Cryptocurrency exchanges are the on-ramps and off-ramps of cryptocurrency markets. Like trading floors for fiat money, these platforms provide a place where individuals can buy or sell cryptocurrencies using other cryptocurrencies or traditional fiat currencies. For anyone seeking to enter the crypto space as an investor, understanding which exchanges are available is one of the first steps.
The majority of cryptocurrency exchanges available today are what’s called “centralized” exchanges, meaning that they are privately owned and controlled by a single entity that maintains some degree of control over the order book. More recently, alternative decentralized forms of exchange have emerged which make use of protocols like Ethereum to allow for peer-to-peer transactions while still offering some of the benefits of private ownership.
Some exchanges make use of “asset gateways” which are platforms for verifying and processing deposits and withdrawals when transferring fiat money like USD or EUR into cryptocurrency, while others make no such provisions. The number of currencies that can be traded on an exchange is another important factor to consider before making any investments.
Finally, if you’re just looking to buy a few hundred dollars worth of cryptocurrency for your own use, there’s no need to spend time researching anything more complicated than an online brokerage account. If you plan on day trading or playing the market frequently, however, some exchanges will offer more advanced features like margin trading and stop-loss orders which can dramatically increase your returns.
How Secure are Crypto Exchanges?
When you deposit money into your cryptocurrency exchange account, you’re ultimately handing over control of that money to a third party. This means it’s incredibly important that the exchange at which you choose to do business is reputable and cannot be easily hacked.
Two basic questions worth asking about an exchange are how long it’s been around, and whether or not it pays out interest to its users holding their money. The older an exchange, the less likely it is to get hacked, while exchanges which hold onto user funds are also more likely to be targeted by thieves. The Bitcoin Up app is a safe platform to trade your coins.
What Types of Cryptocurrencies Can I Trade?
When selecting an exchange, the currencies that can be traded on it may seem like a trivial consideration, but they can add up to a major deal in the long run. There are two primary reasons for this:
- Trading fees. Many exchanges charge different rates of trading fees depending on what types of currencies you trade. Two exchanges may offer identical trading conditions for Bitcoin and Ethereum purchases, but when trading USDT (a dollar-pegged cryptocurrency that can be easily traded for other cryptos) one may charge much lower fees than the other.
- Unique trading opportunities. Some exchanges make it easier to buy and sell certain cryptocurrencies than others, due to factors like large order volume or fiat currency support. For example, you might find that it’s much easier to exchange USD for BAT on one exchange than another, so if you plan to hold your assets long enough that you want to eventually spend them using USDT, it might be worth familiarizing yourself with which exchanges have the best rates for converting between fiat and different types of cryptocurrency.
Wrapping Up
As you begin to look at the cryptocurrency exchanges available, it should become apparent that there’s no one-size-fits-all solution for everyone. If you’re only interested in investing a small amount of money into cryptocurrency, an online brokerage like Robinhood may be able to offer more trading flexibility than popular centralized exchanges like Coinbase. However, if you’re looking to take advantage of the unique opportunities that decentralized exchanges offer, you may want to look into more advanced features like margin trading and stop-loss orders.