The Complete Guide to Choosing Crypto Exchanges: Everything to Know

The future of cryptocurrencies is just beginning. With the Biden Administration signing an executive order to study stablecoins, cryptocurrencies are slowly becoming a solid part of the American and global economies.    

This brings us to choosing crypto exchanges for individual investors.

There are a lot of aspects to consider when selecting a cryptocurrency exchange, but for many investors, liquidity, user-friendliness, and availability in their region are perhaps the most important. Those factors have the potential to immediately save costs and save you time.

So, keep on reading for our full breakdown of everything you need to know when it comes to trading with cryptocurrencies. For now, we’ll focus on your options for crypto exchanges.

Crypto Exchanges 101: Understanding the Basics

Traders and investors may use cryptocurrency exchanges to purchase and sell cryptocurrencies and convert their fiat money (like U.S. dollars) into digital currency.

Users create an account, deposit money into it, and then purchase and sell assets including stocks, bonds, and exchange-traded funds (ETFs), in a manner very similar to that of a brokerage account.

And, once you’re interested in getting your money in cash, that’s where the magic of Bitcoin ATMs comes in. If you’re unaware of how ATMs for cryptocurrencies work, you’ll want to check out this page.

How It All Works

Looking to learn more about how cryptocurrency markets function?

Fortunately, you shouldn’t have to worry too much as a consumer since most of these exchanges strive to provide a frictionless trading experience for their customers.

However, these marketplaces function similarly to brokerage accounts in that both let you purchase and sell shares on the stock market. In essence, they act as matchmakers between buyers and sellers. In return for your fiat currency (for example, U.S. dollars), they will offer you certain cryptocurrencies.

They’ll also facilitate the trading of one crypto for another.

The Fundamentals of Choosing Crypto Exchanges

A trader may make transactions on a cryptocurrency exchange by connecting to a cryptocurrency wallet. The other option is using the exchange’s custodial wallet, both of which are accessible via a mobile app or a web browser.

But, how does one pick the right platform for their needs? Let’s explore the basics.

Crypto Exchange Security

Choosing a trustworthy and secure exchange is your first order of business.

You should be able to increase your account’s security by enabling multiple authentication methods and logging in with a strong password. Do not sign up for a service that doesn’t provide two-factor authentication, and if one does, start using it right away.

Checking out how they are spending their money on hand is also important. Consider how much money is in cold storage and what safeguards are in place to keep it that way.

Most of the valuables should be stored in a vault and insured against loss. You should be able to get this information on their website or by contacting customer care.

Keep An Eye on Exorbitant Fees

The fees charged by different exchanges might fluctuate greatly from one another.

If you’re thinking about making use of an exchange, the first thing you should do is look at the fine print and the fees involved.

As a rule of thumb, you should try to keep trading costs to 1% or less. The aforementioned percentages may appear minor and trivial, yet they may make a major impact in practice.

Let’s do a short analysis based on a hypothetical ten-grand acquisition.

If we make a $10,000 buy using an expensive exchange, we will be charged 5% plus GST, or $500 in fees plus GST, for a total of $525. Contrast this with the purchase of $10,000 worth of Bitcoin on a regulated exchange. The charge would be less than 1%, or $10.

There is a price discrepancy of almost $490 for essentially the same service.

Always Check Trading Volumes

The quantity of buying and selling action on the market is referred to as “trading volume.” The standard for this is 24 hours.

As you may have seen, cryptocurrency prices on exchanges are not standardized. Instead, exchanges are just a collection of the best available buy and sell bids for cryptocurrency at the time of your deal.

You are more likely to make a profit from your trades on an exchange with high trading volume than on one with low volume since more offers are being completed on the former.

Before joining up with an exchange, it’s a good idea to see how much money moves through the system on a daily basis. At least one million dollars worth of trades per day is generally seen as a reasonable minimum amount of daily trading volume.

It’s important to keep in mind that every cryptocurrency operates in its own market with its own volume of trades. For any coins you may be interested in purchasing or selling, this is something you should verify.

Diversify Your Platforms

If you want to trade a significant volume of other currencies, it is a good idea to open a foreign exchange account in addition to a domestic one. This will allow you to trade in a wider range of currencies.

In the event that you are thinking of trading alternative cryptocurrencies, here is a simple method for doing so. Before trading lesser-known cryptocurrencies, you first convert your fiat currency to Bitcoin.

You can rely on Bitcoin, which always has plenty of volume on most exchanges. Then, move your Bitcoin to a crypto-to-crypto exchange. This will allow you to trade lesser-known cryptocurrencies.

Verify Maximum Limits for Exchanges

If you want to put serious money into crypto, you need to pay close attention to the maximum limitations. The maximum amount you may invest in a single trade is governed by these limitations.

Coinbase is one such exchange that will cap your first purchase quantity. This is a major stumbling block to entering the market rapidly if you have a large sum of money you desire to invest.

Bitstamp, in contrast, does not restrict the number of Bitcoin or other cryptocurrencies a customer may buy at once. If you have a sizable sum to invest all at once, this simplifies matters greatly.

Keep in mind that you must take care of your own digital possessions. Get comfortable with the process by testing exchanges and wallets with relatively little amounts at the start.

Study Asset Choices

Is it your asset of choice being traded on that particular exchange?

Considering there are hundreds of distinct cryptocurrencies, it’s unrealistic to expect any one exchange to provide trading pairings for all of them. As an example, Bitcoin, Ethereum, Solana, Cardano, and Binance coins are all widely traded cryptocurrencies. But, certain exchanges may not support trading for a less common cryptocurrency.

The more popular an exchange is, the more likely it is that a currency with a large market cap will be traded there. If you’re an investor in quest of more unusual, less-traded currencies, you may need to check into smaller exchanges. Making a list of what you want and then going out and finding it may be necessary.

For Beginners: Prioritize User-Friendly Exchanges

You shouldn’t make things too difficult for yourself if you’re just getting started with cryptocurrencies or exchanges in general.

If you’re looking for an exchange that doesn’t overwhelm you with features, choose one that’s simple and straightforward. It’s that simple.

Does It Have An OTC Service?

Trading substantial quantities of bitcoin requires the use of OTC services.

An over-the-counter (OTC) service is intended to facilitate the discovery of a single transaction with a large-volume buyer or seller.

By transacting over-the-counter (OTC), traders may sidestep the liquidity and human error concerns that plague normal exchange market transactions of significant size.

Kraken, Bitfinex, Bitstamp, Coinspot, Independent Reserve, and BTCMarkets are just a few of the big exchanges that provide OTC.

Intermediate to Advanced: Look for Derivatives

Instead of just purchasing or selling an item, traders may “bet” on its future value with the use of derivatives, which are complex financial instruments.

Futures contracts and options are examples of such instruments. And, they often come with the option of extremely high leverage, which increases your earnings or losses.

Experienced traders and investors will find derivatives very useful for developing sophisticated trading strategies. Because of its high volume and extensive selection of derivative goods, FTX is the greatest option for beginners.

Crypto Trading Strategy: The Crypto Exchange Edition

Research and investigation are required when selecting a cryptocurrency exchange. It’s critical for ensuring that you get the best possible service for your needs. Not all cryptocurrencies can be bought or sold on every exchange, so it’s helpful to do some research ahead of time to choose which ones you want to trade.

Choose a cryptocurrency exchange after carefully weighing its fees, security measures, whether or not it serves your region and great user interface. We hope that our guide on choosing crypto exchanges has given you a solid starting point for your search. 

Now, it’s time to delve more deeply into actual trading strategies. You’ll want to head straight to our finance section for all the tips and advice you could possibly need.