Key Features To Consider When Choosing A Crypto Exchange

The increasing use of digital technology has greatly influenced the acceptance of cryptocurrencies. Each day, we witness the emergence of fresh coins or technologies within the crypto market. Moreover, blockchain and crypto are currently bringing benefits and innovative services to various sectors, including business, entertainment, sports, finance, and insurance.

However, individuals and business owners are finding ways to enter crypto and generate profit. The easiest and most popular way is to use a cryptocurrency exchange. 

Crypto exchanges provide a platform for individuals to buy and sell different digital currencies conveniently. There are several exchanges available in the industry. Each platform possesses its unique characteristics, catering to the diverse needs of every user or trader.

However, different exchanges vary in features and may not be perfect for every trader’s needs. When choosing a crypto exchange, the average investor must consider the following factors that will benefit their decision-making process.

Accessibility

First, check if your chosen crypto platform is available in your state or country. It is vital to ensure that the platform follows the regulations set by your country to maintain compliance and legality.

Some exchanges have website addresses tailored to specific countries. In the US, it is advisable to visit “exchange.us.” A website with a “.us” domain exclusively serves the United States, ensuring information and services are relevant to your location. You cannot utilize the specific platform if the response is negative.

User Experience And Interface

As we mentioned, each exchange works differently. Whether you are an experienced or beginner investor, choosing an easy-to-use and straightforward exchange is best for a smooth experience. Getting used to new platforms might take a while, but a good interface can help users navigate websites or apps more easily.

Sometimes, developers make the mistake of adding too many features and functions. However, they forget that usability is important and can suffer when things become too complicated or overwhelming.

Therefore, you should also look for a well-designed exchange with important features of your choice.

KYC/AML

Exchanges follow specific laws and regulations depending on their locations, practices, and services. Some exchanges ask people to give their personal information when creating an account. These are Anti-Money Laundering and KYC practices. This helps ensure the legitimacy of users and prevent illegal financial activities.

Each exchange has different rules. Some platforms only ask for personal information like identification and proof of residence when you want to withdraw funds or remove certain limitations. Other platforms require this information right when you create your account. The rigor of these methods increases the reliability of the platforms.

Security

In the past two years, multiple exchanges have experienced security problems. These issues have ranged from hacking incidents to data breaches, potentially exposing users’ sensitive information and funds to risks. However, when choosing an exchange, security must be prioritized.

You can usually find information about an exchange’s security practices on their website. No exchange is entirely secure; it is difficult to determine which is the most reliable. However, you may want to consider exchanges with a long history, many customers, and fewer issues, as they tend to be more reliable and trustworthy. Most importantly, check if the platform offers two-factor authentication (2FA).

Liquidity

If you plan to trade cryptocurrencies frequently, using a platform with liquidity is essential. This means the platform should allow you to start and finish trades whenever you want quickly. Liquidity ensures enough buyers and sellers are available, making trading smoother and more efficient.

Larger exchanges have an advantage because they typically have a higher trading volume. This means that they are likely to have more liquidity than smaller exchanges. However, choosing a more prominent exchange increases the chances of a smooth trade.

Insurance

Many exchanges insure some or all of the client’s assets. This can attract investors who prefer not to give their money to unknown companies. If something bad happens, like a hack or an employee stealing, a platform that offers insurance can protect investors from losing their money.

Some crypto exchanges provide different types of insurance, including:

• Gemini
• Binance
• Coinbase
• Bittrex

Crypto exchanges are not like regular banks or financial institutions. However, they have different rules of protection for your money. To get specific exchange insurance policy details, do your research.

Deposit And Withdrawal Limits

After long-term holding, there may come a time when you want to exit. Most exchanges don’t require a minimum deposit amount. Meanwhile, they can restrict how much you can withdraw and deposit at a time.

Imagine you’re a trader wanting to take money from your trading account. There may be a rule that says you can only withdraw $25K worth of crypto or fiat currency each day. However, if you want to withdraw more, you must plan according to the limits. Major crypto exchanges may have rules on how much money users can transfer within a specific time period.

Reputation

The crypto industry is new. However, knowing the reputation of each exchange you are interested in is essential. Some exchanges have engaged in dishonest practices, hacking, or fraud. They can leave users in a bad situation.

However, search for different exchanges by Googling their names with the word “scam” to see what information you get. This can help you evaluate if there are any reports or concerns about the legitimacy of the exchange. However, it is the best way to find data and make wise choices.

Fiat Exchange

In trading or investing, people may need an exchange that supports fiat currency (such as CAD or USD). This type of exchange allows them to convert their national currencies into cryptocurrencies for trading purposes. They can also convert their crypto profits back into regular money when they want to cash out their earnings.

Not all exchanges support the same banks or types of regular money. It’s important to check which banks are compatible with exchange and what fiat currencies they allow for trading.

Volume

The popularity of crypto platforms can differ depending on how many people use them and the number of traded assets. This factor is important because it determines how smoothly users can enter or exit their trading positions.

Sometimes it can be challenging to check the trading volume accurately because some exchanges may display fake volume. One way to check is by examining the order book on various exchanges. You can observe the quantities of assets listed in the order book and the price differences.

The second way to evaluate volume is to check third-party websites that give such information. OnChainFX, CoinMarketCap, and Coin360 are three sites that provide various data.

Trading Charges

When you buy cryptocurrency, fees can add up and become an additional expense. When you buy cryptocurrency, fees can add up and become an additional expense. Exchanges make money by charging fees on most or all transactions. However, it is important to understand the fees involved in any crypto trade to avoid surprises.

When using the Binance platform, each trade fee can vary between 0.02% to 0.1%. You may get additional fee discounts if you use Binance Coin (BNB). In contrast, Coinbase charges 0.04% to 0.50% per trade.

Transparency Of Platform

Exchange transparency means how much information it shares with users.

It includes details of:

• Legal compliance
• Fee structure
• Trade and transaction processing speed
• Security measures for protecting users’ funds

In the cryptocurrency industry, fraud and hacking are common. Therefore investors and traders should prioritize transparency to protect themselves from potential risks.

Customer Support

As a customer, choosing an exchange that values your satisfaction is important because they charge fees for each transaction. However, not all exchanges prioritize providing good customer service.

In cryptocurrency trading, issues can occur, and it’s essential to have an exchange that promptly addresses your needs. Time is valuable in trading, and even a five-minute delay can result in significant financial losses. Therefore, avoiding unreliable exchanges is crucial as they can lead to long-term losses.

Furthermore, regarding customer support, conducting research and reading online reviews about the exchange is vital.

Bottom Line

Every exchange operates in its unique way. They have specific processes, standards, and service fees. You can determine which exchange suits your needs by considering the abovementioned key features. Moreover, it is advisable to thoroughly research multiple platforms and give yourself plenty of time to learn before making a decision.