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How to Choose a Cryptocurrency Exchange: Essential Features of Crypto

As of now, there are thousands of digital currencies or cryptocurrencies available in the market, and many more are being introduced almost every month. The cryptocurrency cannot be purchased from any bank or crypto bank; instead, traders who want to invest in the digital currency must open an account on one of the industry's crypto exchange platforms. Crypto exchanges, like any other online brokerage platform, provide tools for buying and selling assets in the form of digital currency or tokens such as Bitcoin, etc.

Crypto exchanges serve as a platform for converting traditional currencies (mostly US dollars) into tokens or digital currency. On crypto exchanges, the regular currency is redeemed in exchange for tokens. Because exchange platforms profit from the transactions that take place on their platforms, they have been heavily promoting cryptocurrencies, crypto lending, crypto borrowing, and NFT art auctions all over the world. These are the options that most people are unaware of, but they are being introduced and people are flocking to them.

Crypto traders must begin trading by deciding how to trade, where to trade, and in which digital currency. These are basic questions, but they are critical when beginning to trade in cryptocurrency. When deciding on a cryptocurrency, the most important question is whether it is worth staking and then deciding whether or not to use an exchange. Good crypto exchanges facilitate trades by charging low transaction fees and providing a secure platform to keep assets or digital currency safe and secure. Before you begin trading, you must conduct thorough research on each crypto exchange and select the one that best meets your needs and requirements.

How to Choose a Crypto Exchange?

When deciding on a crypto exchange, there are several factors to consider, including the platform's supported assets, transaction fees, payment methods that allow you to buy and sell from regular currency, and the security of the assets.

Be Cautious

When investing in crypto and choosing a platform for it, the main thing to keep in mind is to be aware of frauds and scams. There are plenty of scams in the crypto industry. Individuals can have a huge loss because of them. Many crypto exchanges by the crypto exchange development companies have been hacked or compromised otherwise.

There are a few tips that traders can use to determine whether a particular crypto exchange is legitimate or not. The first is to look up the physical address associated with the exchange platform. If the address is not available, it is strongly advised not to use the platform because it is most likely a scam. If the address is available, it demonstrates that the platform is open and nothing is hidden. If you have the address of the exchange, you would have a good understanding of the legal ramifications of your investments. Another benefit of having a physical address is that if your account is hacked, you can easily address the issue with the exchange and any regulators responsible for the loss, but only if you have the physical location.

Accessibility

Many countries prohibit the use of digital or cryptocurrency. It is dependent on your location and whether you can buy and sell assets. Different countries have different rules and regulations in place for accessing cryptocurrency exchange platforms. Countries such as China have outright prohibited their citizens from accessing or exchanging cryptocurrency. Different states in the United States have established their regulations, and citizens can access the exchanges following the laws. Accessing the exchanges and making trades on the platform in New York necessitates a license. The license is also referred to as a 'BitLicense.' They only permit licensed businesses to operate within the state.

The exchange's website contains detailed information about the states in which they operate and where investors can buy and sell assets. The limitations of exchanges in various countries and states, as well as all related accessibility factors, are available in the exchange's terms of service.

Research

Before investing in any cryptocurrency exchange, make sure to do your homework. It is critical to understand the exchange platform before creating an account or wallet because you will be sharing personal information and linking your bank accounts. Reading the reviews of other users who have already used the exchange is an important consideration. Knowing about the user experience and whether or not they encountered any issues can help you make an informed decision. The company's description of itself is also very important. You might come across something you don't want to invest in. Examining the exchange's security and whether or not they have encountered any security issues. Even if they did, how they handled the situation is crucial. Try to research using every available resource, keeping in mind that you must find something negative about it. Look for information that the exchange platform would never want a potential customer to review.

Security

Because cryptocurrency is decentralized and no government or country owns it, it is not as safe as traditional currency or stock investments held in bank accounts. Some exchanges have insurance policies worth millions of dollars to protect and secure their users' digital currency and assets from any hacks or frauds that may occur. In the event of a hack, the platform creators or parent company ensures that account holders are protected. Meanwhile, some companies believe in safeguarding the platform through security practices to safeguard the digital currency held on their platforms.

The most important thing to consider is how difficult it is to create an account on a specific platform. The more difficult the sign-up procedure, the more legitimate the platform. Because platforms that are not safe will want more users on their platform, resulting in more digital currency theft. The easy sign-ups with the accounts on a platform are usually untrustworthy.

