If you’re looking to buy or sell cryptocurrencies, you’ll need to use a cryptocurrency exchange. These online services often work similarly to a stockbroker, giving you the tools to buy and sell digital currencies like Bitcoin, Ethereum, and Dogecoin. The best cryptocurrency exchanges make it easy to buy and sell the currencies you want with low fees and strong security features.
When choosing the best cryptocurrency exchange for your needs, it’s important to look at supported currencies, pricing, withdrawal options, and security—which is where we focused when picking this list of the best cryptocurrency exchanges. Keep reading to learn more about which cryptocurrency exchange could be best for your goals.
Why Does it Matter to Choose the Best Exchanges?
The first step to profiting big is choosing reliable exchanges to trade with. They are your gate to the crypto world. Three main factors differentiating between a useful exchange and a useless exchange are liquidity, security, and fees. Look for them when you choose the best crypto exchange platform for you!
- Liquidity defines the ease at which an asset can be bought or sold. If there is a lot of liquidity, then there will always be a buyer or seller waiting on the other side of your order request.
- The second factor is security. When your money is on an exchange, you are trusting them to hold your funds, so you better hope that their security is up to par. Exchanges are constantly under attack. A recent example is Cryptopia who had hackers siphon millions from the exchange. Although these funds have now been reimbursed, imagine waking up one morning to all of your funds being stolen from the exchange. Not good!
- The third factor is fees. Top traders in the industry are aware of fees, including them in their profits. Because of this, I will recommend exchanges that aren’t only liquid and secure, but also cheap.
Frequently Asked Questions
What Is a Cryptocurrency Exchange? How Does It Work?
A cryptocurrency exchange is an online marketplace where users buy, sell, and trade cryptocurrency. A cryptocurrency exchange works similar to an online brokerage, as users can deposit fiat currency (such as U.S. dollars), and use those funds to purchase cryptocurrency. Users can also trade their cryptocurrency for other cryptocurrency, and some exchanges allow users to earn interest on cryptocurrency held within the exchange account.
What Should You Look at When Choosing a Cryptocurrency Exchange?
When looking for a cryptocurrency exchange to use, there are several things to look for, including security, fees, and cryptocurrencies offered. It is also important to understand how your cryptocurrency is stored and whether you can take custody of that cryptocurrency by transferring it to your own digital wallet.
Cryptocurrency exchanges also come in centralized and decentralized formats. Centralized exchanges closely align with financial regulations from governmental authorities (such as the U.S. Securities and Exchange Commission), and many will insure your cash deposits, as well as require proof of identity to use the platform. Decentralized exchanges are unregulated online exchanges hosted on distributed nodes that are user-owned, and there is no centralized governing authority. While this may sound scary, decentralized exchanges offer transparent transactions and fees and a direct peer-to-peer exchange of cryptocurrency.
How Do You Buy Cryptocurrency?
To purchase cryptocurrency, most centralized exchanges allow you to deposit funds via your bank account, credit card, or debit card. You can then exchange those funds for the cryptocurrency of your choosing. While some offer a simple “Buy Now” type transaction that only offers a market order, some exchanges will allow you to set more advanced order types, including limit and stop orders.
Once you purchase that cryptocurrency, the exchange typically takes custody of it, and most store cryptocurrency in offline “cold storage” for safekeeping. If you want to take custody of the cryptocurrency yourself, most exchanges allow you to transfer it to your “hot” or “cold” wallet, along with the private keys for that cryptocurrency.
How Do You Open a Cryptocurrency Exchange Account?
To open a cryptocurrency exchange account, most exchanges require that you create an online account and provide proof of identity (to follow KYC standards). This may include answering personal questions, verifying your identity with a third-party application, or providing a picture of your driver’s license.
Once your account is approved, you can then deposit funds and start purchasing cryptocurrency.