Choosing the best crypto exchange can be a complex process.
“The important features to consider are fees, security, and whether they list the assets you want to buy,” says Stephen McKeown, associate professor of finance at the University of Oregon.
First and foremost, you’ll need a secure exchange, says Spencer Montgomery, founder of Unita Crypto Consulting, which helps non-newbies learn how to get started investing in cryptocurrencies.
As cryptocurrency has become more popular and desirable, it has become an increasingly big target for hackers, and several leading exchanges, including Binance International and KuCoin, have recently been hacked to the tune of tens of millions of dollars. While exchanges often compensate those whose coins were stolen by insuring them, you probably don’t want to be in this situation to begin with. That’s why it’s important to only invest your money in reputable exchanges, says Montgomery.
You can reduce your risk by spreading your crypto purchases across multiple exchanges or moving your crypto from the exchange’s virtual wallet to your “cold” secure offline wallet (and therefore difficult to hack), although you’ll need to keep up with your passcode or you may lose Access to your crypto is forever, he notes.But you’ll also need to look for withdrawal fees when taking cryptocurrencies out of an exchange.These often vary by coin type.
Also consider the cryptocurrencies available on a particular exchange. You might be perfectly fine with a cryptocurrency exchange with only one currency if it’s the only currency you want. On the contrary, if you are a crypto lover, you may want to access the more than 600 available on Gate.io.
But the absolute availability of coins is not enough if there are no deals happening. You will ideally want to see hundreds of millions of dollars in cryptocurrency trading every day to ensure you have enough liquidity, so that you can easily trade your coins and dollars whenever you want or need to.
Furthermore, lower trading markets may end up costing you on sales.
“If there’s not a lot of volume and you place an order, there is something called slippage, where you can buy at a higher or lower price than you want,” Montgomery says. “When there is a lot of volume, you can be sure that you can sell your coins without affecting their price.”
If you are an advanced crypto trader, you may want to make sure that your preferred exchange offers the types of trading – such as limit orders, which can prevent slippage by setting a hard price – and the margin you want. Remember that the types of trading that include the latter are still developing in the United States, so the offerings of different exchanges may vary over time.
If you are just getting started with cryptocurrency buying, find an easy-to-use platform with comprehensive educational resources to help you understand this rapidly developing complex commodity.
And don’t forget the fees. You might be fine with paying a premium for a simple interface when you’re still learning things, but the higher fees eat up your bottom line. High-frequency traders especially want to cut costs.
Finally, don’t assume that an exchange is available in your country, or even your state, just because you can access their website. Many state and federal governments are still figuring out how exactly they want to deal with cryptocurrencies from a legal and tax standpoint.