Factors to Consider Before Choosing a Crypto Exchange

Cryptocurrency exchanges let you trade, buy, and sell cryptocurrencies. You can't purchase or sell digital assets unless you have access to a crypto exchange. There are, however, some options. 

How can you know a good crypto exchange? If you ask any seasoned crypto trader or OG about their first Bitcoin buy, they're likely to tell you about how they wasted a lot of money and time dealing with a buggy, incompetent, or simply overpriced exchange in the beginning.

Learning to separate the wheat from the chaff can take time, but we will try to make the process easy for you in this guide. We will be looking at the factors you should consider before choosing a crypto exchange. 

What Are the Things to Consider Before Picking a Crypto Exchange? 

It may take some time and effort to find the best crypto exchange, but it is well worth it. One of the easy ways you can know the best exchanges is by reading expert reviews. Besides expert reviews, you can also know which exchange suits your trading and speculative needs by looking at certain factors. Exchange security, fees, markets, user experience, history, and liquidity are among the most significant factors you should watch out for.

1. Security

By far the most critical aspect of any exchange is security. Your funds can be stolen if an exchange is not secure, rendering any other benefits it offers useless. No one likes to lose money, therefore consider the following factors in this regard.

Technology:

• The web address of the exchange should begin with HTTPS. HTTP connections should be avoided.

• It should employ two-factor authentication for login safety. 

• It should use offline or cold storage for storing customer deposits

• Additional security guarantees include auditing programs that monitor exchange activities 24 hours a day, as well as email and SMS alerts. 

• For optimal security, you may consider whitelisting your withdrawal wallet addresses or IP address. 

Legal Aspects:

• It's best to utilize an exchange that's based in the same country as you are, as this will make it easy to keep up with regulatory changes. However, exchanges in other countries can also be used. It's worth noting that some exchanges only support a small number of countries.

• Some exchanges will reimburse you if they lose your funds. This is because these exchanges insure their funds. 

Transparency:

• Exchanges that are transparent publish their cold storage address or provide other options for users to monitor their reserves, such as audit information.

• These exchanges also reveal their headquarter address, owners, and team members

2. Fees

Almost every exchange charges some sort of fee. You cannot avoid experiencing transfer or transaction fees. However, as a newbie learning and trying to manage your funds, you must carefully select an exchange that will help you to minimize trading costs. However, don't sacrifice security for a low fee. If you choose to go for an exchange with a high fee, make sure that the exchange offers a better security structure.

3. Ease of Usage and UI

If your privacy is important to you, you are likely not going to choose an exchange that asks you to divulge too much information about yourself. Also, consider the user interface of the exchange you want to choose. Is it easy and simple to use on both a mobile and desktop device? What support does the exchange offer? 

Related: What is a Crypto Exchange?

4. Buying Limits and Liquidity

Some exchanges limit the amount of currency that investors can purchase. However, such limitations are normally on the higher end and are aimed at high-stake investors and traders. Liquidity is another factor you should consider. It is essential for traders who need to convert their cryptos into cash regularly.

In this light, a crypto exchange platform that provides high liquidity is a preferable choice for speedy cash conversions. A platform with low liquidity, on the other hand, can make it slower and more difficult to cash out because one's digital assets are not easily available.

5. Reputation

Although the crypto world is relatively safe, it is still vulnerable to some security breaches. As a result, you should do proper research before choosing an exchange. You will find forums and contents online to let you know if an exchange has been a target of any security breaches.

Other things you need to look out for in an exchange include

• Cryptocurrencies available. Go for an exchange that offers a wide range of cryptocurrencies

• Payment methods. Choose an exchange that supports your preferred payment method. The most common payment methods are debit cards, credit cards, cash, PayPal, and wire transfers. 

Conclusion

We’ve considered in this guide the factors you should consider before choosing a crypto exchange. Most exchanges are different from each other in the factors we’ve discussed. Some are built for novice traders, while others are designed for advanced traders with a lot of money.