How to Choose a Crypto Exchange for Trading and Investment

Oct 7, 2022, 1:32PM
3 min, 9 sec READ
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Even if you're not a professional trader, it’s good to understand the basics of the crypto market, including the site choices and risks involved.

On cryptocurrency exchanges, you can earn much more than on the stock or currency market. However, the risk of losing invested money is also greater. Finding a crypto exchanges list is not difficult; just follow the link.

Decide on Your Goals

What do you want to do on the stock exchange - trade or invest? Crypto exchanges are divided into centralized and decentralized.

The centralized exchange operates as an internet service and controls the personal accounts of all users; there is often a requirement for identity verification. Centralized exchanges have obligations to traders and investors to pay out profits on transactions with a trading deposit (a trading deposit is a certain amount of money that a trader deposits into his own trading account), but exchanges also charge a commission for transactions.

Decentralized exchanges are technical platforms that work on the blockchain. They only allow direct transactions between participants. At the same time, your personal data and assets are not stored anywhere and are not tied to anything—some of the most popular in the crypto world: Uniswap, PancakeSwap, and Compound.

On decentralized crypto exchanges, there is no controlling and verifying body in the form of an administration. And here, there is a higher risk of running into scammers: buy a fake smart contract - even bitcoin is faked (a smart contract is a computer protocol that allows you to conduct transactions and controls their execution using mathematical algorithms), or invest in a dubious coin, which may be behind the project -dummy. In both cases, the investor loses money and "drains" the trading deposit.

However, here you can also find a new interesting crypto asset, which after a while, can take off and be recognized by centralized platforms, buy it at the start and make good money.

Important Criteria for Choosing a Crypto Exchange:

When choosing an exchange for cryptocurrency trading, the following factors should be considered:

Exchange Size

Its reliability directly depends on the size of the exchange: the larger the exchange in terms of trading volume, the more users trade on it, and the more stable it is. Its ability to fulfill its obligations to you on payment of the deposit depends on the financial stability of the exchange. Several factors affect the financial stability of the exchange: the number of registered users, the amount of funds deposited by clients on the exchange, the total trading turnover, and how long the exchange has been operating on the market.

If the exchange pays deposits for a long time (for example, more than a day), then this may indicate the financial instability of the exchange. Large stable exchanges withdraw funds, as a rule, almost instantly.

Exchange Jurisdiction

The jurisdiction of a crypto exchange is formally determined by the country where the servers of the exchange website are located. Although the crypto markets are not directly regulated by the governments and financial organizations of certain countries, now various restrictions are imposed on some sites (up to refusal to register).

What Coins Are Traded on This Exchange

Find out on the exchange website whether it allows you to trade the coins you are interested in (coins, cryptocurrencies). The first, main, and most expensive cryptocurrency today is bitcoin. The rest of the coins are called altcoins. In second place after bitcoin in terms of liquidity is Ethereum. Stablecoins are cryptocurrencies whose value is pegged to one or another fiat currency (that is, the usual currency - the dollar or the euro) and other crypto assets. And also to goods that are traded on the exchange, for example, precious metals and gas: one of these stablecoins is Tiberius, supported by the prices of seven precious metals.

Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.