Cryptocurrency Exchange: Did you know that there are thousands of digital currencies, with more being added every month? And curious crypto investors need to start by deciding how to invest, including how to store their digital assets.
Where and how to trade in cryptocurrency and whether the tokens that give you interest are worth it are important for investors to evaluate. This means finding a crypto exchange, and then deciding how you will use the exchange.
How to Choose a Cryptocurrency Exchange :
Cryptocurrency Exchanges work like brokers, giving you the tools to buy and sell cryptocurrencies like Bitcoin, Ethereum, and Tether. The best cryptocurrency exchanges make it easy to buy and sell the currencies of your choice with low fees and strong security features.
Trading cryptocurrencies is complicated. You can make your life a lot easier by using a crypto exchange. But with so many options — including many that have been around for years — choosing the right one takes care.
When cryptocurrencies first emerged, early adopters acquired coins through mining or by exchanging them on online forums. But if you don’t have a lot of time (and technical skills), you’ll want something more convenient.
Enter crypto exchanges: Businesses that store crypto assets and match you with other buyers and sellers, making it possible to trade crypto like you trade stocks in a brokerage account. (Most big-name stock trading companies like Merrill Lynch and Schwab still don’t place crypto trades.)
But while exchanges have made trading crypto much more accessible, some major problems have also arisen, from headline-making security breaches to trading fees that dwarf what investors might pay to trade other assets.
The result is that you can’t exchange whatever you stumble upon while surfing the web. Key points to consider before choosing a cryptocurrency exchange:
Be Cautious :
The first thing to remember when searching for digital Cryptocurrency Exchange—and when considering any aspect of cryptocurrency investing—is that scams and fraud exist, and they can have a very real impact on individual investors. Mt. Gox, one of the oldest digital currency exchanges and one of the most popular, has collapsed. Others have been hacked or otherwise compromised.
How does one ensure that a particular cryptocurrency exchange offers a legitimate service? First, find the physical address associated with the exchange. If there is no address readily available, you should not use the exchange. There are many reasons for this. First, transparency is often a sign of legitimacy.
Second, without knowing where the exchange is based, you won’t have a good idea of the often thorny legal implications of your investment. And third, if your account gets hacked, it’s much easier to resolve these issues with the exchange and any regulators if you have a physical address with the exchange.
Do your research :
When it comes to cryptocurrencies and exchanges, reputation counts. Before you go so far as to create an account (which should reflect a high level of trust, as it forces a user to go over a variety of personal information), take the time to thoroughly research the exchange you’re considering. What do other users say about the exchange?
What does the exchange say about itself? Have you had security issues in the past? If so, how did that exchange resolve those issues? In your search, dig deep; Look for potential negative stories that the Exchange development team doesn’t want potential customers to see.
Go with high security:
The harder it is to create an account on a particular exchange, the better. If creating an account is too easy, it means that an exchange is not particularly trustworthy. So, what happens if your digital assets suddenly disappear? In this case, you may have a much more difficult time tracking and recovering your money.
Regardless of the exchange you choose, it’s a good idea to keep the bulk of your digital assets in an offline storage service like a cold wallet, which is also often an option for staking coins. Exchanges should do the same with their assets that are not needed for liquidity.
Beware of Fees :
You’ve scoured the pool of potential Cryptocurrency Exchanges and found something with an excellent reputation, a stellar history of security, and no history of hacks or scams. That’s a great start, but now you need to consider how each exchange will affect your investments daily.
The two main factors that differentiate different exchanges are the fees and the currency pairs they offer. Most exchanges will include some type of fee for your transaction. They may be based on transaction size, or they may be dependent on your activity level, or, in some cases, they may be unrelated to any of these factors.
Learn about fees and consider how they will affect your investment based on your style; Are you planning to be very active, doing some transactions every day? If so, perhaps consider an exchange with lower per-transaction fees. If you’re considering trading Ether, you’ll want to be aware of the gas fees associated with different types of transactions.
Another important consideration is the cryptocurrency pairs that your exchange offers. Coinbase, one of the most popular and successful exchanges in the world, only offers a relatively small selection of digital currencies to its users. If you’re looking for obscure altcoins, you might want to look elsewhere, though Coinbase is considered excellent for security, user experience, and more. Make sure you keep in mind how your investment practices will relate to the features (and limitations) of any exchange you may use.
Consider the controls:
Stock exchanges such as the New York Stock Exchange are heavily regulated. By comparison, Cryptocurrency Exchanges are the Wild West. One reason is that while the NYSE has been around for hundreds of years, crypto is barely over a decade old. Another is that Washington is still debating the right way to oversee the crypto universe, with agencies like the Securities and Exchange Commission and the Commodities Futures Trading Commission still waiting to prevail.
Until the dust settles in Washington, it’s best to look for a Cryptocurrency Exchange that already has security controls and financial audits in place. At the very least, any exchange you work with should be able to demonstrate that it has an audited service organization control report. SOC 1 ensures that the exchange’s financial operations and reporting controls are well-designed and effective, while SOC 2 certifies that the exchange’s technology systems for security, processing integrity, network availability, and privacy controls are in proper working order.
Unfortunately, these reports are not always easy to find on the Cryptocurrency Exchange’s website. Exchanges can send press releases after completing SOC 1 and 2 tests, as Coinbase did with auditor Grant Thornton in 2020 and Gemini Deloitte in 2021. But if you can’t find evidence of these reports online, it’s worth calling the customer service department.
Some US states have been proactive on the regulatory front in hopes of protecting consumers. For example, exchanges like Gemini, Coinbase, and Bitstamp have a BitLicense issued by the New York State Department of Financial Services, which verifies that there are strict business controls.
Bottom line :
Consider, if you buy ALGO (Algorand) on Coinbase and choose partnership, you will earn more ALGO rewards at roughly 6.0% APY. The most popular and easiest way to buy, sell and share digital assets is through a digital currency or cryptocurrency exchange. Simple words? Probably when you account for the approximately 380 of these exchanges currently available worldwide.
When you are deciding which and/or exchange to choose, it is important to look at supported currencies, prices, withdrawal options, and security.