CRYPTO EXCHANGE – WHAT ARE THEY AND HOW TO USE THEM? A COMPREHENSIVE GUIDE
If you are someone who has been interested in the crypto or digital money market and are looking for safe options to trade cryptocurrency, you most probably have heard about crypto exchanges.
Investing in Bitcoin or other cryptocurrencies can be daunting at first. Frauds and individuals incurring losses are often reported in the news. Although this is right, and several frauds have occurred and continue to occur, it has never been easier to invest in and trade in cryptocurrencies than it is nowadays. But do you know what are these crypto exchanges and how you can use them for a safe and amazing crypto trading experience? Well, this comprehensive guide will clarify all aspects of crypto exchanges for you. So, let’s get started.
Table of Contents
WHAT ARE CRYPTO EXCHANGES OR CRYPTO TRADING PLATFORMS?
First up, let us explain to you what are crypto exchanges? Cryptocurrency, as we all know, is a digital or virtual currency that is protected by cryptography. It is almost impossible to counterfeit or double-spend because it is protected by a cryptographic scheme. In contrast to traditional currencies, cryptocurrency networks are typically decentralised and focused on blockchain technology. Blockchain technology is a distributed ledger that is applied via a network of various computers. As a result, it works entirely virtually. It is critical to remember that since cryptocurrency is decentralised, no government authority issues it. It is extremely resistant to central government intervention or coercion.
Cryptocurrency exchanges are portals or platforms that allow you to purchase, sell, or swap cryptocurrencies for other virtual currencies or conventional currencies such as US dollars or Euros. Those who wish to trade professionally and have exposure to sophisticated trading tools and analysis indicators will almost certainly need to use an exchange that allows you to check your identity and set up an account.
SOME OF THE BEST CRYPTO EXCHANGES TO TRADE CRYPTOCURRENCY
Now you know what a crypto exchange is, let us tell you about some of the best crypto exchanges. There are several sites available today, but not all exchanges are equally represented. This list is focused on user feedback as well as a variety of other factors such as usability, accessibility, pricing, and security. Here are some of the best cryptocurrency exchanges.
Binance is a cryptocurrency exchange that facilitates crypto-to-crypto trades. This implies they do not embrace real-world currency such as US dollars (USD) or Euros (EUR). The platform was established in 2017 and was initially based in China. That being said since cryptocurrency laws in China are pretty stringent, the company has since relocated to Japan, a nation that adores digital currency! Binance currently supports over 100 different cryptocurrencies. They include well-known cryptocurrencies such as Ethereum (ETH) and Litecoin (LTC), and also minor coins such as Cyber Miles (CMT) and ZCoin (XZC). Another great advantage of the exchange is that its fees for trading crypto-to-crypto are among the cheapest in the industry. Every exchange incurs a 0.1 per cent fee for the customer which makes it an ideal exchange for most individuals. You can get more details by visiting their website.
Like to know more? Read our Binance Review.
Bybit is a cryptocurrency derivatives market where you can swap perpetual futures contracts. You can use ByBit to open positions of up to 100x adjustable leverage. The exchange has a recorded uptime of 99.99 per cent, rates are reasonable, and customer service staff appears to be doing an excellent work of responding to customer concerns. Furthermore, at the moment, Bybit does not need a KYC to use its facilities. While Bybit is accessible in most countries, US people are still not permitted to use the exchange. Get to know about more countries which they support by visiting their website.
Like to know more about ByBit? Read our review.
Phemex is a Singapore-based cryptocurrency derivatives trading exchange that was established in 2019. People can use up to 100x leverage to exchange perpetual contracts including BTCUSD, ETHUSD, XRPUSD, LTCUSD, XTZUSD, and LINKUSD on the platform. Phemex is well-known for offering no-fee cryptocurrency trading on spot pairs. The exchange’s founders hope to attract thousands and thousands of new users to a virtual currency system by providing them with access to a user-friendly, secure, and productive trading platform. Phemex offers amazing functionality, a simple user interface, and high leverage dealing. Visit their website to know more about what they offer.
Like to know moren? Read our Phemex Review.
