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How to select the best cryptocurrency exchange?

Given the attention surrounding cryptocurrencies, it’s only natural that investors would be interested in buying these coins. The first step to doing this is finding a source of the coins, and the safest option is through a cryptocurrency exchange. Fortunately, there are a lot of companies that offer this service, although not all of them would be suitable for you. When it comes to selecting the best crypto exchange, there’s more that goes into the decision than just a simple purchase, and that is the subject of this post. Just like choosing a preferred supermarket, there are certain details that make one better than the other for you. Using several criteria, therefore, you could identify the best cryptocurrency for you in particular rather than going with the crowd.

Main factors to consider about a cryptocurrency exchange

According to CryptoCoinCharts, there are over 190 companies on the cryptocurrency exchange list that are in operation at the moment. Moreover, others are popping up by the day, not to mention the peer-to-peer platforms. For you to make the best choice out of all these, there are several factors you will need to consider about these companies.

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Fund security

As with all things money, security is paramount. After all, you need to be sure that your investment is safe, especially if you are making a huge investment. When you buy cryptocurrencies, your coins are kept by the exchange unless you choose to keep them on your own wallet. Therefore, the exchange needs to have adequate security measures to keep these coins safe. In the past, there have been multiple hacks even among the top crypto exchanges. Some have been kind enough to provide refunds to their clients, but more often the coins are lost forever. Remember that the main attribute of cryptocurrency is its anonymity, which makes it very difficult to trace them to the hacker.

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To prevent this, exchanges have set up various security measures that protect clients’ coins. The most important is 2-factor authentication (2FA). You should be familiar with this security measure since many email providers use this to increase account security. There are different ways every exchange implements 2FS, but the main one is through the use of a confirmation code sent to your mobile phone. The idea is to create an extra layer of security that locks out an attacker, or at least makes it more difficult for them to gain access. Furthermore, all correspondence and transactions should be authenticated the same way to give the exchange time to confirm your identity. On the company’s side, the best crypo exchanges also keep a portion of the coins in cold storage. This is harder to get into by attackers, hence keeping the coins safe.

While you are choosing a cryptocurrency exchange to use for your coin trading, you need to confirm that the company offers all of these protections. They ensure that the coins cannot be stolen as they have been from many other exchanges in the past, keeping yours secure too.

Transaction fees

Exchanges derive their profits from the transaction fees imposed on every trade you make. These fees will vary from one company to the next, so you should also check how much a particular exchange charges for their services. Usually, the fees are lower for bigger transactions, but that is just to encourage bigger trades. Besides, the exchanges impose larger fees on smaller transactions to prevent an overload on their servers. The thinking goes, if they allowed smaller transactions, they would get too many requests that could overload their systems. As a result of this, you need to consider how much every exchange charges in relation to your trade size to prevent large portions of your deposit from getting eaten away.

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To sweeten the pot, some crypto exchanges are even offering dividends. They do so by creating a native cryptocurrency that their clients can purchase in return for dividends and reduced fees. This isn’t a common practice, but something worth considering as a way of saving on transaction cost and earning passive income at the same time.

Location of the exchange

Being an online business, many people don’t consider the impact of the location of an exchange. Nevertheless, it is a very important factor for two reasons. The first has to do with currency exchange rates. Depending on an exchange location, they will have a preferred base currency. For example, a South Korean- based exchange will often prefer transactions in KRW. The biggest exchanges with a worldwide audience may not have this problem, but smaller companies will. It is often advised to choose an exchange in your location to avoid the problem of conversion rates, but if you can’t, then always choose a company that will allow you to exchange cryptocurrency at the best rate. These currency conversion costs may seem small at first, but they add up especially if you are a frequent trader. Long-term holders may not feel the pain as much.

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Apart from currency, location may also determine the quality of customer support you receive as well. An exchange may not have the ability to hire customer support staff who understand all languages and instead stick to the local language. That may cause difficulty if you can’t understand each other. No one understands the importance of customer support until they need them, which is why you should think ahead. In case of any crisis, these are the people who can help you out of a jam.

