You have amassed SOME knowledge on cryptocurrency and are eager to dive into getting your first crypto, but do not know which crypto exchanges to choose from. There are so many crypto exchanges out there that without some DYOR and/or advices from professionals, you might just end up picking one that is poorly suited for your needs thereby ruining your virgin crypto experience (big NO NO).
If you are too lazy to DYOR or do not have anyone well-versed enough to consult, this basic guide is just right for you. Do NOT jump right into picking a crypto exchange: it is imperative to understand their function, the various characteristics, and the different types, before taking the metaphoric plunge.
What Exactly is a Cryptocurrency Exchange?
A crypto exchange is simply a platform (digital marketplace) that enables you to buy, sell, and trade your cryptocurrencies. They also offer storage for crypto and price discovery through trading activity. With hundreds of crypto exchanges offering a plethora of digital assets, differing levels of security, and associated fees, you need to choose the right exchange that cater to your needs, price range, and security expectations. In a nutshell, select an exchange that aligns with your goals.
Some Key Characteristics to Look for in an Exchange
a)Accessibility
This is very geographical-based: depending on where you are, your location may hinder you from buying and selling crypto on certain exchanges due to state or national regulations. To find out the details about the geographic limitations of an exchange, simply look for the terms of service on its website. Some countries, like China, have banned citizens from accessing crypto exchanges completely.
b)Security
Since crypto is not backed nor protected by any central authority (like how our money is protected in the bank), some exchanges have insurance policies to protect the digital currencies that users hold from hacking or fraud. Look into how much assets the exchange keeps offline. If an exchange keeps the majority of its holdings offline, it is more difficult for hackers to access. Also, look for extra security measures like two-factor authentication: in addition to your username and password, you will need to verify your identity using an extra method each time you log in. If you are unsure of an exchange’s security, going big is generally safer. That means stick to more popular exchanges with an already large customer base as you will be taking on more risk with smaller and/or newer exchanges.
So, whether you plan to leave your crypto holdings within an exchange or have it there for a limited amount of time before transferring them to your wallet, the exchange’s security must be a top priority.
c) Fees
Exchange fees may be a fixed price but are usually a percentage of your trade though some exchanges charge fluctuating fees based on price volatility. There may be different amounts depending on which currencies you trade, and it may differ if you are the seller or buyer. Some exchanges may have a higher fee structure (a turn off for many) but it might be worthwhile for the added protections and insurance (if they have). Ensure you understand how and what you will be charged before handing over your money.
d) Liquidity
The exchange should have enough trade volume to ensure your holdings are fairly liquid, which means you can sell whenever you want. Typically, the more popular exchanges are those with the largest trade volumes. Reason being, you have a higher chance of buying or selling your crypto at the best price when a lot of trades are occurring within an exchange at any given time. On the contrary, you could end up paying a higher price than you would on more popular exchanges if the exchange you use does not have a lot of trade volume.
e) Coins Offered
Are you looking at popular coins like Bitcoin or Ethereum, or smaller, newer altcoins with a small market cap? If you are looking for the former, any given exchange will probably have them. For the latter, more looking around is required since not every exchange offers each of the thousands of crypto that exist. When in doubt, experts recommend sticking to more established crypto. With any crypto you are considering, never invest what you cannot afford to lose.
f) Educational Tools
When you are a beginner, you might not know where to look when it comes to information. It is easier when most or everything you need is on a single platform. Some exchanges offer courses and have articles to help you get started, learn more about the crypto markets, etc, while others offer rewards for watching videos and finishing quizzes related to different coins. From an education standpoint, this kind of exchange is more value-added.
Some Types of Crypto Exchanges you Might Encounter
1)Brokers
Though not pure crypto exchanges, some traditional securities brokers can act as intermediaries between the crypto markets and investors who want to buy and sell. You simply visit the online broker and purchase the crypto at prices set by the broker.
2)Traditional Crypto Exchanges
Some exchanges deal on in crypto while others allow users to trade in fiat currencies for crypto, and are broken down mainly into two main types of exchanges:
a)Centralised
This type of exchange is overseen by a third party which helps to make sure the user sign ups and trades smoothly. They are quick and easy to link to your bank account to buy crypto but usually comes with fees on top of the asset purchase. Most centralised crypto exchanges (CEX) let users buy and sell digital assets with both fiat currency and other crypto.
b)Decentralised
Decentralised crypto exchange (DEX) lacks third-party oversight, is open-source, and depends on peer-to-peer (P2P) trading. However, it often requires more technological skill and in-depth knowledge of crypto to use as compared to CEXs.
