One of the most essential first steps when getting into cryptocurrency is to choose a crypto exchange. Choosing the wrong platform might lead to a journey filled with hacks, diversions, and wasted time.
First, you must define what you want to achieve before even looking for the right crypto exchange. Is your purpose to simply invest for the long-term or to do short-term trade(s) on a regular basis? By evaluating your needs, you can find the best for you and for your needs.
Here’s a quick guide to help you choose a crypto exchange that is more suitable for you.
- Draw up a list of exchanges
- Consider the reputation of each exchange
- Review geographical locations and restrictions
- Receive licenses and regulatory status
- Consider their security features
- Compare fees and other charges
- Explore their features.
How to Choose the Best Crypto Exchange
1. Draw up a List of Crypto Exchanges
At the time of writing this guide, there were 475 cryptocurrency exchanges in existence, according to data from industry tracker CoinGecko. These trading platforms differ in terms of supported cryptocurrencies, features, and services, as well as what clients are allowed to use them.
Since you are considering choosing the best exchange, you might want to make a list of the most suitable platforms that align with your trading needs and conduct due diligence on them, in order to select the best.
2. Consider the Exchange’s Reputation
Due to the fact that the cryptocurrency business is still relatively young, it is important to be aware of the company’s reputation before you choose a crypto exchange. Many exchanges have involved malicious activity, including hacking and exit scams, putting customers in a bad financial situation.
It’s critical to do research on various exchanges or legit bitcoin investment sites simply by searching for them on Google with the phrase “scam” and reviewing the results. Check what other people are saying about the exchange on social media to see if there have been any complaints.
Another point to look into is the exchange terms and conditions, noting and keeping in mind anything that is concerning or out of place. You can easily find the T&Cs on their respective websites.
3. Review Exchange’s Geographical Locations and restrictions
Geographic location and limitations are at the heart of the user’s cryptocurrency exchange experience. The vast number of cryptocurrency exchanges only serve people from a certain geographic area. Consider this: what good is signing up for an exchange if you can’t legally trade on it?
So, before you sign up for a cryptocurrency exchange, make sure it’s accessible from your country (and legal). Because the law and other rules around crypto and blockchain are still in development, it’s possible that your government has imposed restrictions on your ability to access and utilize an exchange.
4. Review Licenses and Regulations
Another consideration is where the exchange is registered and licensed. The majority of anonymous crypto exchanges may be licensed in “crypto-friendly” jurisdictions like the Cayman Islands, Malta, and other countries. These jurisdictions have enacted legislation that would allow cryptocurrency companies to engage in their financial ecosystems. Some exchanges also opt to establish themselves as tax havens in order to avoid paying exorbitant taxes.
When it comes to decentralized exchanges, regulations are still unclear. According to some experts, DeFi platforms are most certainly violating financial regulations in at least some jurisdictions. These DeFi platforms may soon be forced to get suitable licenses, depending on the services they provide, and regulators will be allowed to investigate them.
5. Consider Their Security Features
The more difficult it is to open an account at a specific exchange, the better. It implies that an exchange is not very trustworthy if it is too easy to create an account.
Each exchange has its own set of security measures. Check whether the crypto exchange supports two-factor authentication (2FA). If not, the exchange may not be up to today’s security requirements.
For instance, Google authenticator and other popular third-party 2FA options arguably provide better security than mobile text-based 2FA.
Some exchanges could also have additional security measures worth taking a look at, such as cold storage wallets and custodial storage services.
6. Compare Fees and Other charges
You’ve looked through the list of possible exchangers and discovered a few that look to have good reputations, solid security histories, and no history of hacks or frauds. That’s a good start, but you’ll also need to think about how each exchange will affect your investments on a daily basis.
The fees and currency pairs available are two significant features that define different exchanges.
Most exchanges charge a fee for your transactions; this cost may be based on the quantity of the transaction, or it may be based on your level of activity, or it may be unrelated to either of those variables in certain situations.
Some sites offer comparisons between crypto exchange fees and they can help you determine which exchange has the most attractive fee structure.
7. Explore Their Features
The importance of conducting adequate research on how to choose a crypto exchange that aligns with your trading needs cannot be overemphasized. Exchanges differ, and the features supported on platform A could be entirely different from what is hosted on platform B.
You either get to explore these features first hand by registering on your favorite platforms, or you surf the web for unbiased reviews that clearly state what services and features are supported. Either way, you would have to put in the work and find out for yourself.
The features you should look out for include: basic and advanced trading tools, ease-of-use, mobile app compatibility, customer service support, among others.
FAQs on How to Choose a Crypto Exchange
What are the Fees to Register?
Registering a trading account attracts no fee, it is usually free. However, it is important to consider the amount of fee the exchange charges users to trade, deposit, and withdraw funds. Binance, the largest cryptocurrency by trade volume, is known for its relatively low fees that may be considered almost insignificant by many investors.
How Long Does it Take to Create a Crypto Exchange Account?
Depending on the exchange you opt for, creating an account is usually simple and fast. On most exchanges, signing up for an account and commence your cryptocurrency trading journey does not take up to five minutes.
While some exchanges have simplified their registration processes, others may require users to comply with a mandatory know-your-customer (KYC) requirement, which usually takes longer.
What is the Best Crypto Exchange?
At the moment, the most widely adopted cryptocurrency exchange for traders outside the United States is Binance. This is because of its user-friendly interface, wide support of several altcoins, and relatively lower fees.
For users in the United States, Coinbase seems to be the most reliable for American traders. Regardless of the listed exchanges, it is important that you conduct adequate research to discover what cryptocurrency exchange meets your trading needs.
Final Thoughts on How to Choose a Crypto Exchange
Here you have it, the seven steps to choose a crypto exchange that is right for you. Going forward, before choosing an exchange, you might want to consider going through the points listed above to guide your choice.
Whatever you do, always conduct due diligence before you choose a crypto exchange.