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Cryptocurrency Exchanges: What They Are and How to Choose

June 27, 2022 By Crypto Reporter PR

Recently, there’s been a significant uptick in the number of crypto exchanges ready to serve and cater to the needs of teeming crypto enthusiasts globally. However, choosing the perfect crypto exchange is always a daunting and overwhelming experience because of the abundant number of available crypto exchanges operating today.

Most importantly, an ideal exchange should have the right mix of flexibility, stability, and security. Although security is one big issue when it comes to selecting a reliable crypto exchange, especially with the incessant cases of hacking and exit scams prevalent in the still-developing industry, there are other equally concerning points to consider. In this guide, we will introduce you to the most crucial tips you need on how to choose a cryptocurrency exchange service provider that is perfect for your needs.

What Is A Crypto Exchange?

A cryptocurrency exchange is an online platform where you can trade, swap, and exchange various crypto coins for one another or convert crypto directly into fiat. In simpler terms, crypto exchanges work similarly to traditional brokers, who give you the tools to make asset exchange easy and accessible for a small transaction fee.

What Should You Look Out For In A Crypto Exchange Before Trading With Them?

1). Security

You should ensure the crypto exchange you choose to trade with has advanced security technology like account encryption and 2-factor authentication. All this is to ensure your funds are safe in the event of a hacking attack against your account or the exchange itself. Also, this meticulous scrutiny helps security experts trace and retrieve your funds in case your digital assets suddenly disappear.

However, for added safety, it is advisable to safely keep the majority of your digital assets in offline cold wallets or fully decentralized wallets, where you have access to your seed phrase.

2). Competitive Rates

Choosing an exchange with competitive rates is crucial if you intend to trade regularly with your account, as they could significantly affect your profitability. Most crypto exchanges have two principal set up for charging fees; either it is based on transaction size, or it is determined by the frequency of your trades. You should choose the crypto exchange that best suits your trading needs.

3). Number of Cryptocurrency Pairs Supported

Another point to take note of is the number of currency pairs supported by the exchange you plan to choose. For example, if you want to buy and invest in only a handful of popular crypto coins, you can choose an exchange like Coinbase. However, if you are more interested in the opportunity present in trading several obscure altcoins, you can opt for Binance or other non-custodial swap exchanges like Swapzone, Changelly, and more.

4). License and Regulation

Generally, dealing with a government-recognized brand is always a reliable and convenient trade strategy. This is even more crucial in the unstable and scam-ridden crypto industry. Although radical crypto-enthusiasts loathe the mention of government involvement or regulation, most reasonable crypto traders cannot deny the importance of moderate regulation and intervention. These regulations help protect beginners and low-cap investors who are still navigating the crypto space. Licensed crypto exchanges display their licenses on their landing page and are required to carry out a KYC registration on all users.

5). Liquidity

The higher the trading volumes recorded daily on an exchange, the more liquid and safe that crypto exchange becomes. Liquidity is the amount of free cash available to settle all the transactions on an exchange at any given time without affecting its market price. A crypto exchange with a high trading volume and liquidity ensures the safety of your capital, as well as, assures you that all your trades will be completed timely and withdrawn, if necessary, at any time without any hassles.

In sum, the best cryptocurrency exchange is different for everyone. Always do your research and carry out all due diligence before you trade on any crypto exchange. However, if you consider all the points mentioned in this article, you can be sure of dealing with a reliable and trustworthy exchange.

Always understand the tax implications of any transaction before you make a trading or investing decision. Use a crypto accountant like ResultsTaxAccountants.com to stay in legal compliance with the Internal Revenue Service (IRS) and state tax department. Results Tax Accountants is located in Denver, CO, but helps any crypto investor, trader, miner and others in all 50 states. Why? Because what you do not know about crypto taxation can hurt you. A crypto specialized CPA has the potential to help you save you money in taxes.

Chose the cryptocurrency exchange that best fits your needs and meets the criteria discussed. Also, make sure you understand the tax consequences of your crypto activities and taxable transactions.

Filed Under: Press Releases

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