Crypto Exchanges: Why Choosing The Right One Matters
Choosing the right crypto exchange is essential if you want to start trading Bitcoin and altcoins. However, there are many crypto trading platforms in the market, making it difficult to know which one to use. If you’re not careful, you may end up using a platform that may risk your coins or assets to cybercriminals. With such, here are some reasons why you should be careful when selecting a crypto exchange:
1. May Not Work In Your Country
Although anyone in the world can buy crypto, some exchanges only cater to specific countries. This means that you can’t buy or sell on the exchange if you live in a country not included in their jurisdiction.
Some exchanges also have web addresses depending on the country they’re based in. For example, instead of using ‘cryptoexcahnge.com,’ they have ‘cryptoexchange.us.’ When you see this, the exchange may only be able to do business in that area because regulations restrict them. This also means that their target market is residents from such countries or states.
So if you’re living in Australia, it may be best to check out that the crypto exchange is also based in that country. For instance, you can check out www.swyftx.com and other similar sites targeting Australian crypto traders.
2. Avoid Cyber-Security Issues
Since crypto trading has been popular for years now, hackers see it as an opportunity to steal coins and other digital assets. They are innovative enough to hack into crypto exchanges, stealing millions, if not billions, of cryptos. Unfortunately, the stolen coins have never been retrieved.
That’s why, before registering on an exchange, ensure that you have checked their security methods. If they offer two-factor authentication (2FA), then it means that the exchange is following cyber security standards today.
However, it’s also best to have an exchange that offers Yubikey, Authy, and Google authenticator as common avenues of 2FA. These have better security when compared to mobile text-based 2FA.
Other security measures that good crypto exchanges have are custodial storage services and cold storage asset reserves. You can quickly transfer your crypto assets if you have other wallets to safe-keep your coins.
3. Save On Hidden Costs
While a crypto exchange that offers low taker and maker fees makes them competitive in trading fees, some exchanges may have hidden costs. If you don’t check such fees, you may waste your profits on unexpected expenses.
One example of hidden costs you need to take is the difference between the highest sell price and lowest ask price on the platform, also known as the spread. With a large spread, you may have orders that will be filled at worse prices instead of the expected rates. Meanwhile, an exchange that serves orders close to market value has a good spread.
Although the exchange may have trading fees as low as 0.25%, you can have reduced profitability if they have a large spread. A high spread can also be due to a lack of liquidity, making you vulnerable to market manipulation. This can result in difficulty in altering the price dynamics of the market since the order books are too thin to absorb such actions.
Moreover, some exchanges don’t demonstrate the actual cost when traders use their platform. This often makes you pay more for services that you may get cheaper in other exchanges. With such, you may be losing more instead of earning more commission.
4. Enough Liquidity
As mentioned, it’s best to use an exchange that has relatively high liquidity when trading, selling, or buying crypto. You can quickly sell your crypto assets whenever you feel like it. This means you have to consider the size of the exchange. The larger the trading volumes of a crypto exchange is, the more popular it is. And you may want to consider this because it means that the platform has higher liquidity.
This is important because when a platform doesn’t have a lot of trade volume, you may pay higher prices, especially when crypto prices move quickly. But for higher volume exchanges, you have higher chances of achieving the best price since there are a lot of trades happening in a given period. As a result, you can possibly grow your crypto here.
You can use third-party websites like CoinMarketCap to check which exchanges have the most trading volume worldwide because they continually track the trade volume of such platforms.
5. Easily Reach Out The Platform
Whenever you encounter an issue or have queries, it’s essential that you can easily talk to the customer service support of the platform. That way, you can confidently use the exchange, knowing that they’ll get back to you as quickly as possible if something goes wrong with your account. On the other hand, an exchange that doesn’t offer good customer service may disappoint or frustrate you in the long run.
Nowadays, trading crypto is made easier thanks to crypto exchanges. You can now do it on your desktop or mobile phone without a broker. However, you need to choose the best exchange to avoid losing your assets.