I know, I know, it could be so very confusing out there. You have heard of cryptocurrency exchanges, crypto brokers, crypto platforms… You have heard of scams and frauds, and now you do not know what to do, which one to choose, are they going to screw you over, can you take your money back… aargh!
So, sit down and calm down for a minute, OK? It might sound overwhelmingly complicated but actually, it is not. The choice of the right crypto exchange is, of course, an important step and a mandatory step in trading, but things are not as bad as you think. The truth is the cryptocurrency market, in general, is getting consolidated and much more organized lately. Yes, a few years ago it was not like that. It was full of newly opened platforms with a dubious outlook and totally suspicious services. Many people did get burnt by Ponzi-scheme like structures or bankrupted brokers. But currently, the crypto world looks friendlier, much more stable and certainly, easier to use and understand. In short, you are not alone.
In this article, I am going to gather some important factors to watch for when choosing the right cryptocurrency exchange. It is based on my experience of working with clients, present or former crypto and/ or forex traders and on a constant research and advance in the sphere. When predisposed, people talk. And you cannot ever believe what kind of stories I have heard! Hence, do read the following tips carefully and please, be from the happy-ending stories.
Before even going to the website itself, do a detailed research. Is the platform popular? Do many people use it? Has it got a good reputation online? There are some good digital tools like this one, that can show you a heuristic marketing analysis of what users say about the cryptocurrency exchange. Beware of paid reviews and sponsored content – lately, they are very similar to the news articles and the original texts. Trust only qualitative data, views, and opinions of people who really share an actual experience. Do a search engine checkup, see the social media, read feedbacks and talk to friends. If you encounter too many negative reports, do not bother.
OK, let’s say you chose a few options of reputable crypto exchanges and now go online to check them out. What is the first thing you see? Take a look at the interface, is it user-friendly, does it seem easy to use. Believe me, it might sound like a small detail from the whole experience, but a clumsy software is a real pain in the ass. You will thank me later.
A vital one! Security is one of the most important features to look for – after all, it is your money we are talking about. Pay close attention to how the website supports its system – do have a team of developers to take care of the safety issues, what kind of programs do they use, how it is backed up? Also, another crucial point – how and where do they store data, i.e. money. Do not be lazy with this one and read all the uploaded information carefully.
Time to open an account, right? I know, it could be so slow and irritating sometimes. But do not underestimate the qualitative verification process. It could feel like you hit your head on the wall, indeed, but that is the way for both sides to protect themselves. From the exchange point of view, they should know who they deal with. The level of anonymity in the crypto field might be high, and yet respectable brokers want to know their clients. From the trader’s point of view, you would not like to mess up with someone who is irresponsible about these steps. It seems too shady for them to take your money without even shake your hand. Think about it and prepare your ID.
5. Payment methods
This is one decisive primarily for your personal convenience. Options vary from VISA, Mastercard, bank wire, Pay Pal, SWIFT, etc. Wire transfers usually take longer due to the operational time of the bank processing. Card payments could require additional identity verification because of the risk of frauds (it could be a photo of you, holding your ID or similar). Otherwise, it is significantly faster but could go with higher fees. And that is another essential component of the cryptocurrency trading to watch for.
6. Fees and commissions
Often a neglected by crypto traders factor. Exchanges could have a deposit fee, a withdrawal fee, a broker’s commission as a percentage of the profit and/ or service charges. Research detailly for all of them. It is not uncommon for a platform to offer fee-less deposits to attract customers. But the withdrawal one could possibly rip your skin off. Usually, they vary from 0.5% up to 5 – 6 %. So, be careful or otherwise you would suffer a lot at the end.
Leverage is the extension of your funds, i.e. if you invest a sum the broker doubles it for instance. Some big cryptocurrency exchanges might offer high leverage, which is good and bad at the same time. It means you can trade a lot more than you possess. But if you lose, you lose a lot. The most common case of a leverage rate is 1:2, sometimes 1:5, it depends on the deposit. Do not count on that too much but check it out to be sure.
8. Coin pairs
This is one is really a question of personal preference. But do not be so sure all crypto exchanges offer the pair you want to trade. If you go online with the intention to have fun with the U.S. against the Bitcoin, you might get genuinely surprised to find out that they offer only crypto pairs, or only Euro to crypto, for instance. Take a peek to their listings and if they actually work with fiat currencies or not. If you have an external wallet, it would not be a problem to deposit your digital assets straightly. In any other case, you would probably want to buy the coins with your ‘normal’ cash.
9. Cryptocurrency variety
Most of the crypto exchanges sell the top popular coins, such as Bitcoin, Ethereum, Ripple, Litecoin. If you want to trade with other, smaller or less popular cryptocurrencies, make sure you reviewed the listings of Altcoins they offer. Same with ICO’s, though. Most of them do not support ICO’s, especially newly launched. Hence, think about that, too.
10. Customers’ support
Another neglected feature. In the very beginning no one cares about that factor and exchanges, smartly enough, do not accentuate on the ways of connecting with them. Yes, it is very expensive to keep customers’ care stuff to answer the phone, lead the email correspondence or live chats. But if anything goes wrong (and it does!), ask yourself – is there anyone who I can contact? It also shows transparency – you can talk to real people with real names who can give you personally-tailored solutions.
There was this case with a lady from South Africa who lost her private key. She was begging me to help her return her investment. Unfortunately, the crypto exchange she has chosen was apparently a fraud one – no telephone numbers, no emails, no names listed. She lost all her savings.
I did not want to go too technical here, but it is not so hard one. Liquidity is the speed the money flows through accounts, off and online. High level of liquidity is a good thing – it means faster transactions, quick bank transfer, easy withdrawals. Yes, it is imperative to have a proper liquidity rate. Otherwise, you would wait for weeks to get your money back.
That is the very boring part of all juridical documents crypto exchanges have somewhere on their ‘About us’ or ‘Legal’ menu. But we want to make sure they are legal, are we not? It does not exist another way of receiving this information except going around their homepage and inspecting the legal claims. They should be registered somewhere and must possess a legal number for operating a business with financial assets.
13. Country restrictions
Do not mix country laws with a target group. Indeed, some cryptocurrency platforms are directed to a certain group of clients, but this is not what I am talking about. When registered under a country’s regulations, a broker could not be applicable for customers worldwide. Or the opposite, you would not be eligible to register and to make an account there. As well as the restrictions, some exchanges might offer only one type of ‘ordinary’ currency, for instance, only Australian dollars. If you are not Australian and do not have AUD, you would want to mess with endless conversions of money.
14. Exchange rate
This does not apply only to cryptocurrency. Normal money also varies in prices, according to the bank or institution that sells and buys it. If the Euro is now stabilized in the most European countries, expectedly the cryptos are not at all. There is an approximate value, pointed as average that most exchanges go around. But the difference could reach 10%!
15. Mobile apps
It might sound like a total indulgence to look for all possible tools and features. But depending on your trading strategy, you might want to check your positions a few times per day. Or to check prices. Or to see how your bid is going. Or a crypto boom might explode and you would want to react from your car or from the bar while having one of these salty frozen margaritas… Anyways, you need this.