Whenever traders intend to keep assets or digital currency in the exchange platform for an extended period, or even if they intend to keep it for a short period, the exchange's priority should be the exchange's security. The factor to check the security of the platforms is how many assets are kept offline or in hard storage, also known as cold wallets. Whatever exchange platform you choose for your assets, you should always try to keep the digital currencies in an offline storage service, such as the cold wallets that are available. The options for the cold wallet are mostly presented in the form of stake coins. Maintain the majority of your digital assets offline. If the assets are needed for liquidity, exchanges should keep them online. Hackers cannot easily access cold wallets. For security reasons, some exchanges keep the majority of their funds offline and in cold wallets. For example, CoinBase keeps 98 percent of its customer funds offline, while only 2 percent of its assets are kept online and active for trades. The cold storage is mostly insured, and the accounts will be safe in the event of a loss or hack.

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Because cryptocurrencies are a growing platform with increasing asset value, they are more profitable targets for thieves and hackers. In 2020, nearly 28 attacks on crypto exchanges were reported, with one of the largest attacks on an exchange occurring in the year 2020 on the Singapore-based crypto exchange platform called 'KuCoin,' in which approximately $200 million in assets and digital currency were stolen.

There are a few general security measures in place to keep your account safe, including Two-Factor Authorization. It is a general security measure implemented by many social platforms as well. Its purpose is to improve the security of the platforms. When you sign in with your username and password, an additional method is attached, which is mostly a code verification via text or email. Every new login from a new device generates a warning to ensure that the account is only being used by you. Traders are new investors who feel more at ease investing in popular platforms that have already gained the trust of a large number of users. When investing, lowers the risk factor. New or small crypto exchange platforms may not be safe, and the assets will be at risk.

Fees

Fees are another factor that traders must consider when selecting a cryptocurrency exchange. Because of the high fee structures, the majority of new trades are turned off. The exchanges that charge higher fees typically make buying and selling very simple. Many popular exchanges charge higher fees, but the trade-off is worth it in terms of asset insurance and security. They also make it simple to deposit and withdraw digital currency in regular currency, as well as trade from one asset to another.

The fees charged by the crypto exchanges, as well as the currency pairs, are the main factors that differentiate them. In many cases, exchange fees are fixed, but more often than not, they are a percentage of the trades. Fees are assessed for each transaction and differ for buyers and sellers. Sometimes the transaction fees percentage is also affected by the fluctuation in the values of the assets, so the transaction fees fluctuate as well. Charges on some platforms also vary depending on the currency used to purchase assets or withdraw funds in a currency. It may also be affected by the level of activity on the platform by traders. In some cases, it is solely dependent on one of these variables. The important thing is to understand how and when the crypto exchange will charge you fees before handing over or transacting with the assets.

Understanding the fee structure is also important because you must understand how it will affect your investments. It is determined by the active transactions that the trader will conduct on the platform. If the trader has a plan and is using a strategy of making multiple transactions on the platform every day, the higher fees will be difficult for them to bear and will have an impact on their investments. Traders should choose an exchange with a low fee structure in this case.

Liquidity

Another important consideration is the liquidity of the crypto exchange made by the crypto exchange developers where you intend to invest your assets and digital currency. The market's liquidity is important because it makes it easier to buy, sell, and trade currencies. When traders have the option to sell assets whenever they want at good market prices, the platforms are considered liquid. To ensure that your assets or digital currency are liquid, choose an exchange with a high trade volume. When a large number of users use an exchange for their trades all over the world, the exchanges are usually liquid. The most popular exchanges are those with high trade volumes.

The size factor is important because if there are a large number of active traders on the platform who are constantly buying and selling assets, it will be easier for you to buy and sell assets at good prices due to the high trade volume. If the exchange's trade volume is low, you will end up buying and selling at higher prices than on other popular and liquid exchanges. If you are on a low-trade-volume exchange, you will pay a significantly higher price than the market price because your purchase will not be completed until the prices rise again.

Preferred Coins

Choosing a crypto exchange platform is also influenced by the coins you wish to trade. Because there are thousands of cryptocurrencies and they can't offer them all on one platform, not every coin is available on every exchange. If you want to trade in the most popular cryptocurrencies, such as Bitcoin and Ethereum, these are the coins that are available on nearly every platform. However, if you intend to trade in new altcoins, coins that are not widely used or have a low market cap, it will be difficult to find an exchange that accepts them. However, dealing with small and new altcoins can be risky, and traders can lose money.

Because of this, many crypto experts stick with the big names and popular cryptocurrencies.

There are still some additional aspects to consider when choosing a specific cryptocurrency exchange based on your preferences. You should contact the exchange's customer service to see how well they will assist you in any case or problem. Another factor to consider is the exchange platform's mobile application, including how easy it is to use and the overall experience.

Take as much time as you need to understand the platform before investing any real money in asset trading and digital currency trading. Make a plan and choose a strategy for working on the platform. Before investing, you should define your goals and plans. Cryptocurrency is a high-risk asset, so before putting your money at risk, consider the fee structures and security measures that you are comfortable with.

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