What is a Cryptocurrency Exchange?

A cryptocurrency exchange is a website or platform where people can be connected so they can trade (buy or sell) their cryptocurrencies. It is a well-organized marketplace, where you can see the offers – called bids and asks – on each Cryptocurrency.

cryptocurrency exchange

Who can use Cryptocurrency Exchange?

Cryptocurrency exchanges can be used by everyone, from investors to traders, and even curious people desire to watch how all this works. On most exchanges, you do not even have to register to see the live trading. Just give it a try here: https://www.binance.com/en/trade/btc_usdt

crypto exchange

As you can see, there is much information on many exchanges. We are not going into the details of the menu, but the exchange gives you a lot of important data if you want to trade.

First, you can notice which pair you are monitoring in the top left corner. The chart in the center displays the price action. On the left panel, you can see all the orders from traders who want to buy or sell your pair. In the right panel, you can see the list of cryptocurrencies supported on Binance, and just below that, the history of all the recent trades. This picture is relevant only for the Binance exchange platform. However, all the exchanges are organized in the same way, showing the same information, but not displayed in the same position.

The Different Types of Exchanges

Before helping you how to choose your exchange, we will break them down in 4 different types of exchanges:

  • Fiat Exchanges
  • Altcoin Exchanges
  • Margin Trading Exchanges
  • U.S. Exchanges

Fiat Exchange

Fiat money (U.S. Dollars, Euros, yens…) are the national currencies you are using every day to buy yourself a coffee at the machine. To obtain your first cryptocurrencies, you will have to get through a Fiat Exchange to buy your first cryptocurrencies. Popular exchanges amongst them are:

Classic Exchange

A classic exchange provides a broader range of cryptocurrencies, but most of them do not deal with fiat money. Those platforms are known as “crypto-to-crypto” exchanges.

These exchanges allow you to trade your Bitcoins for several altcoins. While they may look a bit complex for novice users, they offer more trading options than fiat exchanges.

You can try any exchange on the list below that are, in our mind, the best options:

You can see Binance appearing twice already. Binance has recently been supporting a fiat deposit. Thus, many exchanges are now trying to add this feature to their users.

Margin Trading Exchanges

If you just started to investigate trading cryptocurrencies, this part is not for you. However, you must know that Cryptocurrency exchanges for Margin Trading are existing and are dangerous for novice traders.

Margin Trading allows you to trade with more capital than you have in your possession by borrowing assets to an adequate platform. Margin trading can give you more significant profits but also increases your risk.

The list below gathers the best Margin Trading Exchanges for cryptocurrencies:

If you are curious to learn more about Margin Trading, please read our article here.

US-based Exchanges

Most exchanges quoted before are not allowing U.S. citizens to register on their platform.

However, there is a vast list of options to obtain and trade Cryptocurrency as a United States citizen.

All the exchanges are not included in the list. If you find an exchange that is fitting your needs, first make sure you are allowed to trade there as a U.S. citizen.

Decentralized Exchanges

Since 2017, countless platforms for the exchange of cryptocurrencies have emerged. Most of them are centralized platforms. They are subject to the will of their creators, and to use them, you have to entrust your funds to them.

It is, therefore, quite natural that many other projects aimed at setting up decentralized exchanges. Given the popularity of these platforms and the total lack of understanding of the term, the simple mention of the word “decentralized” is enough to increase the notoriety of the project.

Many exchanges chose to describe their platform as “decentralized“. It is necessary to understand what a decentralized exchange(DEX) is to untangle the truth from the false.

Decentralization is not a genuinely measurable quality. However, with the right criteria, it is possible to establish degrees of decentralization, depending on the number of objectives achieved:

  • Independence of the platform
  • Anonymity (of the users and the creator)
  • Buy and Sell orders transparency
  • The self-possession of your cryptocurrencies

Now that we know the ideal characteristics of a decentralized exchange, we will be able to see that, in truth, few can be described as decentralized:

  • IDEX
  • 0x Network
  • WavesDEX

Some are making genuine efforts to decentralize and are acting in the interests of public service.

This is not the case with BinanceDEX, which is nothing more than an attempt to confuse users with misleading advertising, to crush the competition by profiting of an advantageous situation.

We, therefore, suggest that you discover by yourself all that DEX have to offer and determine which ones are right for you.

How to choose your Exchange?

In this chapter, we will be looking at exchanges to help you determine which one is better for you. You can visit this link to see the list of most exchanges.

Things to keep in mind when you are going to choose your exchange.

Reputation

choose your exchange

The best way until now to find out about an exchange is to search online for its Reputation. From individual users to well-known industry, any review is crucial. You can even interact with people if you have any questions on Reddit or BitcoinTalk.

Our Discord can be a great place to discover and talk about exchanges.

Location & Restrictions

exchange rates

One of the most critical factors when it comes to selecting a cryptocurrency exchange might be its location and the restriction applied from it. First, make sure that the cryptocurrency exchange is accessible and legal from your country.

Volume & Liquidity

cryptocurrency exchange

A large volume of trading is a good indicator. Volume often brings more liquidity to an exchange, which makes trading simpler and less risky. It will also impact your ability to buy or sell any of your assets if your balance is relatively important.

However, if you are looking into the best volume exchange & liquidity, you might find exchanges that are using wash trading to artificially increase their volume, and reach the top of the exchange ranking.

To avoid that, always check the Reputation online, visit the exchange, and draw your conclusions.

Fees

cryptocurrency lesson

Most exchanges, if not all, will not ask you for any fees when you deposit on their platform. However, they will charge you fees for trading and withdrawals.

You can find fee-related information on their website, so before joining any exchange, make sure that you understand and agree with their terms.

Moreover, most exchanges offer a reduction of fees if you sign up with a referral link, so do not hesitate to use our links if you like our content.

Last but not least, some exchanges also use their Exchange Currency, and offer a reduction of trading fees if you own some of their coins.

Security

bitcoin storage

When it comes to your wealth and investments, you should always look for the most secure option. Considering the exchanges you should trade on, you must try to find the one which as a good track record. If the exchange dealt with compromised security in the right way, it must attract your attention. Nowadays, crypto exchanges being hacked are common. However, some are managing better the funds of their users, and you should prioritize them.

Find here a list of all the cryptocurrency hacks and how it impacted their user’s experience.

You must also make sure that your exchange has the 2FA enabled, and a secure captcha. The more an exchange has security layers, the more you can trust it.

Privacy/Verification Requirements

bitcoin

Unless you chose a decentralized exchange, most of the serious platforms would ask you to provide them with an I.D. The process is known as Know-Your-Customer (KYC) verification.

Cryptocurrency is starting to gain some audience. Thus, Financial Authorities are now forcing exchanges customers to verify their account by providing documentation to confirm their identity. However, some exchanges can allow trading on their platform until you need to withdraw a specific threshold.

If you are a U.S. or U.K. citizen, some exchanges might require you to verify your I.D. to make deposits and withdrawals.

Supported Assets

altcoins

The exchange that you will choose must have the coins you want to buy. On Coinmarketcap, you can see the list of assets each exchange supports, and the pairs available.

Moreover, regarding the goal you have by choosing your exchange, having a big amount of assets to trade can give you more opportunities to have.

Customer Support

otc trading

Customer support is a crucial factor in evaluating your future cryptocurrency exchange. Any issue can happen; it can happen that for security reasons, you are not able to connect on the exchange or withdraw any funds. Even if you have some questions because some features are confusing, or because you are a novice, the customer support should be able to help you.

An exchange with responsive and friendly support is to prioritize and will save you a lot of time and anxiousness.