Prime XBT is a trading site that offers Forex and commodity markets as well as leverage derivatives. The exchange’s services and fees are highly competitive and appealing. The platform is unrestricted and only accepts cryptocurrencies. Although the exchange provides numerous opportunities for profit, using excess liquidity in conjunction with an uncontrolled platform will result in significant losses, so trade with caution. Prime XBT, as a fully Bitcoin-based exchange, works on a nearly borderless global scale with limited regulatory enforcement.
The cryptocurrency fee is 0.05 per cent for all trades, regardless of whether the maker or taker is involved. This is a reasonable price in comparison to rivals. Prime XBT also allows you to trade against high-profile indexes such as the S & amp; P500, FTSE 100, and JAPAN, as well as assets such as gold, natural gas, crude oil, silver, and others which you can check out on their website.
Like to know more about Prime XBT? Read our full review.
HOW TO FIND THE BEST CRYPTO EXCHANGE?
Choosing the right digital currency exchange will make or break your cryptocurrency assets. As the popularity of cryptocurrency rises, more people are wondering what platform they can use to start buying and selling these properties. There are hundreds of features to investigate across exchanges, and consumers’ levels of crypto and investing expertise differ. But here are a few factors to consider when choosing or finding the best crypto exchange:
Availability of the crypto exchange
Although it will seem obvious, not all cryptocurrency exchanges are available globally and supported throughout every jurisdiction. This is mostly due to the financial reforms that control the cryptocurrency sector. For instance, a cryptocurrency exchange headquartered in Australia that supports AUD, NZD, and USD transactions does not permit a New Zealand-based investor to invest funds, even though NZD currency is accepted.
To get onto the safe side, approach the exchange service desk or FAQs to confirm two things. The exchange supports your regional fiat currency and allows you to deposit money from your home country. For more details, approach the exchange or your financial institution.
An exchange with low and competitive trading fees is an essential factor for buyers and sellers. High trading fees will eat away at your investment in your national currency by deducting a fraction every time. This fee is charged any time you purchase, trade, or sell a cryptocurrency. This can stack up to a sizable sum for investors over years. Especially for investors who do not keep the investment for an extended period, such as traders. Even so, high-frequency day traders will amass these without really realising it, and this could be the difference between being a successful crypto investor. You can also look into the spread fees. We do warn, however, that cryptocurrency exchanges do not always disclose their secret fees. The spread tax, which is charged in connection to the exchange fee, may be as high as 5.2 per cent.
The number of currencies offered
Most cryptocurrency exchanges enable buyers to invest, trade and exchange popular cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and Ripple. Coinbase, one of the world’s most common and profitable exchanges, only provides a limited range of digital currencies to its users. However, if you wish to invest in a lesser-known altcoin, you must first determine if the platform allows you to trade this virtual currency versus your local paper money. It is normal for platforms to display the cryptocurrencies that are available on the official website. There must also be enough liquidity to fill orders.
In comparison to conventional financial markets, which are highly controlled and supervised in most nations, the cryptocurrency sector is still fairly fresh. Regrettably, since the emergence of blockchain technology, there have been numerous exchange attacks, robberies, and privacy violations that have culminated in users losing their funds. In 2019, seven big exchange breaches resulted in the loss of millions of dollars. So, before you apply to a cryptocurrency exchange, you can do your investigation and fact-checking using Google. Simply check for the exchange’s name + “SCAM,” for instance. This will expose any security violations that have occurred during the lifespan of the exchange.
Security and encryptions
Following on from the preceding point, another critical consideration when determining which cryptocurrency exchange to use is the platform’s safety precautions. Considering that the bulk of exchanges are centralised, your funds will be deposited on the exchange at some moment in time, putting you at the mercy of their safety precautions. You must be able to locate out what protection procedures are in effect if you go to the portal. At the very least, the exchange should provide:
- Cold storage wallets for at least 90% of client money
- Directly transfer cryptocurrency funds to a hardware wallet.
- Withdrawal permission with several signatures
- Two-factor Authentication
- SSL Certificate for Site Protection
- It’s also a good idea to look at groups and social networks and see if other users have had problems with the exchange.
