These are all the top 3 Factors To Consider Before Choosing A Crypto Exchange as a cryptocurrency lover.
Acquiring cryptocurrency has never been so easy! However, choosing the best crypto trading platform is a tricky task. The cheapest crypto exchange is not always an ideal option to exchange crypto. It could be an illegal platform, or it may offer low prices, but charge hidden fees, etc. Thus, check out our article on what aspects to consider before choosing a crypto exchange.
What Is A Crypto Exchange And How Does It Work?
A crypto exchange is a digital marketplace where individuals or businesses may trade currencies, securities, commodities, and other items. A cryptocurrency exchange makes it simple to swap one cryptocurrency for another (a crypto-to-crypto exchange) or fiat cash for cryptocurrencies (a fiat-to-crypto exchange).
Exchanges announce the exchange rate for each trading pair they support, whether crypto-to-crypto (BTC/LTC) or fiat-to-crypto (EUR/ADA). Clients can trade by placing buy and sell orders in the order book of the exchange marketplace. The exchange’s role is to match eligible orders to execute deals, sometimes for a nominal charge.
Users must create accounts to start trading. However, it’s also obligatory to go through a verification procedure. Reputable companies ensure the safety of their customers and avoid helping criminals engage in money laundering schemes. Thus, a few factors must be considered before selecting the right exchange.
Factors To Consider Before Selecting An Exchange
Crypto exchanges are made differently. While you can trust the largest crypto exchanges because of their good reputation and transparency, they may not work in your country (this is the factor we will discuss in detail). Thus, you should choose a reputable platform for crypto exchange. Consider the following factors before creating an account.
Security And Safety Measures
Companies know cybercriminals’ activity and continually improve their platforms’ security features. Platforms that prioritize security are often among exchanges with substantial trading volumes of digital assets.
Check if the following security precautions are in place before selecting a platform for the trade:
- Two-factor authentication (2FA).
- Verified withdrawals.
- Wallets for custodial purposes.
Note. Most exchanges now hold users’ assets offline as a precaution against hacking and other unanticipated incidents. Thus, checking whether the exchange you’ve selected stores digital tokens on cold wallets is best. For instance, WhiteBIT, Europe’s biggest exchange, stores 96% of its assets on cold wallets.
Availability And Regulatory Compliance
Many services list all global crypto exchanges that are allowed to operate. However, not all have the necessary permission to operate in a specific country. A check reveals that while some of them claim to support USD, EUR, or other fiat currencies, it doesn’t mean that the company operates legally in your country. Thus, using an exchange without first checking if it is legal in your region is risky.
Before selecting the best trading platforms, ensure that the company has the right to operate in your country. You should understand that even if you can access the exchange, it may not necessarily mean it operates legally. If you store money on such an exchange, it may be sanctioned, leading to you losing money.
Moreover, there are regulatory factors to consider. Exchanges that do not utilize basic Know Your Customer (KYC) and anti-money laundering checks (AML) may not operate legally. Check whether the owners and team behind an exchange offer transparent data about their security measures.
Exchanges regulated in politically stable jurisdictions often have individuals behind the platform who can be held accountable if something goes wrong. Moreover, choosing an exchange from the same country where the business operates may aid in ensuring compliance with any legislative changes.
Fees, Liquidity, And Other Features
When choosing between two or more exchanges, liquidity (trade volumes) and fees are key factors to consider because they affect trade. As an example:
- Some exchanges impose withdrawal and deposit fees in addition to transaction fees, so choosing an exchange with fewer fees will help cut expenses. Thus, select a platform with reasonable withdrawal fees or without such fees if possible.
- A big trading volume on an exchange may assist in avoiding trade slippage. It’s when the trade can’t be made for several days or even weeks because of low trading volumes within the marketplace.
However, fees and trading volumes are not the only factors to consider. Here are some other important aspects when opting for a platform:
- Does it allow you to buy crypto with fiat currency and vice versa?
- What coins and trading pairings it supports?
- How fast the customer service solves issues (check reviews if necessary)?
- What trading methods are available?
- What additional useful features make the exchange stand out?
Yes, the exchange must be safe and operate according to your country’s legislation, but it should also offer useful tools. For instance, it may offer a trading platform with convenient tools so that users can gain crypto and start trading.
This article about the top 3 Factors To Consider Before Choosing A Crypto Exchange has all the necessary information you would love to know, read and understand.