5 Must-Know Tips for Choosing a Cryptocurrency Exchange
With the price of Bitcoin and other cryptocurrencies reaching record highs, many new investors are looking for a good place to start trading virtual currency.
Cryptocurrency can be a risky business, especially if you trade without knowing its basics. You can make huge profits, but you can also go bankrupt before you even study the market. There are several things you need to know, including how to choose a crypto exchange. Selecting the wrong crypto exchange could lead down a path riddled with distractions and wasted effort. Read on for five important tips that will help you choose the right cryptocurrency exchange.
1. Research the exchange’s authenticity and security
Thorough research will help you choose a secure and legitimate exchange platform. There are a lot of incompetent exchanges that not only expose investors to fraud, but also end up scamming the little investments left by online scammers. Before settling on an exchange, find out if it can protect you from fraud.
2. Compare the fee structures
Cryptocurrency exchanges have different fee structures and transaction fees. Many people overlook this factor and end up choosing exchanges with high transaction fees, not knowing that they could have used a good exchange that offers discounted fees. An exchange with tokens often has fewer transaction fees than those without. If you’re comparing two exchanges with tokens, pick the one holding more. A crypto exchange comparison can help you pick the exchange with the most appealing fee structure.
3. Know the different types of cryptocurrency exchanges
There are three types of cryptocurrency exchanges: brokers, P2P exchanges, and trading platforms. Learn about what each entails. Cryptocurrency brokers work like forex brokers by setting prices and providing a platform where buyers can purchase cryptocurrencies.
P2P exchanges link sellers and buyers for direct interactions and leave them to agree on transactions. They create a secure system to allow safe exchanges of cryptocurrencies. Most investors use trading platforms. Instead of direct interactions between buyers and sellers, each party interacts with the platform. The sellers place their cryptocurrencies on the platform, and buyers place their orders. The platform charges a transaction fee. Learn the basics of each before making a decision. Research the pros and cons of each and choose the one that best appeals to you.
4. Purchase methods
Cryptocurrency purchase methods vary based on exchanges. Some platforms require users to use PayPal or bank transfers, while others accept debit and credit cards. Still, some require buyers to purchase using cryptocurrency. Before settling on an exchange, find out how long it takes to complete a purchase. A platform that processes transactions instantly is better than another that takes days or weeks.
5. User experience
User experience and functionalities is a critical factor to consider, especially if you’re trading cryptocurrency for the first time. Exchanges with good user experiences attract the largest growth in transaction volumes. Some platforms provide their users with free tokens, and it would be helpful if you choose an exchange with such offers.
If you just got into cryptocurrency, it’s essential to weigh different factors before investing your money. Exchanges operate differently and have varying degrees of security and user experiences. Explore all the available options and pick the exchange that guarantees users’ safety.