7 Things to Consider Before Using a Crypto Exchange

With the crypto industry now worth trillions of dollars, it’s no surprise that there are countless exchanges for investors and traders to choose from. But it can be tricky to trust a platform with your money and find one that offers you everything you need.


So what should you consider when choosing a crypto exchange and what should you look for?


An Important Note About the Security of Crypto Exchange

Before discussing what to look for when choosing a crypto exchange, there is one very important thing to remember: no crypto exchange is 100% secure. While some are more secure than others and generally more reliable, no matter which exchange you select, there is always a small chance of a successful cyber attack.

We recommend that when you are not actively using your money, you keep it in cold storage via a hardware wallet. This is especially necessary if you own large crypto holdings, as a single hack can drain your assets if your exchange-based hot wallet is targeted. Exchange wallets are good for short-term storage between trades or bets, but shouldn’t be your go-to for holding all your crypto permanently.

Now let’s take a look at what to consider when looking for your perfect crypto exchange.

1. Supported Coins

If you want to trade different assets on an exchange, you need to know if your future platforms support them. The most popular exchanges support hundreds of different coins and tokens, including market giants and new entrants. But not all exchanges are the same, so one asset might be supported on Exchange A, while it’s not supported on Exchange B.

If you are mainly interested in new and emerging coins, it is even more important to check if they are supported. It may take a while for newer assets to be listed by exchanges, with some deciding to avoid certain coins altogether. So if you’re looking to invest in newer cryptos or have your sights set on one specific asset, make sure your future exchange supports it before you get started.

2. Cost

Fees are widely known as the bane of the crypto industry. Whether you are buying, selling, staking or mining, there is always some sort of compensation. While some exchanges charge next to nothing for their services, others charge a hefty fee per transaction, which can be very frustrating.

For example, Bitmex charges super-low maker and taker fees of 0.025% and 0.075% respectively. On the other hand, Bittrex charges a maker and taker fee of 0.35%. While this still sounds quite low, it can certainly add up over time, and very large trades can leave you with hundreds or even thousands of dollars in fees.

There are also a few exchanges that don’t charge trading fees, such as BlockFi. But some free exchanges come with other fees, so make sure you know exactly what you’ll be charged for each action before creating an account.

3. Security Features

This is an extremely important aspect of any cryptocurrency exchange. Crypto exchanges hold massive amounts of crypto for their users, making them a prime target for criminals. So if you want to protect your assets as much as possible while interacting with an exchange, you should take note of its security features.

There are several green flags regarding the security features of a crypto exchange. Two-factor authentication, cold fund storage, and wallet address whitelisting are just a few options offered today. Of course, you want to try and use as many of the security features available on your chosen exchange as possible to effectively protect your assets.

We have a piece examining whether Coinbase is safe, as well as comparisons of exchanges such as Binance and Kraken or Coinbase and Uphold to give you an idea of ​​which major exchanges offer which security features.

4. Fund insurance

Many crypto exchanges offer fund insurance for those who lose money due to a technical problem or theft. Each exchange differs in its insurance, but it is advantageous to choose one that guarantees to insure your money in conjunction with an official entity.

Take Binance for example. This platform provides insurance for US dollar deposits up to $250,000 within the United States. The platform partners with the Federal Deposit Insurance Corporation (FDIC) to make this possible.

Fund insurance does not apply to financial losses incurred due to market changes. When you invest in cryptocurrencies, you are effectively acknowledging the risk of fund loss through price fluctuations, so exchanges cannot compensate for this.

5. Ease of use

If you are new to the crypto industry, you will want to choose an exchange that is not overwhelming. Some exchange interfaces can be very intimidating and confusing. This can even keep you from trading crypto altogether. But there are many exchanges that offer simple, clear interfaces for all experience levels.

Some exchanges offer two different interfaces for experienced and novice traders. For example, Coinbase provides a simple interface through the regular exchange, but also allows users to trade through Coinbase Pro. As the name suggests, this version of the exchange is much better suited for experienced and professional traders who understand the market well. Binance also offers two different user interfaces through the smartphone app.

6. Geographic Availability

As with many websites, crypto exchanges are subject to geographic availability. Because some countries, such as China and North Korea, have banned or restricted crypto trading, exchanges can only take place within legally permitted areas. In addition, some exchanges are not licensed to conduct business in certain countries (due to international restrictions), further limiting their availability.

Many of the largest crypto exchanges are available in many locations. For example, Kraken is available in most countries around the world, with a few exceptions, including Iraq, Syria, Tajikistan, and North Korea. In certain countries, such as Russia and Yemen, an account can be opened but may not be used for trading.

In addition, differing local financial laws may result in partial availability. For example, you can use Binance in Europe for any function except for derivatives trading, while there is a US specific version of Binance to comply with government regulations. Certain digital assets may also be restricted based on the location of the trader.

7. Reputation

The reputation of a stock exchange is another important factor to consider. Some exchanges have a brilliant reputation while others are known for suspicious activity, poor security or even illegal transactions. Even if an exchange is popular, it is not necessarily safe or reliable.

For example, Coinbase is a generally secure platform that is used by millions of people, but has been caught a few times carrying out illegal activities.

It is always worth researching any exchange you are considering to determine whether it is wise to sign up.

Your money is important, and so is your exchange

When considering where to put your money and conduct all your crypto-related activities, research is very important. While an exchange may seem like a good match, certain factors can affect availability, reliability, and ease of use. So, if you are looking for a new crypto exchange, pay attention to the above considerations to give yourself the best chance of choosing the best option.

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