A cryptocurrency exchange is one of the first meeting points of a newbie who wishes to enter into the crypto space. With the prevalence of cryptocurrencies being lost through cyber attacks and exit scams, no stone must be left unturned when choosing the perfect and most secure cryptocurrency exchange.
There are more than 200 cryptocurrency exchanges listed on CoinMarketCap and newbies and pro’s need to take careful considerations in order to make a perfect choice.
In this article, I’ll be sharing on things you must consider in order to choose the most secure cryptocurrency exchange.
A cryptocurrency exchange is a service that allows the changing of one cryptocurrency for another, the buying and selling of coins and the exchange of fiat money for crypto. There are websites where you can buy, sell or exchange cryptocurrencies for other cryptocurrencies or fiat money. There are three common types of exchanges. They Include:
It is not news that cryptocurrency exchanges have been objects of many cyber-attacks over the years. 740,000 bitcoins were lost in the MT.Gox exchange in 2014, which were worth $430 million dollars at that time. Earlier in the year, Canadian exchange QuadrigaCX also admitted that it could not get access to about $137 million in cryptocurrencies after it’s CEO died late in 2018, allegedly not leaving the private keys behind. The risk of scams and exit scams makes it very important for you to choose a secure cryptocurrency exchange. The best exchanges keep stored funds in cold storage, with adequate security measures like multi-signature access by a trusted group of people. It should also have adequate insurance. Exchanges like Coinbase and Binance have good reputations for security; but, no exchange can claim to be completely immune to cyber attacks. It is best for you to not store your cryptocurrency on exchanges. Except you plan to trade soon, move your cryptocurrencies into a secure cryptocurrency wallet, preferably a hardware cold storage wallet.
The cryptocurrency space is open to all, and anyone can wake up and set up a website and an exchange if they know how to go about it. If you’re going to trust an exchange with your crypto, the responsibility is on you to do your due diligence, and be certain that the exchange lives up to what it claims to be. You must confirm that it is a legally registered company, and check for any verifiable information about their founders and management team. If an exchange offers little or no information about itself, its founders, address and fee structure, this is a big red flag. You can search through reviews from users and popular industry websites. The cryptocurrency community is a very active one. A quick search on search engines like Google or social media platforms like Facebook and Twitter and community forums like Bitcoin Reddit and Bitcoin Forum would give you information about the reputation of any exchange from existing users.
Exchanges that possess higher trading volumes usually have greater liquidity. Liquidity makes it possible to complete transactions faster, more easily and without having to deal with price volatility. This means they are able to process your order quickly. Big exchanges rarely possess low volumes, but many listing requests could result in higher stringency in approval requirements. It is better to pick an exchange with higher trading volume. The trading volume is the measure of how much cryptocurrency is trading on the platform on a daily basis. Exchanges with higher trading volume allow for higher price accuracy since the exchange is processing many transactions at once. Before selecting your exchange, You can view the exchange’s ranking by trading volume on the Coin Market Cap. You should also see if the exchange offers “locked in pricing”, which guarantees you the price of your transaction even if it is not settled immediately.
Most exchanges charge trading fees which consist of maker and taker fees. These fees could vary from exchange to exchange. A trade gets a maker fee if the trade order is matched immediately against an order already on the order block, and a maker fee if the order is not matched immediately. Some exchanges are more expensive than others, so it is advisable to check for cryptocurrency exchange rates between different platforms. Some crypto exchanges will offer better rates than others. Some exchanges offer discounted fees. It is not uncommon for rates to differ by up to 10 % or more among exchanges. Most exchanges should have information relating to fees on their websites. You must understand how much each trade costs, and how the fees will be calculated before making a decision. Make sure the deposit, transaction, and withdrawal fees are favorable to you. A small fee might look insignificant at first, but due to compound return, it can add up to much on the long run
The quality of the user interface could vary among different exchange sites. Some sites look very confusing and complex, others are simpler and more beginner friendly. Experienced users might prefer sites clogged with charts and more pieces of information, but if you’re a newcomer, the simpler, the better. If you wish to access the exchange from a mobile phone, you should be sure that the exchange you’re considering has a mobile application. Some specific user functions offered by some exchanges are only accessible from certain countries. You should be sure the exchange you are considering allows full access to all platform tools and functions in your country. Bigger exchanges have a larger customer base, and their customer support tends to be more developed. Before choosing a cryptocurrency exchange, check for the kind of support they have in place, their communication language, and how you can contact them.
It is important to leave nothing to chance when choosing your cryptocurrency exchange. The most secure cryptocurrency exchanges are the ones who tick all these boxes. Watch out for any red flags, and ensure that your cryptocurrencies are kept as safe as possible.
About the Author
Dr. Edson Pindza