4 Things to Consider When Choosing a Crypto Exchange
When selecting a cryptocurrency exchange, various elements come into play. However, for most investors, aspects such as liquidity, user-friendliness, and the exchange's operational reach should be primary considerations. Paying attention to these factors could result in immediate time and financial savings.
While individual priorities may vary among crypto investors when deciding on a crypto exchange, it is likely that a significant portion of individuals in the crypto arena may weigh the following factors before opening an account and initiating trades.
Availability Across Different Locations
Crypto exchanges, like many websites, are bound by geographical constraints. Some nations, including China and North Korea, have imposed bans or limitations on crypto trading, thus exchanges can only operate in regions where they are legally allowed. Some exchanges also lack the necessary license to operate in specific countries due to international regulations, further limiting their reach.
Several of the leading crypto exchanges are accessible in a wide range of locations. For instance, you can convert USDT to Dollar in most countries globally, excluding a few such as Iraq, Syria, Tajikistan, and North Korea. In some countries like Russia and Yemen, trading may be restricted while one can open an account.
Varying local financial regulations can lead to partial availability of services. For example, Binance is fully functional in Europe, barring derivatives trading. However, there's a separate version of Binance for the U.S. to adhere to governmental regulations. The availability of specific digital assets may also vary depending on the trader's geographical location.
For traders, liquidity is essential as it enables them to execute trades anytime. This necessitates that an exchange maintains a substantial volume of orders in its order books daily. To achieve this volume, the exchange must possess a large user base or users with significant assets on the exchange who trade frequently.
Potential trading partners may be unavailable if there's a scarcity of orders. During heightened volatility, common in cryptocurrency markets, liquidity is more significant. Reduced liquidity can intensify volatility so that prices can undergo extreme fluctuations.
Fees & Charges
The cost of buying and selling cryptocurrencies varies widely across different platforms, so it's crucial to understand the associated fees before choosing an exchange. Cryptocurrency exchanges seldom offer services for free - they often levy charges for each deposit, trading activity, or withdrawal.
The fees typically fluctuate between 0% and 5% per transaction, influenced by your chosen payment method and the nature of the transaction. Most commonly, these fees are determined by your cumulative trading volume over a 30-day span. As your trading frequency escalates, the proportion of fees you must pay tends to decrease. Hence, it's essential to consider these factors when selecting a cryptocurrency exchange.
Most cryptocurrency exchanges deal in Bitcoin and Ethereum, but seasoned crypto investors know these two major currencies are just the beginning. The range of cryptocurrencies supported varies greatly from one exchange to another; for instance, Binance offers trading in a vast array of altcoins, while Coinbase limits its offerings to four key cryptocurrencies. "Stablecoins" offer another option for diversifying your portfolio. Traders often leverage these as a safeguard against the notorious volatility of the crypto market.
TrueUSD, for example, is a cryptocurrency backed by the US Dollar and collateralized across a network of banks. It employs custodial accounts to provide legal protection and direct banking to token-holders, ensuring that the company never has direct access to the funds. These custodial accounts also facilitate regular audits and offer complete legal protection.
With its backing by the US Dollar, TrueUSD provides a reliable, stable currency for use on digital exchanges. Following the SEC's subpoena of Tether, the leading USD stable coin, there is a pressing need for a new alternative.
The intricacy of crypto exchanges can be daunting, and picking the suitable one for your needs and objectives demands a fair amount of research. Understanding the specific cryptocurrency you aim to trade is useful (as not all cryptocurrencies are supported on every exchange), and creating a crypto wallet is also important.
When deciding on a crypto exchange, factors such as the pricing model, comprehensive security, whether the exchange functions in your region, and the platform's ease of use should also be considered.