Cryptocurrency exchanges. How to choose the best one?
The bitcoin cryptocurrency and its underlying cryptocurrency blockchain technology have become a real breakthrough not only from a technical point of view, but also from a financial point of view. More and more people are attracted to investing in cryptocurrencies and blockchain technology. Every month the capitalization of the industry is growing and the number of digital currencies is expanding. In order for those interested to invest, buy and sell cryptocurrencies, special narrowly focused exchanges have been created.
What is a cryptocurrency exchange?
When we hear the word "stock exchange" we immediately imagine Wall Street, spacious rooms with huge screens displaying quotes of currencies, stocks and stock indices, and serious brokers in suits buying and selling all this stuff. Can you imagine that? It's a little different with a cryptocurrency exchange.
Since we are dealing with cryptocurrencies, which are computer code, a cryptocurrency exchange is first and foremost, digital platform. But since it is still an exchange, this digital platform performs all the functions inherent to exchanges: exchange and trade.
That is, the main purpose of cryptocurrency exchanges is to exchange cryptocurrencies for traditional currencies and vice versa. Additionally, such exchanges provide an opportunity to trade cryptocurrencies.
As you know, it is possible to obtain bitcoins or other digital currency through mining. But this is not the only way. Cryptocurrency exchanges are the place where you can acquire bitcoins or any other cryptocurrencies.
What cryptocurrency exchanges are there?
The division into types of cryptocurrency exchanges is rather conventional and comes from the functions they perform. At the moment, two main types can be distinguished:
- Exchanges performing the functions of classical exchange offices. That is, they are exchanges where you can exchange cryptocurrencies for traditional money.
- Exchanges that provide their participants with trade opportunity cryptocurrencies or exchanging bitcoin for other altcoins.
How to choose a reliable stock exchange?
Cryptocurrencies are very popular now, accordingly, 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 that difficult. To safely and easily buy cryptocurrency with traditional money, choose an exchange for yourself according to the following parameters:
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Exchange reputation
Some cryptocurrency exchanges have been around for a very long time. They have a good reputation and have proven themselves positively. Naturally, it is hard for a beginner to figure out which exchange 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. The best way to do this is on specialized sites where digital currencies are discussed.
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Methods of payment
This parameter is very important. For example, not all cryptocurrency exchanges work with Visa and MasterCard payment cards. In addition, if you use a bank card, you will have to undergo multi-level verification.
If it is a bank transfer, the procedure is time-consuming - it may take up to 5 business days. In addition, when using a SWIFT transfer in favor of a cryptocurrency exchange, there may be a problem 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 deposit and withdrawal methods to avoid problematic situations.
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Commission amount
Each exchange charges commissions for transactions and operations of deposit or withdrawal of funds. The amounts of these commissions are specified on the exchanges' websites, so it is not superfluous to familiarize yourself with them.
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Exchange rate
Each exchange has its own exchange rate. Since these rates are set by the exchanges themselves, they can sometimes differ significantly. Naturally, it makes sense to compare them and choose the most favorable one for yourself.
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Verification procedure
Each cryptocurrency exchange has its own rules. In order to make any transactions on most platforms, you will need to go through the procedure of confirming personal data, that is, verification.
There is no need to be afraid of this. Cryptocurrency exchanges do this solely to protect against money laundering and fraud.
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Geographical location restrictions
Some cryptocurrency exchanges may have geographical restrictions, which are necessarily indicated on the official website of the exchange. For example, the American cryptocurrency exchange CoinBase is not available for users from Russia, Ukraine and Belarus.
There is also the other side of the coin. You should not choose a crypto exchange registered in an offshore zone for exchanging or trading. With a high degree of probability you will fall for fraudsters, or the site will simply be unreliable.
The most trustworthy cryptocurrency exchanges are those under American or British jurisdiction.
To get a summary of the most popular cryptocurrency exchanges, you can use specialized sites that have reviews and ratings.
Example of rating of cryptocurrency exchanges.
Which exchange to choose for cryptocurrency trading?
Let's say you want to not only exchange your hard earned money for bitcoins, but also trade cryptocurrencies. Among traders, the following exchanges are the most popular now:
The best option for selecting cryptocurrencies from different exchanges is to use tradingview.com, a well-known service among traders.
Which cryptocurrencies are best suited for trading?
In principle, you can trade any cryptocurrency. But our goal is not just trade, but make speculative profits on exchange rate differences. You can only earn such profits if there is liquidity.
If a cryptocurrency has no liquidity, its value does not change. Naturally, speculation on rate differences is out of the question. That is why you should choose cryptocurrencies that have liquidity for trading.
The more money invested in a cryptocurrency, the greater its capitalization (the total value of the asset that is in circulation) and therefore higher liquidity.
Market capitalization of cryptocurrencies is calculated as the product of the number of issued crypto coins and the value of one unit. At coinmarketcap.com you can see such information for each cryptocurrency and choose a suitable one for trading.
Note that for cryptocurrency trading, as for any other financial asset, trading volume is of great importance. On the same website you can get this information from the column Volume (24h) - trading volume over the last day. Naturally, the higher the volume, the higher the liquidity of the cryptocurrency.
The second most important parameter when choosing a tool is traded volume (Trade Volume). On the same site there is a Volume (24h) column, which displays the trading turnover for the last 24 hours. The higher it is, the higher the liquidity.
Is it profitable to trade cryptocurrencies on an exchange?
Cryptocurrencies at the moment have a very high volatility, which provides a wonderful opportunity for speculative earnings. Therefore, the use of short- and medium-term trading strategies for cryptocurrency trading is justified.
Cryptocurrency trading also has another very significant advantage. Compared to classic exchanges, cryptocurrency exchanges are still very young. There are too few professional big players and trading robots in this market, so cryptocurrency price moves more technically than currency pairs quotes on , making much less false movements.
As in trading on the currency market, it is better to start trading cryptocurrencies on a demo account. Such an account can be opened with a broker that provides the opportunity to trade cryptocurrencies, but the set of trading tools at such brokers is very limited, although there is a prospect for improvement. As an alternative, you can try trading in demo mode on a cryptocurrency exchange, for example, on Bitfinex.
The cryptocurrency market, at the moment, looks very attractive for trading. And each coin itself is a high-tech project, which is interesting even just to study and research. It is likely that cryptocurrencies in general and bitcoin in particular have a great future ahead of them and now is the time to become a part of that future.
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