Payments options available
What are the payment options available on the exchange? If you can use a credit card? If you can use a debit card? Can you make a wire transfer from your bank account? Is PayPal available? Do you have the ability to exchange in USD/EUR? It might be inconvenient for you to use an exchange if it has restricted payment options. Realize that buying cryptocurrencies with a credit card would still necessitate identity authentication and will arrive at a premium price due to a higher probability of theft as well as higher payment and service charges. Buying cryptocurrency via wire transfer would take far longer because banks take time to process.
So, these were the few major factors that you should consider before choosing the best crypto exchange. There are also some key factors which you should pay keen attention to while joining a crypto exchange which we will be discussing further.
WHAT ARE SOME FACTORS YOU SHOULD PAY ATTENTION TO WHEN JOINING A CRYPTO EXCHANGE?
To begin, you will, of course, need money to trade with. If you don’t have any savings and begin trading with the cash you can’t afford to lose, it could have a significant negative effect on your life. Trading is not an easy task; the vast majority of new traders take a loss. You should assume that the capital you set aside for trading will disappear easily, and you will never recoup your losses. This is why it is advised to begin with smaller quantities to take the plunge.
Your ultimate trading strategy is something you’ll have to consider. When it relates to earning profit in the stock markets, there are several options. You could choose from a variety of methods to meet your financial objectives, based on the amount of time and effort you have available.
Finally, many traders perform better when trading is not their main source of income. The emotional strain is easier to handle in this manner than if their day-to-day survival relied on it. Removing emotion is a key characteristic of effective traders, and it is much more difficult to do when one’s life is on the line. So, particularly if you’re just beginning out, you might consider trading and investing as a side business. Remember to begin with small quantities to learn and practise.
LOOKING FOR THE BEST CURRENCIES TO INVEST ON CRYPTO EXCHANGES? HERE ARE THE TOP 5
Now, we believe that you have a clear understanding of the basic concepts of crypto exchanges, you might be wondering what currencies you should invest in and trade? Well, we have the answer right here for you. Here are the top 5 cryptocurrencies you should trade-in if you want to head start your crypto journey.
Bitcoin, the forefather of all cryptocurrencies, was the very first and has become the most well-known digital currency on the internet. It also has the highest market cap and is one of the most heavily traded cryptocurrencies, ensuring liquidity in the near term. When it relates to retail growth, Bitcoin reigns supreme, outpacing all other cryptocurrencies in aspects of payment acceptance.
Since its launch in 2015, Ethereum has seen huge gains as the cryptocurrency and network that popularized the term “smart contracts” in the cryptocurrency industry. Ethereum, which is currently second only to Bitcoin in terms of market capitalization, has been one of the most highly debated blockchain ventures in recent years.
Ripple differs from the majority of its cryptocurrency rivals in several respects. Ripple is a Ripple Labs creation, and the Ripple token is being used in high-speed and low-cost financial transactions around the world. Ripple Labs has confirmed several collaborations with pioneering money transfer providers, with further financial industry collaborations on the way.
EOS is a virtual currency that, like Ethereum, uses smart contracts and is growing rapidly. EOS is accredited with being the first blockchain operating system, providing application programs that operate on the blockchain as well as parallel processing, allowing for higher processing speeds and greater scalability than rivals. Exchanges on the EOS platform is completely secure and free.
Bitcoin cash (BCH)
Bitcoin Cash, a variant of the bitcoin Blockchain project, is one to keep an eye on since it is the fourth-largest digital currency by market capitalization. Slow processing speeds are one of the primary problems that Bitcoin faces in its present form if one is compelled to criticise it. Bitcoin cash was created by modifying code from the Bitcoin venture to allow for larger block sizes, resulting in quicker transaction times and improved usability.
DO YOU WANNA KNOW SOME GOLDEN RULES FOR TRADING AND INVESTING CRYPTOCURRENCIES?
As you might already have this idea by now but cryptocurrencies have taken the world by storm and it has been one of the most evolutionary phenomena to date. Cryptocurrency investing, like many other types of investing, requires perseverance and dedication to the trade. Here are some golden guidelines to follow to improve your trading experience and make it more profitable as well.
- Make a strategy
A strategy is required for effective investing, which includes understanding your investment horizon (how far you will hold) and trading technique (active or passive). You should know what kind of gain you want to obtain and how much risk you’re willing to take to get there. Currencies can be volatile, and investing without even a well-thought-out strategy raises the risk of financial damage.
