What To Look For When Choosing An Exchange
There are hundreds (and soon to be thousands) of cryptocurrency exchanges that currently exist in this space.
However, not every cryptocurrency exchange is a good fit for each individual, and more so, not every exchange is available to each user.
Some countries, like the US, have regulations and restrictions in place that limit their citizens to specific exchanges. If you fall into that category, then here are some things to look for when choosing an exchange in the US.
Things To Know
There are two main types of cryptocurrency exchanges: a centralized exchange (CEX) and a decentralized exchange (DEX).
While each carries many benefits due to its ease of use and security, the CEX will be the one covered today.
Mainly because most Centralized Exchanges in America are federally insured (FDIC), which means, should anything happen to your cash balance held in your exchange account, you would be insured up to a specific amount (commonly $250K.)
Another thing to consider is the type of investing or trading you will do, even down to the specific cryptocurrencies you will be purchasing. Each exchange differs in these areas and what they provide.
Fees, personal identification requirements, security, how long they have been established (reputation), outages – these are vital subjects to consider when choosing the “perfect” exchange.
As a trader, the goal is to win every trade possible and achieve maximum profits. However, making sure your profits are secure and safe once obtained is just as important.
Reputation
Like any product in life, the social proof goes a long way. In fact, you may have heard that the best marketing is word of mouth, and the same goes for exchanges.
It’s common to find other users posting their reviews (sometimes even video reviews) on social media for the world to see. Either they have become raving fans or quite the opposite.
Although you have to be mindful of paid reviews, most times, you will be able to tell the difference between solicited and unsolicited feedback – and when they are genuine, there’s usually no holding back.
Researching the platform itself to determine when it was established or how long it has been in business can reveal a lot about a company.
Usually a quick internet search can tell you a lot about an exchange, its history (both good and bad), and its reputation.
For instance, you may find positive press releases, blogs, and social media campaigns on a reputable exchange versus ambiguous press releases, perhaps even negative articles and reviews written on unreliable exchanges.
Available Resources
Not all traders are created equal, and the same goes for exchanges. While there are exchanges out there that offer hundreds and sometimes even thousands of cryptocurrencies for sale or trade, not one platform offers them all.
Many in this space begin on a mission to buy a specific coin; go through the verification, approval, and funding process, only to find out that their desired coin is not listed on the said exchange.
This step is easily preventable with a quick search of the assets that is most commonly listed under the marketplace of most platforms.
Also, if you happen to be a trader that is looking to automate your crypto trading, then choose a platform that offers API integration. Some exchanges limit their users to the type of bots they are allowed to use, and not every bot is compatible with every exchange.
This can be critical to certain traders who trade with specific strategies as there are many variations of bots and which trading strategies they do or do not support.
Before diving into the sign-up and registration process, make sure to check the FAQs (frequently asked questions), or you could even reach out to their support team if available to confirm capability.
At the very least, try to find an exchange that has its own built-in trading bot (which is becoming a common practice in this space).
Little Nuances
Whether you’re brand new to this sector or consider yourself a veteran, many nuances follow most users regardless of tenure.
Examples are holds placed on deposits by the exchange themselves, your banking institution blocking your transactions, a lengthy account approval process, and limited to no customer support, to name a few.
Some exchanges also place a daily deposit and withdrawal limits on their customers depending on various factors such as your account level (how verified you are) and your sending or receiving financial institution.
Additionally, there are still many banks and other institutions that are not crypto-friendly and will reject such transactions.
While the customers facing this situation hope that one day their bank will support crypto transactions, on the other end of the spectrum, and even worse, are the financial institutions that at one point allow these transactions only to later on ban them.
While most of the above hurdles can’t be verified until you either begin the registration process or start using the platform, reviews can reveal a lot, so always start there first.
In The End
It all comes down to your preferences, trading style, and comfort. The best way to learn (for some) is by hands-on experience. Always remember to protect your information and be mindful of links, emails, and messages that you come across.
Remember, finding an exchange is just like shopping for the perfect pair of shoes – you may have to try a few different ones out, it make take some time, but when you find the “right” one, it all becomes worth it.
Even then, once you find an exchange that fits your needs, you should never become too comfortable with it to the point where you never feel the need to search for another exchange again.
Technology, platforms, features, and benefits they provide to the user are always growing and evolving in this space, and so should your personal standards as a consumer.
There are many exchanges, and indeed there will be many more to surface in due time, but as always, taking the time to perform your own due diligence is key.
Ella Marcotte
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