There are absolutely loads of Bitcoin and cryptocurrency exchanges these days. Different examples will appeal to different users. Some people want a very basic user experience that will just let them get some crypto coins with the least amount of potentially confusing options. If they don’t plan to sell these for some time, a brokerage or peer-to-peer platform is probably best.
Then there are the different deposit options and trading pairs supported at an exchange. Some users will want exposure to Bitcoin only, whereas others will need multiple different cryptocurrencies to be supported. Meanwhile, one exchange might let you buy Bitcoin with a credit card and others might insist on you using a bank transfer. Other things to look for include licensing, advanced options, and security.
Brokerage, Peer-to-Peer, or Trading Platform
First, you need to decide the kind of exchange you’re looking for. Do you want to just buy some cryptocurrency and take it off the exchange to hold for a while? Or do you want to buy and sell cryptos to try and make a profit by timing the market?
If you’re wanting to buy cryptocurrency to hold or take off an exchange, a broker like Coinbase would probably be your best option. Their service is very quick and easy to use. It’s been designed for absolute beginners to buy their first cryptos on.
Alternatively, you could opt for a peer-to-peer platform like LocalBitcoins. LocalBitcoins unites sellers with buyers and will support whatever payment is requested by either buyers or sellers. This makes it one of the more versatile services around. You can even pay with PayPal or an eWallet-type service like Neteller.
Finally, if you’re wanting to trade cryptos with the intention of making a profit, you’ll need a trading platform style exchange. Platforms like CEX.IO offer many different options to set orders for buying and selling digital assets. They also provide for automated trading with API solutions and trading on margin with a maximum leverage of 1:3. There are many others too.
Next, of course, you’ll want to pick an exchange that supports the deposit option that you want to pay with. Not all exchanges support all deposit options. Some peer-to-peer platforms will support a huge range of different deposit options. This is because it’s the users who get to decide which method they are happy to receive payment in.
Meanwhile, some centralized platforms allow users to pay using a credit or debit card as well as bank transfers. Finally, there are the big trading platforms. Most of these will only offer limited deposit options. They are tailored to users who are trading huge sums of money. For that reason, only bank and wire transfers make sense to use on such platforms.
Next, it’s important to check if your chosen cryptocurrency exchange supports the coin you want to buy. It used to be the case that the crypto exchanges that offered fiat (government issued) currency trading pairs would sell Bitcoin. However, nowadays there are many more platforms that will let you deposit in dollars or euros and swap them for a range of crypto assets. That said, it’s still the case that these fiat-friendly exchanges will have a rather limited set of coins available on them.
If it’s brand new, tiny market cap, or obscure crypto coins that you want to trade, you might need to use two exchanges – one to buy some Bitcoin with and a second to send Bitcoin to so that you can then swap it for whatever up-and-coming coin you wanted to gain exposure too. Examples of platforms that support these little-known cryptos are Bittrex, Binance or Poloniex.
Licensing and Regulatory Oversight
Another important thing to inspect before choosing a cryptocurrency exchange platform is what licensing the company has. If you’re hoping to trade back to fiat currency on your chosen platform, it’s important that the exchange you’re going to use has been audited, is licensed to handle money, and has insurance for its fiat products. One of the best cryptocurrency exchanges known for its heavy licensing and respect for existing financial regulations is CEX.IO.
Cryptocurrency exchanges represent a huge target for hackers. They’re like digital bank vaults. Breaking into one could be incredibly lucrative for cybercriminals. If you Google search cryptocurrency exchange hacked, you will see loads of different examples of exchanges having their security compromised.
For that reason, it’s good to inspect an exchange’s security measures before signing up to them. Many reliable exchanges store their fiat money in insured bank accounts and their crypto funds in completely offline, cold storage. If you search online for an exchange and their security measures, you will likely come across the platform’s security page. This will detail everything you need to know about how the company plans to keep your funds safe. The more security measures in place, the better!
Finally, you might want to look at whether the exchange offers any advanced trading features. This will only apply to proper trading platforms like GDAX, Gemini, and CEX.IO. Some of these will allow users to set several types of buy or sell orders. This might mean that you limit a buy to only fill at the price you set. Alternatively, you might want to buy the asset in question at whatever price is available.
Then there are margin orders. These are very advanced options and actually involve you using the exchange’s money to boost your bankroll on the platform. However, it does also mean that you can lose money that you never had to begin with. If you’re not an experienced trader, it’s probably best to steer clear of these kinds of options.
That said, even novice traders will want to make use of several of the different buying and selling options, so make sure the exchange you’re signing up to offers the features you need!