
If you are a novice, you must have heard of a few of the cryptocurrencies like Bitcoin, Ethereum, Ripple, Litecoin, and a few more. And you might end up choosing the exchange which has listed these currencies only. However, you must diversify knowledge about the fact that there are more than 5000 cryptocurrencies available in the market, with a number of stablecoins and tokens. Regardless of your risk-taking capability, you must choose a platform supporting a maximum of the digital assets. You can easily check the availability of cryptocurrency on the “List section” of a particular crypto exchange.
Liquidity ( Check the Flow!)
Most of us forget to check the liquidity or trading volume while scrolling for the cryptocurrency exchange platform. Liquidity is one of the major factor which makes the transaction speed faster without considering the price volatility of currency. It could be different for different reading pairs depending upon their supply and demand (cryptocurrency exchange rates), in the crypto markets. You can easily check the trading volume or liquidity by clicking on the website of CoinMarketCap and filtering the exchanges on the basis of liquidity.
Trading Platform (Check the Purpose!)
There are mainly three types of crypto exchanges in the crypto marketplace which are utilized as the trading platforms.
Full trading platforms: You must have heard about Binance and Coinbase, they are the full-fledged trading platform or marketplace where users can easily buy or sell cryptocurrencies. These regulated crypto exchanges allow the users to exchange among themselves within a platform by paying the nominal transaction fees.
P2P Exchanges: Many of the crypto traders, wish to maintain the privacy as much as possible, so they generally choose the peer-to-peer exchanges to trade directly with either buyers or sellers of crypto assets. P2P platform acts like a bridge between the traders so that traders can negotiate the prices, decide the mode of payment, and many other conditions. These platforms help in reducing congestion of network, maintaining security and trustless system for exchange.
Crypto Brokers: Crypto brokerage is one of the crypto exchange platform where the brokers or any middleman tries to negotiate the prices between sellers and buyers through their platform. If you are a newbie or do not want to engage in technical analysis, you can choose the crypto brokers as trading platforms.
Thus, you should consider that if the trading platform is a full-fledged exchange, P2P platform, or brokerage firm, before selecting the Best bitcoin exchange.
Fee Structure (Check the Hidden Ones!)
Transaction fees or fee structure is different on different exchanges. Some exchanges offer discounted fees depending upon their trading volume and reputation while other charges are higher for providing numerous services. While choosing a trading platform, the user must consider the competitive trading fees rather than choosing the platform which is offering the lowest fees in the crypto space. Also, do not forget to check the spread fees or hidden charges which could unnecessarily eat up your funds.
Method of Purchase (Check the Mode!)
Coinbase is a fiat-to-crypto exchange while Binance is crypto-to-crypto exchange. Before choosing the crypto exchange, you must take into account the method of purchase that a particular platform is offering. It could be back transfer, credit and debit cards, Paypal, or online wallets for fiat currencies while some exchanges allow you to purchase coins from cryptos only (bit inconvenient!). Newbies can go with the platforms which are accepting the fiats of their country while advanced or highly frequent traders can select any of the platforms.
User Interface (Check the Ease!)
Either you are a newbie or an advanced trader, a user-friendly interface with good cryptocurrency services could always captivates the interest of the investors. But the definition of interfaces differently for different users. Some of the investors wish to have all trading charts on their screen for the informed decision while others wish to have the recommendation board or live price charts on their screen. Depending upon the requirements, you must explore the interface of the website or app before making your account on that particular exchange.
Reputation (Check the Status!)
The cryptocurrency marketplace is still in a nascent stage which is non-regulated and decentralized, making it vulnerable to scams, hacks, and cyber attacks. So, before you end up in creating your crypto account on any of the exchanges, you must conduct thorough research either by reading the reviews or searching about the hacks associated with the exchanges. This exercise could make you aware about the security breaches took palace on the exchanges. Many of the giants even assures the compensation in case of any hack on the exchanges.
Considering the above factors, it can be concluded that while selecting a cryptocurrency exchange platform, the balance among all the factors need to be maintained to assure the best returns on the investments. Every exchange is different in terms of their payment infrastructure, security protocols, rules and regulations, fee structure, user experience, and many more. Therefore you need to self educate yourself about the major factors which need to be taken into account for a better experience in the crypto space.
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Tarulika is an engineering graduate and an eloquent crypto blogger. Being a digital economy supporter, she keeps herself updated with the course of the latest innovation in the crypto industry, Blockchain Technology, and the Internet of Things. Currently, she is dedicatedly curating the simpler and interesting content for crypto guides for beginners to accelerate the movement of the financial revolution. If you want to learn more about the cryptocurrencies, latest trends of blockchain-powered AI applications, you are free to follow her on LinkedIn.