Number of cryptocurrencies available

This is one of the most important factors you need to consider, and the more options the better. No one likes to be restricted in choice, so you should also choose that exchange with the widest variety of coins to choose from. Nearly all exchanges will offer Bitcoin and Ethereum, which are the most popular cryptocurrencies. Nevertheless, you may be in need of, say, Bitcoin Cash because it is faster or Monero because it offers more privacy. Your choice should come down to the particular coins you are interested in, and whether that exchange can offer them to you. If you are interested in more than just the most popular coins, the best altcoin exchanges will provide a wider selection of coins to choose from.

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Methods of deposit

It is not so easy to buy coins from an exchange as you may think. One of the main reasons for this is that many of the top cryptocurrency exchanges may not accept deposits in fiat. This renders your credit card and wire transfers useless since they can’t get you any coins from most exchanges. These companies require that you make your deposits in cryptocurrency, and that makes it difficult for someone who holds none at that moment. You could still buy coins from peer-to-peer platforms and then send them to your exchange’s wallet, but that would incur an extra cost for the two transactions. Those few exchanges that allow deposits in fiat are thus the most favourable for first-time buyers.

Those methods of deposit also matter due to other factors. For example, wire transfers reduce the anonymity of the buyer since your identity can be tracked back to you. Depending on your reason for purchasing coins, you may want to consider this factor. There is also an issue with the speed of transactions, where methods like wire transfers take longer than, say, credit card. Things move fast in the crypto world, so the speed of transactions becomes critical in volatile moments. Finally, every method of deposit will have a limit. Wire transfers will accommodate bigger transactions, while credit cards may have daily limits.

Even though certain methods of deposit may be instantaneous in theory, only cryptocurrency exchange reviews can definitively describe the experience.

Due to all the above, the best exchanges are those that allow various methods of deposit. Different options will provide more flexibility to you depending on your particular situation thereby improving your overall experience.

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Other issues to consider about the exchange

The above are the 5 main factors to consider about every cryptocurrency exchange you look into. That should be enough to help you narrow down your options to a few favourites. Now let’s get to selecting the very best best altcoin exchange for you by looking at other issues that may have an impact on your opinion.

Company profile

Even though a company may hit most of the high points on the surface, it is important to look below at the company itself. One main reason for this is that you get to learn about its legitimacy. Most countries still don’t have specific laws for cryptocurrency exchanges, but a few have already done so. In Japan, South Korea and the US, exchanges are required to be licensed by the respective financial regulators. This is to ensure that the company adheres to ethical rules and prevent fraud. Meanwhile, countries like China have completely outlawed exchanges from operating. You need to know about the exchange’s location and the regulations that company needs to follow to get a sense of its legitimacy. For example, an exchange based in the US but isn’t registered by the SEC should raise red flags. It may not provide sufficient protection for your funds, or worse… it may be a total scam.

An even simpler way of determining an exchange’s legitimacy is by analysing crypo exchange reviews. No one is better at telling about a particular company than someone who has dealt with them before. Even with the most thorough research, there are some things you only learn when it’s too late. But you can learn from others’ mistakes through previous customer reviews. These will help you know a company’s reputation and avoid the bad eggs.

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User-friendliness

While the user-friendliness may not directly influence the actual cryptocurrencies, it does affect your experience with the exchange. This is why so much time and money is spent on web designers to make the experience as simple and effective as possible. That should also determine your decision to pick one exchange over another if you intend to do a lot of trading.

Liquidity

You also want to choose an exchange with high liquidity, meaning that it processes higher volumes of transactions. Obviously, this gives the exchange more credibility since many people are working with them, but it also ensures you get more accurate quotes. Due to high volatility in crypto markets, smaller, obscure exchanges may have very different quotes from the best cryptocurrency exchanges. For example, you may purchase Bitcoin at $10,000 when it is actually trading at, say, $9,500 on another exchange. This means that you would have lost $500 for every Bitcoin, and the actual prices may never get to the price at which you bought the Bitcoin. High liquidity exchanges keep you safe from these price differences that could have a detrimental effect on your profitability.

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All things considered

From all the above issues and factors, the choice of a cryptocurrency exchange is clearly not a very simple matter, nor should it. A good exchange could mean the difference between you joining other disgruntled traders and being a regular investor. Because it is so important, take your time when making the decision to weigh all the above carefully before making the final decision. Do not also be wary of signing up with several exchanges and getting a feel of their services. Nothing beats first-hand experience.

And when you do find your preferred candidate, do not go in all the way right away. Instead, test the waters by making small gradual investments over time until you are completely confident. There is no shame in being careful, and only fools rush in.