A cryptocurrency exchange makes it possible to exchange or buy/sell digital money. Such platforms are quite popular not only among investors but also ordinary users.
Cryptocurrency exchange refers to an internet resource aimed at conducting trading in real-time. Graphs and interfaces in most cases are made so that they remain accessible even to beginners.
So how to choose the right cryptocurrency exchange?
Types of Cryptocurrency Exchange Platforms
We have examined the general principle of how a cryptocurrency exchange works, so now let’s move on to considering the types of exchanges depending on their method of mediation and the provision of services.
Centralized Exchange (CEX)
Centralized exchanges act as intermediaries throughout the bidding process. They store your funds, accept and execute trade orders, and at the end of the procedure, they can purchase your crypto.
Centralized exchanges are more suitable for a beginner since they almost entirely manage the entire trading process. Also, they have a reasonably clear user interface. Many have a well-developed system of technical user support. Finally, many people choose such exchanges, since it is safer to buy BTC through a real company, and not through an anonymous distributed network.
However, such exchanges have disadvantages. The first is security. Since your cryptocurrency is stored on the exchange, there is a risk that it will be stolen during a hacker attack, and history already knew such cases. Nevertheless, there are cryptocurrency exchanges such as AgoraDesk that put security in the first place what makes the platform the best option. Another minus is commission fees, due to which centralized exchanges cover the costs of maintaining the system.
Decentralized Exchange (DEX)
Decentralized exchanges (or peer-to-peer) do not belong to any company but are placed in a distributed network. If there are a suitable seller and buyer for trading, they exchange funds directly through an external portfolio of orders and internal settlement, or an interactive contract.
Since these exchanges do not belong to a legal entity, government agencies cannot intervene in their work. Secondly, these are peer-to-peer networks, so they do not require any maintenance costs, which means that there are no commission fees. Accordingly, on such exchanges, you buy cryptocurrency with almost no commission.
However, decentralized exchanges, unfortunately, are far from perfect. Volunteers serve these exchanges, and many of them are not able to achieve such a convenient system as in CEX.
The DEX interface is often quite awkward and confusing, which means that the user has many inconveniences. Usually, the entire purchase and sale transaction procedure can be too complicated. There is no user support (which is essential in various obscure situations) which can help you when you got tricked.
How to Choose a Cryptocurrency Exchange Platform
Cryptocurrencies are now prevalent, respectively, the number of such exchanges is growing. Not all of them are equally useful. However, choosing a reliable and easy-to-use exchange is not so difficult. To safely and buy a cryptocurrency for traditional money, select the exchange for yourself according to the following parameters.
The list of attacks on cryptocurrency exchanges over the past five years is impressive, and it is continuously updated. At the end of last year, about a million BTCs were stolen from crypto exchanges in one way or another.
Thus, it’s of utmost importance to consider security measures before creating an account. For instance, Estonian cryptocurrency exchange, ROKKEX, performs regular pentests and attracts white hat hackers to test their systems. Besides, the company partnered with Ledger to ensure safe cold storage of user’s funds.
Some cryptocurrency exchanges have been around for a very long time. They have a good reputation and have proven themselves positively. Naturally, it is difficult for a beginner to figure out which of the exchanges has a good reputation. Therefore, as in any business, you need to see or hear the opinion of people who have already worked with several cryptocurrency exchanges. This is best done at specialized sites where digital currencies are discussed.
For example, not all cryptocurrency exchanges work with Visa and MasterCard. Besides, when using a bank card, you have to go through multi-level verification. If this is a bank transfer, then the procedure is delayed in time; it may take up to 5 business days. Also, when using the SWIFT transfer in favor of the cryptocurrency exchange, a problem may arise in the purpose of payment, and your bank will not be able to send an international transfer. Therefore, when choosing a cryptocurrency exchange, always pay attention to the methods of depositing and withdrawing funds to avoid problems.
Each exchange charges fees for transactions and deposit or withdrawal operations. The sizes of these commissions are indicated on the websites of exchanges; therefore it will not be difficult to familiarize themselves with it.
Each exchange has its exchange rate. Since the exchange rates are set for themselves, sometimes they can be different. Naturally, it makes sense to compare them and choose the most profitable for yourself.
Each cryptocurrency exchange has its own rules. To perform any operations on most platforms, you will need to go through the procedure for confirming personal data, that is, verification. You shouldn’t be afraid. Cryptocurrency exchanges do this solely to protect against money laundering and fraud.
Some cryptocurrency exchanges may have geographic restrictions, which are necessarily indicated on the official website of the exchange. There is a flip side to the coin. Do not choose a crypto-exchange that is registered in the offshore zone. With a high degree of probability, you will fall for scammers, or the site will be unreliable.
Top 7 Cryptocurrency Trading Rules
- Do not spend the last. Invest only those funds that you are ready to lose without any considerable problems for the budget.
- Do not let greed make decisions for you. It can be tough for beginners to fix profits since it always seems that one could earn even more. It is better to withdraw profits and make a new approach than to wait and suffer losses.
- “Trust but check.” What is written in the exchange chat should be subjected to no less thorough analysis than the situation in the cryptocurrency market. Many people are ready to promote a particular currency by any means for personal enrichment.
- Analyze. Not all cryptocurrencies are the same — some are more stable, others less, and some, at all, are doubtful. Stable cryptocurrencies are suitable for medium and long-term investments, but with “dark horses,” you can take risks at short-term distances. The main thing is not to store all the eggs in one basket.
- You need to buy a cryptocurrency when it falls, and sell it when it grows. So you get ahead of the crowd, which is thoughtlessly following trends.
- Do not try to catch the minimum and maximum. This is a too risky game, especially for a beginner. Even stock sharks cannot always correctly assess market sentiment.
- “Hope for memory, but don’t be fooled.” Strategies and orders must be written down. This will help you in the future to calculate the average purchase price and create your plan for each stage of trading.