- Do not put all of your money into the marketplace at once
The volatility of cryptocurrency offers regular openings to “buy the dip,” allowing you to get better deals when business confidence is excessively negative. You can’t take advantage of price cuts if you don’t have any reserve resources.
- Profits should be taken
Don’t be reluctant to sell and collect a profit if you have a big unachieved gain on an available spot. Losing out on dividends after your offer is a minor issue after you’ve already made money from a sale. Even if open positions have significant unrealized profits, there are drawbacks to keeping them.
- Do not be alarmed by major drops or gains
Human emotion and feeling play a significant role in investing. If there are large price declines or losses, many new or novice investors make irrational, short-sighted judgments. In times of high uncertainty, the smartest way to do this is to take a step back and evaluate the situation as objectively and unemotionally as possible.
- Keep up with the latest news and stay updated
The cryptocurrency world grows at a breakneck pace. New knowledge, whether favourable or unfavourable, may significantly alter an investment thesis for a specific project. So, keep a close eye on financial updates, upcoming events or any political news which may alter the prices of your cryptocurrency.
- Don’t spend more than you’re willing to lose
While cryptocurrency is an enticing investment strategy, it is extremely risky and more unique than conventional investing. It is important to consider the risks associated with cryptocurrencies and only commit money that you are prepared to lose.
WHAT TYPES OF CRYPTO EXCHANGE EXISTS?
Assuming you have thoroughly read and understood all that is stated above about crypto exchanges, you might be prepared to choose your preferred crypto exchange and start investing. But before you do that. Let us explain to you a very key point about crypto exchanges. Two types of crypto exchanges can be found on the internet. They are:
- Centralised crypto exchanges
- De-centralized crypto exchanges
Centralized cryptocurrency exchanges serve as a middleman between a purchaser and a seller. Centralized exchanges are more reliable since they are owned and managed by a corporation. Approximately 99 per cent of all cryptocurrency transactions are processed through centralised exchanges.
Decentralized cryptocurrency exchanges (DEX) enable people to conduct peer-to-peer exchanges without the involvement of a third entity or broker. Some people Favor decentralised exchanges owing to some of the problems associated with centralised exchanges. Decentralized exchanges, on the other hand, do not allow for the exchanging of paper currencies for digital currencies.
Choosing the best cryptocurrency exchange platform for your particular needs can be a time-consuming and challenging method. Take into consideration the rates, credibility, protection, verification procedures, and geographical services provided by an exchange platform. Keep in mind that you are not restricted to using a single cryptocurrency exchange. Fingers crossed, the information given here will help you decide which exchange platform to use, how to choose the best crypto exchange platform and what factors to consider when joining a platform.
Crypto Exchange FAQ
One of the most common ways for exchanges to make money is by charging a fee per transaction. The fees can seem tiny per payment, but they add up over time, particularly when the volume is large. Depending on the number of trades handled by your exchange, you can build your fee structure per trade or even introduce your Loyalty Token.
A multi-layer security system comprised of different servers, 2-factor authentication, high-level cryptographic protocols, DDOS protection, and cold storage. These several well-known features can be found on some of the most secure Exchanges. Still, a few platforms have not been completely devoted to making their trading platforms secure for their traders. However, when it relates to their clients’ assets, others are constantly working hard. Also, you can make take some steps to ensure that your account is safe and protected. Always choose a very strong password and keep changing it often to reduce the chances of breaches and attack. You should also never give away your personal information such as your email address and password or your security questions to anyone.
Binance has the lowest fees for pure cryptocurrency trading. Coinbase (broker), GDAX (exchange), and Bit panda (broker) have the lowest fees for exchanges that accept credit cards and bank transactions.
Binance is among the newest exchanges, but it has repeatedly delighted its clients and is regarded as being one of the best cryptocurrency exchanges in the United States. They also have one of the largest trading volumes on some of their trading pairs, as well as a massive number of coins for sale. It is headquartered in Hong Kong and has branches in many other countries, including Japan and China. It is open to all countries and states of the United States. The Binance exchange has its coin, Binance Coin, which allows people to save a lot of money on trading costs.