August 2, 2023 In the eyes of the outside world, the cryptocurrency sector has evolved from a purely speculative asset class to one that Is now taken seriously and respected due to its technological advancements.
As the number of individuals who are educated on cryptocurrency continues to rise, the adoption numbers or number of new users onboarded continue to grow as well. It is undoubtedly an exciting time, the start of a new journey everyone should enjoy.
However, with any new endeavor, ensuring that you get off to the best start possible is key – laying your foundation, so to speak. Choosing your cryptocurrency brokerage exchange is one of the best places to start.
With countless options available, making the right choice can be a bit of a task, but it can also provide value to you for a long time to come. This article will explore five key factors to consider when choosing a crypto brokerage exchange to ensure a secure and seamless trading experience.
Security is paramount when dealing with cryptocurrencies, given the decentralized nature of the market. Before selecting a crypto brokerage exchange, it is important to verify its security measures. Look for platforms that employ industry-standard security protocols such as two-factor authentication (2FA), encryption, and cold storage for customer funds.
One feature, called a “bug bounty,” is a reward exchange offer to the public if they can find and report any bugs in their platform. Seeing exchanges offer these kinds of incentives is great as it shows they are focused on protecting their users by engaging and paying outside developers to help make their platform as safe as possible. Some bounty payouts are as high as (some higher) than USD 10k!
But you also want to ensure they have been audited and reviewed by professionals. Cer.live is a reputable 3rd party company that does security tests on exchanges and then publishes a public sore on them for the industry to see. Looking to see if an exchange has security credentials as such is always a good idea.
Ensure the exchange you are reviewing has the legal right to operate in your country or district. To help confirm, look under the exchange’s “licenses” section, whether that’s a FAQ or in their disclosures. Local operating licenses, regulatory licenses, and more. As time progresses and regulations change, some individuals may no longer be allowed (by their country) to use certain exchanges, so confirming eligibility is vital.
One very positive sign is if an exchange is “FDIC” insured. FDIC stands for Federal Deposit Insurance Corporation, meaning that their cash accounts are insured up to $250k per individual. Should an individual have $250k cash in their account held on the exchange and it is compromised, the FDIC will reimburse the customer.
Additionally, consider the regulatory framework under which the exchange operates. Regulated exchanges are subject to government oversight and are more likely to follow strict security practices and adhere to anti-money laundering (AML) and know-your-customer (KYC) requirements. Verify the exchange’s compliance with local and international regulations, as this will surely reduce the risk of malicious attempts.
Trading fees can significantly impact your overall profitability in the crypto market. Different exchanges have varying fee structures, such as trading, deposit and withdrawal, and inactivity fees. While some platforms offer low trading fees, they might compensate through hidden charges or inflated spreads.
Most exchanges do this in a tiered structure, rewarding those contributing to higher trading volume on their platform. While fees are a natural part of business, and without them, the said exchange wouldn’t be able to operate, they should be easily accessible and clear to understand for the users.
The best action here is to gather the fee list from the top exchanges you are interested in and then compare them. This may not be straightforward as some exchanges could charge a portion of the overall trade amount, so keep in mind your average or at least starting trade amounts.
It may also be a good time to check the “settlement period” if the exchange has one. A settlement period is what an exchange considers the period either before or after the purchase or sale of a cryptocurrency where the trade has a holding period in your account (usually 2-3 days) before the assets can be moved.
For example, if you sold a cryptocurrency position, the exchange may place a 2-3 day hold on the funds before you can withdraw them. The same is sometimes true for deposits into your account. Deposits into your account may be frozen from sending to other exchanges for a period while the funds are verified.
The availability of cryptocurrencies and trading pairs on an exchange is vital, especially if you plan to invest in specific altcoins. Bitcoin and Ethereum are widely available on most exchanges, but the range of altcoins can vary greatly from one platform to another.
Since tens of thousands of cryptocurrency coins exist, not one exchange can offer them all to trade. If you have a list of coins and possible pairs that you know will be the primary coins you trade, one place you may want to start is by checking the list of approved or supported coins that the exchange provides.
Additionally, consider the availability of fiat-to-crypto and crypto-to-crypto trading pairs. A diverse range of trading pairs will provide you with more flexibility and opportunities in the market. This includes trading strategies such as “arbitrage” where a cryptocurrency is purchased from one exchange and instantly sold on another exchange at a higher price, taking advantage of the differences in price across the market.
The more coins an exchange supports, the better your chances of success in those trading strategies.
A user-friendly and intuitive interface can greatly impact your trading experience. Navigating a complex and cluttered platform can be frustrating, especially for beginners. Look for an exchange that provides an easy-to-use interface with clear and accessible information.
There are many trading tools, resources, methods, and even types that range in technicality – to newer traders, even glancing at such technical trading screens can be overwhelming, so finding an exchange with a “simple” layout can be helpful.
An ideal platform should offer advanced trading tools for experienced traders while being beginner-friendly at the same time. Tools in the cryptocurrency industry tend to be much more user-friendly than those historically used in the traditional markets and have even led to the creation of new technology, such as automated trading bots.
Not only do these resources automate the trading process for you, but they have also evolved into automating well-known strategies such as Dollar Cost Average and Arbitrage.
Demo accounts can also benefit newcomers, allowing you to practice trading with virtual funds before risking your real money.
Check for additional features the exchange offers, such as price alerts, scheduled direct deposit options (for those interested in periodically investing), P2P trading, and more.
Many exchanges today are also mobile-friendly, meaning it is just as easy to place a trade from your computer as it is from your phone if you are away from your home.
A crypto brokerage exchange’s reputation and customer support can provide valuable insights into its reliability and trustworthiness. Look for customer reviews and testimonials to gauge the experiences of other users with the platform. Social media and online forums are excellent resources for gathering this information.
Responsive and reliable customer support is critical, especially in the fast-paced crypto market, where every minute matters. Check if the exchange offers multiple communication channels, such as live chat, email, or phone support, and if they provide support in your preferred language.
If so, it may be a good idea to try and test one of those outlets to get a firsthand experience at dealing with the exchange and their support system.
Longevity is always a positive sign for any business, which is exceptionally true in cryptocurrency. There are thousands of exchanges, with a new one launching every day, but that doesn’t mean they will all (or have) last.
Finding an exchange that has been operating for over two years in this space with positive reviews is surely a promising sign for reputation.
Choosing the right crypto brokerage exchange is an important step in your cryptocurrency trading journey. By considering factors such as security, fees, available cryptocurrencies, user experience, and customer support, you can make an informed decision that aligns with your trading goals and risk tolerance.
Remember to conduct thorough research, read reviews, and compare different exchanges before choosing. Additionally, stay updated on the latest trends and developments in the crypto space to ensure you are equipped with the knowledge needed to make successful trades.
There are many moving pieces to comprehend in this space, but that doesn’t mean it has to be an overwhelming experience. Start small and with one step at a time.
First, use this article’s information as a map or guideline to help you find the perfect crypto broker exchange for you!
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