To start investing in Bitcoins, Ethereum or Litecoins, you need to register on a cryptocurrency exchange where you will convert euros and dollars, getting wide access to buy-sell offers. However, novice investors may have doubts as to which exchange is the best, which can offer security and favourable terms of sale.
It can be difficult to compare the opportunities offered by different platforms on your own. For this reason, we have prepared a comprehensive guide to explain how cryptocurrency exchanges work and point out the important aspects you should pay attention to when signing up.
Types of transactions on cryptocurrency exchanges
A person who logs on to cryptocurrency exchanges usually has several options when performing transactions. The first way is similar to that of an online exchange office – we can perform it automatically – in this case, the other party is the exchange itself. The user only needs to enter the amount of money he or she is interested in and will immediately receive an exchange proposal.
This is a good solution for those who are in a hurry, exchange smaller amounts or who are just starting out – this does not guarantee the best exchange rate, but you can be sure that you will not be scammed, and you will receive your money immediately. However, experienced traders prefer to trade with other users. For this purpose you should post an offer with the proposed amount and exchange rate and wait until there is someone willing to trade. You can also use the offers posted by others. What are the best cryptocurrency exchanges? We answer this question below.
How do cryptocurrency exchanges work?
Cryptocurrency exchanges are online platforms that allow you to trade cryptocurrencies – Bitcoin, Ethereum, Lithecoin and others. The mechanism of cryptocurrency exchanges is similar to the way stock exchanges operate. They offer the ability to buy and sell cryptocurrencies in a variety of ways – both at a set (usually slightly higher) rate from the exchange itself, as well as from other users – resulting in very appealing transactions.
Keep in mind that an exchange is not an alternative to a cryptocurrency wallet – you should not keep your accumulated funds on it for long periods of time, as several platforms fell victim to hacking attacks or went bankrupt. Always transfer your funds to a cryptocurrency wallet immediately after completing the transaction, which provides much greater security.
The best cryptocurrency exchange – how to choose a crypto exchange?
There is no single right answer to the question of which cryptocurrency exchange is the best, although it is always worth considering factors such as security or age and reputation when choosing.
Each user has slightly different needs, so before you decide on one platform it is worth thinking about how you want to use it. A different solution may be good for someone who only occasionally wants to purchase a small number of Bitcoins and wants to make transactions quickly, and yet another solution for those who are looking for interesting opportunities to make money on niche cryptocurrencies.
It is worth familiarising yourself with how a particular exchange operates and if it offers the features that are most important from your point of view. It is also important that the platform is easy to use and intuitive – possible problems in this aspect may cause a lot of unnecessary stress.
Cryptocurrency exchanges – how to get started?
The moment when we first register on a cryptocurrency exchange to start investing can cause both excitement and apprehension. In reality it should not pose any major problems – although we will certainly have to get used to navigating some of the features. The registration itself proceeds similarly to that of any other kind of website – we have to provide our e-mail address to which we will receive a message with an activation link.
The next step is to fill in all the necessary details. Unfortunately, at this stage we usually do not get full access to all functionalities of the exchange. Account verification is required, which aims to confirm the identity of the user. For this purpose you may be required to Submit relevant documents. You can only make a deposit and start investing once the account has been verified.
Cryptocurrency exchanges – payment methods
It is always a good idea to check the payment methods offered by the chosen exchange, so that you can quickly and conveniently perform transactions. Most often we have the option of paying by bank transfer, credit or debit card or using PayPal and other popular payment systems.
Modern cryptocurrency exchanges try to provide investors with a wide range of methods so that everyone can easily transfer money in a way that is the most convenient for them. However, it may happen that the option you want will not always be available – which may be due to the lack of an agreement between the exchange and payment operators.
It is also worth paying attention to the fact that some of the payment methods (for example credit card) may be associated with a slightly higher commission, whereas the choice of other methods (such as bank transfer) may contribute to a slightly longer processing time.
Cryptocurrency exchanges – limitations
Unfortunately, some of the exchanges may have certain restrictions on access to all of its features – for example, not all of the services may be available in your country. Although the exchange will operate internationally, due to Geographical limitations some functions will not be available in your region. For this reason, it is worth checking how the use of a chosen cryptocurrency exchange operates in a particular country before registering.
Cryptocurrency exchange rates
Of course, when seeking to make money with cryptocurrencies, we must always carefully check the exchange rate of cryptocurrencies at the time of purchase and sale. Keep in mind that this exchange rate can vary significantly not only depending on the day, but also on the exchange through which the transaction is carried out.
These differences are often much greater than conversions in traditional online exchange offices – they can reach up to 10%, and for this reason it is recommended to compare the conditions on several exchanges and think about your own plan of action before conducting larger transactions. Remember, however, that choosing the cheapest offer will not always be the best idea – it’s worth checking for other hidden costs or security flaws.
Data verification on a cryptocurrency exchange
Initially, cryptocurrencies such as Bitcoin were chosen by many primarily as an alternative to traditional means of payment, appreciated by those who, for various reasons, cared about anonymity. Currently, most reputable exchanges no longer provide it – in order to deposit and withdraw money and get access to all available features, it is necessary to verify your personal data.
For this purpose, it is often necessary to attach a scan or photo of an ID card or passport and confirm your address (for example with a document that includes it). In some cases, even before verifying the details, we can gain access to the demo version of the platform – without the possibility of making real transactions. Of course, an account on a cryptocurrency exchange can only be created by adults.
Criteria for evaluating cryptocurrency exchanges
Are you wondering which cryptocurrency exchange is worth choosing? Here are the most important factors to consider when deciding on one:
- Security – when choosing cryptocurrency exchanges, and any other type of online financial service – security should always come first. So what if the fees are lower than anywhere else, if due to fraud or insolvency you will lose all the money you have earned? For this reason, before making any transaction, always check what the security features are. These should look the same as they do for traditional online banking. The basis is the SSL protocol and two-step authentication using a SMS code when logging-in.
- Reputation, size, and age of the exchange – as a rule it is recommended to choose large, reputable exchanges that have been operating in the market for years and have already earned a certain reputation – using them involves less risk than transferring large amounts of funds to a newly established platform about which not much is known. Be careful though – in the past there have also been bankruptcies of well-known exchanges with a good reputation.
- Handling a high volume of requests – which allows us to maintain financial liquidity. If there are very few orders on the exchange, we may have trouble executing some trades (e.g. with less popular cryptocurrency pairs). This is also a serious sign that the liquidity of the exchange may be threatened – which threatens insolvency.
- The cryptocurrencies and payment methods available – before you decide to register, check what currency pairs are offered and the available payment methods. In the case of the most popular cryptocurrencies such as Bitcoin or Ethereum, there should be no problem, however, lesser-known ones are not always offered. There are exchanges that use only cryptocurrencies for trading – on these platforms, designed for experienced investors, the unit of account is Bitcoin.
- The amount of commissions and fees charged, promotions – as with traditional financial services, you should always carefully review the information regarding all costs – the fees and commissions charged. It is worth paying attention to promotions offered, remembering, however, that the cheapest offer is not always the best.
There is no single answer to the question of which cryptocurrency exchange is the best. Each user has slightly different expectations and needs. Exchanges change over time; in the way they operate and the opportunities they offer – it may turn out that the first choice was not the best and we will prefer to make subsequent transactions somewhere else. But it is always a good idea to gain as much knowledge about a given platform and familiarise yourself with its terms and conditions before registering.