If you want to trade, buy or sell cryptocurrencies, you start by creating an account with a cryptocurrency trading platform. Crypto exchanges work almost similarly to online brokerages, giving you the tools to trade digital currencies and tokens such as Bitcoin, ALgo, Ethereum, and Dogecoin. However, not all crypto exchange platforms will provide you with everything you need. You need to consider factors like fees, payment methods, supported assets, centralization, projects, speed of transaction, and security.
What Is a Crypto Exchange?
A crypto exchange is a digital currency marketplace where people can trade cryptocurrencies. It works similarly to digital fiat trading platforms but deals strictly with cryptocurrencies. Examples of popular crypto platforms are:
- Binance
- Coinbase
- Netcoins
- Bisq
- Crypto.com
Cryptocurrency trading platforms require users to have an account where they create different order types to trade and speculate in the crypto market. Some exchange platforms support advanced trading features such as futures trading and margin accounts. Others have tools or features like crypto loans or crypto staking that allow users to earn interest on crypto holdings. The best exchange platforms offer educational resources to users with updates on the market, regulations, and more.
Types of Crypto Exchange Platforms
Crypto exchanges are broadly categorized into centralized and decentralized exchanges. Centralized crypto exchanges (CEX) are managed by a single organization. They enhance starting cryptocurrency trading by allowing users to convert fiat currencies directly into crypto easily. Many crypto trading platforms are centralized and support many exchanges because they’re convenient and reliable. However, they’re less secure and prone to hackers stealing vital assets.
Decentralized crypto exchanges (DEX) are crypto trading platforms that distribute the responsibility for verifying and facilitating crypto trades. DEX network users can certify and validate transactions as they do on cryptocurrency blockchains. This increases DEX’s accountability and transparency and keeps them running effortlessly. Decentralized crypto platforms are less user-friendly in terms of user interface and currency conversion. For example, you can’t deposit fiat money like dollars directly and exchange them for given crypto. This means you must already own crypto or first use a centralized exchange to get crypto.
How to Choose a Crypto Exchange
Beyond the type of exchange platform, the following are other factors you can consider when choosing the best cryptocurrency exchange:
Crypto Exchange Fees
You need to consider trading and withdrawal fees. Do not choose a platform that has too high of fees on both.
Accessibility
Not all exchanges are available everywhere. Check and verify that the exchange you want is available in your country. Some decentralized crypto exchanges like Algorand aren’t available in the U.S., while you can buy XLM in Canada, U.S., and many other countries.
Security
Crypto’s increasing popularity is attracting hackers’ attention, resulting in millions of losses. Although exchanges reimburse lost coins due to theft, you don’t want to be in that position. You have two options: select a platform you know is highly secure (decentralized platform) or spread your crypto across multiple centralized and decentralized exchanges. Alternatively, often move your crypto holdings to a secure “cold” wallet.
Available Coins
Cryptocurrencies that trade only a few coins are more secure than those with more coins out. Carefully research cryptocurrencies with available coins for exchange and select those that suit you.
Trading Volume
Available coins aren’t sufficient if no trades happen. Verify that the exchange has sufficient trading volume to ensure liquidity, allowing you to trade your coins easily. Don’t settle for exchanges with low trading volumes or those with too high trading volumes.
Educational Resources
If you’re a newcomer in cryptocurrency, consider an easy-to-use platform that provides plenty of educational resources to guide you. You’ll benefit from the educational resources as you learn your way through crypto trading.
Endnote
With too many crypto exchanges in the crypto industry, choosing the best exchange platform can be challenging. Check the fees, security, availability, trading volumes, and educational resources. If you’re a newcomer, start with a centralized platform before you proceed to a decentralized one.