These days, cryptocurrencies are gaining more attention as a suitable investment strategy. As a result, investors are on the lookout for a suitable crypto exchange where they can purchase cryptocurrencies from. While there are plenty of options out there, it’s important that you’re choosing the right one. In this guide, I’ll talk about the main questions you should ask when selecting a crypto exchange.
Is It Safe And Secure?
If the latest news about crypto thefts have taught us anything, it’s that crypto exchanges are vulnerable to hackings. While no exchange is fully immune from data breaches, you’d be smart to look for a platform that takes its cybersecurity seriously.
A common example is that of two-factor authentication, as well as biometric login, which prevents unauthorized users from accessing your account. Plus, you should check to see if the exchange complies with Know Your Customer standards, which requires users to provide government-issued ID before making an account.
What Coins Can You Trade?
When you’re picking the right crypto exchange to sign up for, you should look for a platform that offers the most common options. Particularly, this means common tokens like Bitcoin and Ethereum. Considering how there are over 20,000 cryptocurrencies available, you need to make sure that exchanges offer the most reliable ones.
Similarly, you should check out what trading and investment features and tools it provides. Because crypto exchanges have become more complex, their offerings extend beyond the usual cryptocurrencies. They even have futures contracts, ETs, and leveraged tokens, so make sure that the exchange you’re considering offers the tools you need.
How Much Fees Do They Charge?
There’s nothing more suspicious than a vague fee system, so if it looks too good to be true, it probably is. You should always expect the crypto exchange to charge for different features. For instance, they can charge fees in deposits, withdrawals, trading, and transfers.
As for how much, a rule of thumb is that fees are inversely proportional to the size of your trades. So the bigger the trades, the lower the fees. Fees are also connected to your trading volume over the past 30 days. Most often, crypto exchanges charge a transaction fee of 0.2 percent or lower.
Do They Have Enough Liquidity?
In case it’s difficult to understand, crypto liquidity refers to the ease with which you can convert your crypto into fiat and then vice versa. The important thing is that it shouldn’t have a major effect on the price of the token. According to Kraken, an exchange is considered to be more liquid if you can sell off an asset as close to your asking price as possible.
Therefore, you’re looking for a platform that offers adequate liquidity, which allows users to fulfill transactions cost-effectively and efficiently. The easiest way to assess an exchange’s liquidity is to check its 24-hour trading volume.
Do They Comply With Regulatory Bodies?
When selecting a crypto exchange, you need to know where it’s authorized to operate. It’s common knowledge that the stock market is heavily regulated. However, crypto exchanges are a novelty in the financial industry, so they are less likely to face the same level of scrutiny. Nevertheless, make sure that the exchange you’re signing up for has been audited, which you can confirm through the Service Organization Control reports.
Bottom Line
To sum it up, choosing a crypto exchange requires you to evaluate a number of factors. Some of the things you should look at when choosing a crypto exchange include cybersecurity measures, what tokens it offers, and how much it charges in fees. You should also evaluate whether it offers any additional investment or trading features, whether it complies with regulatory bodies, and if it has enough liquidity to ensure seamless transactions. When you look at all these factors, you’ll be able to decide on the right crypto exchange for your needs.