The fintech industry has become one of the most innovative and exciting in the last few years, as companies and investors swarm to the blockchain and web3 space, investing billions into exciting new projects. With all this attention comes a saturation of the market, notably in the area of cryptocurrency exchanges.
Cryptocurrency trading platforms allow users to buy, sell, and trade digital assets. The vast majority of trading is done through major trading platforms, which have become a long way since the incompetent, buggy, expensive rubbish that seasoned crypto traders would have experienced in the early days.
There is an abundance of exchanges to choose from in 2022. But, how do you filter through the nearly endless list of trading platforms to find the right one to cater to your needs?
Well, it’s important to assess exchanges based on a set of standardised criteria, analysing the quality of the platforms’ security, liquidity, fees, and the overall user experience. Throughout this guide, we’ll guide you through the necessary steps to ensure that you find the perfect exchange for you.
What To Consider When Selecting A Crypto Exchange
Before you deposit funds with the first exchange you were recommended by a friend, you should consider a variety of factors. Finding the perfect exchange can be time consuming, but in the long run, it’s certainly worth it.
Firstly, users must consider that not all exchanges offer crypto-to-crypto trading, as some focus on crypto-to-fiat—allowing users to trade using dollars, euros, and yen, among many other popular fiat currencies. As well as that, there are various hybrid exchanges, such as eToro, that allow users to trade various commodities, including FX, crypto, stocks, ETFs, and more.
Overwhelmingly, consider the coins and tokens you’re interested in and then look to choose the appropriate exchange. We say this, because if you’re aiming to invest in altcoins and specific trading pairs, then margin trading and over-the-counter (OTC) deals are going to be appealing.
Also, if you to work with some of the most popular cryptocurrencies, then it’s worth looking for low trading fees on major coins. Either way, we’ll help you to dissect exchanges using the various requirements we’ve listed below.
This is a kind of broad aspect of an exchange, as it covers a lot of bases. We would say that any exchange now offering two-factor authentication is probably worth avoiding. You may have heard of the term “cold storage”, which refers to the ability to store cryptocurrencies offline, alleviating the possibility of being hacked. Another option, which is common across major exchanges, is to offer the ability to whitelist your IP address, which reduces the possibility of fraudulent activity taking place on your account.
Given the turbulent journey the industry has had with security, any new investor should have this as the number one requirement on their list. If an exchange has a shady past in any way shape or form, step away. Investing can lead to securing vast amounts of wealth, which you’re going to want to be protected. Every trader wants to buy, sell and save your digital assets without having to worry about losing your funds.
With the cryptocurrency landscape constantly adjusting and evolving into something new, it’s important that the exchange keeps within the legal requirements of the respective country. Do your homework regarding the legalities of crypto trading, before you even consider depositing funds. Some exchanges actually offer insured funds, meaning if a security breach does occur, you’re funds will be entirely safe.
Transparency and Marketing
Key information regarding the exchange should be easy to find; the exchange’s owners, the address of the HQ, and are there LinkedIn profiles for the employees? These are all important company details that should be readily available online. If the company has no active social media accounts but claims to be a popular exchange, it’s probably a scam. Ultimately, if you feel the exchange is actively trying to communicate with the public, it’s probably more trustworthy than one that isn’t.
Finally, we discuss user experience. It is definitely a subjective point, but there are clear standards that first-rate crypto exchanges should offer. The first thing is that an exchange should offer mobile support, in the form of an easy-to-use mobile application adapted for both iOS and Android. Simply put, a simple trading platform, offers the chance to view advanced statistics, market data, and other features that help traders to make the right moves.
This is where you must do your own homework. To say that one trading fee is better than another simply isn’t true. Rather which fees do the exchange charge and how do they compare to other major exchanges, with top-tier providers offering trades for less than 1% per transaction. We should mention, that it’s not just about transaction and trading fees, but also any fees incurred when depositing and withdrawing funds—watch out for exchanges with unusually high withdrawal fees!
Whatever exchange you choose, be sure to do your own research. This can be done by reading peer reviews or exploring the history of the exchange to see if any malpractice has taken place over the years. If the exchange boasts an impressive record and fits the various criteria we’ve mentioned above, it may be time for you to start trading!