Exchanges have an important role in buying and selling crypto-assets or cryptocurrencies. It’s the intermediary that connects buyers and sellers. A comparative analogy would be a brokerage company or securities in stock trading. Choosing the wrong crypto exchange can lead to disappointment and wasted efforts.
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Here are five essential tips that will help you choose the right cryptocurrency exchange.
1. Understand Authenticity and Security
A bit of time and research will guide you to choose a safe and legitimate exchange platform. Make sure the exchange you choose offers a cold storage type wallet. There are two types of wallets in a cryptocurrency exchange, namely hot wallets and cold wallets. A cold wallet is technically offline because it is not connected to the internet therefore limiting opportunities for hacking.. Cold storage (or offline wallets) are one of the safest methods for holding crypto assets (as per the Bitcoin offline wallet) as these wallets are not accessible via the Internet. A good exchange should have a 2-factor authentication (2FA) feature, as a second layer of security after password access when logging into accounts, making withdrawals and sending transactions. In addition, it should also have an e-mail encryption and verification feature which requires you to confirm every withdrawal or delivery transaction.
2. Fees & Purchase Method
Purchasing methods of cryptocurrencies vary widely between platforms. There are exchanges that require an initial deposit via transfer, Paypal, credit or debit cards and exchanges that will accept cryptocurrencies for purchases. It is important for new investors to choose a platform that accepts fiat currency. In addition investors need to know how long it will take to complete a purchase. Some platforms process transactions almost instantly whilst others can take days or weeks.
Next, regarding service fees. Please note that there are several fees charged to investors such as withdrawal fees and transaction fees. Many people unwittingly end up choosing an exchange with high transaction fees, not knowing that they can use an exchange that offers lower fees.
It is important to use an exchange that offers a full range of features to allow traders to transact successfully. There are several important and useful features for traders such as the price chart feature that will help technical price performance analysis. Then, there is a cut loss feature that can help traders limit losses to certain prices, as well as a short selling feature to ensure traders continue to make profits even though the price of their crypto assets is experiencing a decline or entering a bearish phase. One of the biggest problems in the cryptocurrency industry today is centered on pump-and-dump schemes, namely a drastic price increase in the price of crypto assets followed by a drastic decline in value. This happens due to the purchase of a lot of coins by traders which causes pump activity and once the market conditions are unstable because everyone is competing to buy coins, the traders then dump their coins so that the price suddenly drops. For beginner investors, features like this are very crucial, considering that crypto assets have high price volatility and are aggressive.
4. Traffic Exchange
A top-tier crypto exchange will generate significant buying and selling activities for investors. This greatly affects the opportunity to secure competitive rates. However, this traffic may not result if the exchange does not have substantial crypto assets. Make sure you choose an exchange or exchange that supports all the cryptocurrency tokens you may wish to purchase. An easy to navigate and intuitive exchange interface will provide a positive user experience therefore supporting further traffic, which is particularly important for first time investors. Exchanges with good user experience attract the greatest growth in transaction volume. Some platforms even give free tokens to their users which can be advantageous.
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