How to Choose a Cryptocurrency Exchange

It appears cryptocurrencies are here to stay. Just look at the insane growth of Bitcoin from its initial launch of less than one cent a little over a decade ago to its mid-September 2020 price of around $10,463. This meteoric rise in growth, despite the volatility of sudden and dramatic price drops, highlights why cryptocurrency is one of the best-performing assets over the prior 10 years.

So, what about trading and investing in crypto? Just like traditional stocks, you pick a trading platform to execute your trades. That is where crypto exchanges come in offering a marketplace to exchange FIAT into crypto and perform trades.

Crypto exchanges offer a few important benefits according to StockBrokers: “The first, and most important, is robust security with two-factor authentication, cold storage, and integrated safe wallets. Second, is a user-friendly website and platform. Third, they provide access to trading a variety of cryptocurrencies like Bitcoin and Ethereum.”

Some things to take into consideration when you’re picking a crypto exchange are:

A variety of tokens/currencies available to offer investment flexibility and liquidity. If the exchange does not command a substantial number of trades or volume in your specific cryptocurrency, look for one that does. No exchange offers every single type of cryptocurrency, but it should have multiple investment options available.

Versatile payment options. Look for more than just Bitcoin and Ethereum. Ideally, there should be many payment options for transactions, such as the U.S. dollar, the euro, and more. The exchange needs to be able to accept the fiat currency you wish to exchange into cryptocurrency.

Centralized vs. Decentralized Exchanges. Centralized exchanges generally control funds as opposed to decentralized exchanges where the owner-user controls the funds. Although centralized exchanges may be prone to more hacks, the increased liquidity, tools, and ease of use tend to make these exchanges more prevalent and favored.  

Security. Unfortunately, crypto exchanges are targets for hackers, which is why strong security measures are extremely important.

Location and registration. Is the exchange registered with the proper channels and appear to be who they say they are? Who is running the exchange? What information can you find on the leaders? Look for legitimate businesses that exhibit transparency.

Fees. Check minimum balance requirements, exchange rates, and any trading fees associated with it.

Great customer service. If you’re entrusting your cryptocurrency to a centralized exchange, especially a newer one, you want to be able to access knowledgeable customer service help, either in live phone calls and/or live chats. Email-only support is not good for institutional investors.

One way to do your due diligence on an exchange is to read reviews from actual users and see what their experience has been. Also make sure to research if the exchange has ever experienced a data breach, how they responded to it, and what security measures were employed post the breach to prevent it from happening again. You can also read technical reviews from credible sources.

According to MoneyInternational and StockBrokers, two U.S.-based exchanges that are well-known to be very secure are Coinbase and Kraken, and a third popular option is Gemini, founded by the Winklevoss twins. Others on their list are TradeStation as a great overall platform, eToro for low fees, Bittrex for the most altcoins, and Robinhood as the top mobile app for crypto exchange.

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