Since 2009 and the launch of Bitcoin, the world of digital currencies has existed, with each passing day expanding and strengthening its market capture. To buy, sell or transact these digital currencies, you need cryptocurrency exchanges, platforms designed to facilitate cryptocurrency trading. Through these exchanges, you can trade Bitcoin and other altcoins against assets, fiat currency, other digital currency, etc.
How to Select an Exchange
- Accessibility
Cryptocurrency is a new introduction to the world, which is accustomed to the fiat currency system. Many countries are still doubtful or skeptical about the legitimacy of this system. Countries like China have even banned its citizen from trading in cryptocurrency. Even in the US, there are multiple regulations revolving around cryptocurrencies, with many States defining their regulations. For example, an exchange must acquire a BitLicenseto operate within the state of New York.
Further, not all cryptocurrencies are approved, and only licensed companies are approved to offer those limited digital coins. According to the National Conference of State Legislators, almost 31 states have their legislation for 2021 pending regarding cryptocurrency regulations. Read more about What are the different types of crypto assets?
These exchanges often have accessibility issues, so check for information like:
- Limitations concerning geographical boundaries
- Acceptance of currencies and assets.
- Terms of service in different states
- State Regulations
- Transaction fees and withdrawal fees
- Policies and terms
- Number of crypto tokens available on the platform
- Payment medium
These are a few of the important factors. In addition, you should also have a closer look at the trading market news and the number of users using the exchange. This will help you in filtering the best option from so many crypto exchange platforms.
Security
Since digital currencies are completely decentralized, there could be potential loopholes in security; this is why looking for security in exchanges is essential. You can check for:
- The security quotient of your balance is left in the exchange after transactions. While some exchanges Kraken, and others rely on their stringent security system to guard your balance against hacks and frauds, exchanges keep balances that are in fiat currency with FDIC-insured banks. But this insurance does not apply to balance in cryptocurrencies.
- Exchanges also hold insurance policies to secure frauds and hacks, which can protect even the loss of account holders. Coinbase is one such exchange that has an insurance policy worth $255 million.
- Check terms and conditions and account policies of the exchange to verify how many assets they keep offline and online accordingly. To guard against hacks, it is safer to hold cryptocurrency balance in cold storage or offline. For example, Coinbaseclaims that it stores 98% of customer funds in cold storage/offline, keeping only 2% handy in active for ease of trade.
Fees
Most exchanges charge a percentage of your trade as their fee. However, there are exceptions like Cash App, which has designed a transaction fee based on the fluctuating cryptocurrency market. Thereby, the fee differs as per the market.
However, fee schedules at most exchanges are crafted to motivate higher and frequent trading from buyers and sellers. Many exchanges also decrease the fee for traders whose 30-day cumulative trade increases.
Liquidity
An exchange with high trade volume, where a lot of trade goes on at a point, offers you a lucrative platform to have an enhanced scope of trade. Whether you are a buyer or seller, picking up an exchange with a high volume of trade can help you pay an even lower fee.
Crypto Availability
Bitcoin or Ethereum is the most popular cryptocurrency in demand throughout the crypto market. These are available in any exchange you pick. However, when you are looking for some less popular altcoins, you need to check the list of digital coins available with an exchange before opening an account with them.
Wrapping it up !!!
Finding good exchanges like Bitcoin Superstar software can be easy if you look for customer reviews online. However, the market value or potential you can expect from Bitcoin or Ethereum is never the same with new altcoins. Do good research work if you are seeking to invest in less popular cryptocurrencies that are new in the market or before associating with exchanges that have no review or feedback available online.