HELP! There are so Many Exchanges, Which Do I pick?
Calm down, take a chill pill. I am positive you have heard of Coinbase, Gemini, Kraken, and the likes ─ these are not some mythical creatures, animal pet names or random buzzwords; these are just some of many crypto exchanges out there. You would not pick an unflattering colour and a wrong size top for yourself right? Same goes for crypto exchanges ─ there is no such thing as the single best exchange out there but there is a best exchange tailored for you.
1)Coinbase
Coinbase’s homepage
If you have already DYOR, even a little, chances are Coinbase was likely the first or top few names you came across. Started in 2012, Coinbase offers a trusted and easy-to-use platform that is intuitive and user-friendly. Coinbase has $217b quarterly volume traded, $96b assets on the platform, and over 103m verified users, 14,500 institutions, 245,000 ecosystem partners and 4,900+ employees in more than 100 countries. What’s more ─ resources are aplenty to aid you on your crypto learning journey, and you get paid to learn about specific coins with rewards offered for taking short courses on certain currencies. Vast majority of the digital assets are stored in secure offline storage and the exchange maintains crypto insurance as well as all USD cash balances are being covered by FDIC insurance up to a maximum of $250,000. The ease of use with perks comes with a price though: Coinbase has higher fees compared to some of the popular exchanges but that extra cost might be worth it.
2) Crypto.com
Crypto.com’s homepage
Having a ton to offer, Crypto.com is a beginner-friendly trading platform that is highly intuitive with an easy onboarding experience. Founded in 2016, Crypto.com has over 50m users in more than 90 countries where buying and selling of the 250+ crypto happen at true cost. Users get up to 5% back when spending with the Crypto.com Visa Card, as well as rewards of up to 14.5% on their crypto assets. Security-wise, transactions are protected by multi-factor authentication (MFA) which includes password, biometric, email, phone, and authenticator verification. On top of that, 100% of users’ cryptocurrencies are held offline in cold storage.
3) Gemini
Gemini’s homepage
Gemini is a next-generation crypto exchange and custodian founded in 2014 that allows users to buy, sell, and store digital assets, with a “security-first” mentality. Gemini’s features are pretty bountiful: from Gemini Mobile (app that allows you to trade on the go) to Gemini Earn (earn up to 8.05% APY daily on your crypto balance), Gemini dollar® (a regulated stablecoin designed for scalability and usability in all kinds of transactions), and more. Its security is also top-notch with account security controls (multi-factor authentication and verification of new devices), scam mitigation (finding and blocking wallet addresses associated with scams), customer verification (reviewing and approving new user accounts to limit fraud and abuse), and account takeover (ATO) mitigations (evaluating signals that help respond to suspicious movement).
You can also peruse informational and educational details on their blog, webinars, Twitter Q&As, cryptopedia, and the likes. When you open a Gemini account, you can earn $10 in BTC after trading $100 in crypto!
4) Binance
Binance’s homepage
Founded in 2017, Binance is a crypto exchange that combines digital technology and finance, and features an extensive portfolio of crypto products and offerings, such as trading and finance, blockchain and crypto education, data and research, decentralisation and infrastructure solutions, 24/7 customer support in 40 languages, and so much more. With strict protocols and industry-leading technical measures, Binance stores 10% of all trading fees in a secure asset fund, provides advanced personalised access control, and secures your transaction data via end-to-end encryption. From real-time monitoring and a 360-degree risk management system to advanced data privacy tools and end-user security education, Binance’s security is one of the assurance for its users.
5) Kraken
Kraken’s homepage
Kraken provides spot and futures trading between Bitcoin, Ethereum, and 40+ other digital assets. Having been on the blockchain revolution since 2011, this exchange is one of the oldest exchanges in the world with more than 9m clients in nearly 200 countries, and has a quarterly trading volume of $207b+. You can earn up to 23% in rewards annually by simply staking your assets too. Kraken not only provides 24/7 live chat support, it also has low fees, versatile trading options, rigorous security standards, as well as educational/informational manuals such as blogs, crypto guides, videos, podcasts, and the likes. From over-the-counter trading to personalised white-glove account management, Kraken is suitable for institutions of all sizes.
Bottom Line
At the end of the day, there are obviously other factors you can take into consideration and many other crypto exchanges to choose from. I do have my bias but what I like and what I am currently using is different because of their functions and features. Have in mind what you need or what characteristics and features you prioritise or prefer prior to browsing through the exchange platforms. Learn more about each space and get educated.
Disclaimer: The content in this article is by no means financial advice and is purely for educational/informational purposes only.
Written by: [Coinlive] Catherine
Alex
