Want to Buy Crypto? Here’s What to Look for In a Crypto Exchange. Kraken, CoinEgg, Gemini, Binance—these four cryptocurrency exchanges are all digital marketplaces where you can buy and sell digital assets. You cannot just buy crypto directly with your bank or investing firm. After you have decided to purchase Bitcoin (or another cryptocurrency ,you will begin the process of creating an account on a crypto trading platform in order to exchange your U.S. dollars (or other currency) for a certain amount of digital assets.
In other industries, you might use a third-party like PayPal to facilitate transactions. For crypto, exchanges play this role. Coinbase and Robinhood are two of the more popular exchanges today, but they aren’t the only platforms available. There is a variety of factors to consider when choosing which exchange will suit your needs best , whether you’re looking for security, ease-of-use, or other features.
What is a Crypto Exchange?
A crypto exchange is a platform on which you can convert one cryptocurrency for another, as well as use to trade cryptocurrency with real world currency (not to be confused with ‘cash’!) If you choose to take this route, you will have to provide your bank account details and such, although this is typically an irreversible process. Your gains, profits or losses that you incur during sell & buy transactions may also be affected by the fees collected by an exchange; those are usually calculated on a per transaction basis and they could be high depending on the exchange.
There’s no one crypto exchange software that’s best for every user, says Tyrone Ross, a financial advisor and CEO of Onramp Invest, a crypto investment platform for financial advisors. Instead, he says it helps to evaluate your own goals when it comes to participating in trades using cryptocurrency. For instance, maybe you’re interested in conducting specific transactions on an exchange — such as placing orders — or you may want to continue learning more as you engage in more crypto-related transactions.
“Am I shopping for something like Casa because Casa is a great home, it will take care of so much for me and I’ll never have to worry about upkeep or repairs? Or am I going to Gemini, because Gemini has this weird coin that I want and they’ll be able to help me trade it? Or am I going to Coinbase because Coinbase has these really cool tools that allow me to learn as well as earn crypto online?”
What to Look for in an Exchange
Although buying and selling cryptocurrency on exchanges might seem like a global phenomenon, in reality it’s quite complicated because of all the different locations you may want to access for exchanging crypto. For example, China has banned citizens from accessing most crypto exchanges inside the country so in other words, it’s difficult for Chinese investors to easily purchase or sell any crypto coins abroad.
Other countries have established strict regulations as well, like, for example, New York which requires anyone wishing to operate a crypto exchange from within their state first apply and be approved for a license and furthermore only allows certain approved methods of exchanging currency.
Some states are taking steps to integrate digital currencies and blockchain with their legislative efforts while other states are considering similar actions. Thirty-one total states have pending legislation regarding digital currencies in their 2021 legislative sessions, according to the National Conference of State Legislators.
Some sites list similarities between exchanges that it may be helpful when undertaking research prior to making your selection such as geographic limitations, related payment methods and currencies accepted for transactions and deposits, among others.
Cryptocurrencies move like the wind, they don’t make change, and they aren’t insured. This is to say that if you own cryptocurrencies of significant value, if someone were to break in to your account and steal them from you, there’s not really anyone you can turn to for help. They’re just gone — forever! To help with this problem why not store your crypto on a wallet that provides insurance so then at least if something goes wrong at least you will be covered against any losses
To help protect your crypto, some exchanges offer insurance policies against hacking attacks or fraud to cover losses from any amount of cryptocurrency taken from its accounts. Coinbase for example, has an insurance policy worth $255 million USD to protect its customers’ funds in one of the largest such initiatives taken by a trading platform.
What does this mean? If a hack happens and any amount of cryptocurrency up to $ 255 million USD is taken out of Coinbase’s reserves, their customers will be protected. Other exchanges like Kraken have opted not to take out insurance policies on behalf of their users but have instead focused on developing strict security practices to ensure fewer cases of theft occur in the first place.
Before investing in a cryptocurrency, it’s important to research its security protocols because this will help you keep your assets safe. Some exchanges are safer than others. You should look for exchanges that store their majority of assets offline and use multi-signature technology! Make sure your exchange of choice has implemented 2FA (2-factor authentication) on all accounts – including withdrawals as well as deposits which is an extra layer of security against hackers.
The biggest crypto theft ever was in January when Quadriga CX lost $190m (£152m) in digital cash belonging to its users following the death of the founder, Gerald Cotten. It is important to note that not all cryptos are secure even if they’re decentralized; according to MDeC researchers, around 8% stolen from cryptocurrency events since 2017 were put into a “hot wallet,” which could pose a risk.
A smart way to buy, move and store your crypto assets is to go with a company which keeps the majority of your digital money in cold storage. As mentioned by Coinbase: “cold storage is just a fancy term for offline or paper wallets.” Cold storage is important because while hot wallets may have more ease of use, they do not guarantee your protection from hackers.
When people send you digital cash that are stored on an exchange such as Coinbase, make sure that they don’t hold possession of them at any point, and instead send those funds directly to an address you control on a separate device. That ensures there will be no confusion about who owns what if something goes wrong .
You might consider checking out a variety of online guides to see what you can do yourself to protect your account. For example, some exchanges offer 2 Factor Authentication for securing accounts and make it harder for anyone to log in. 2-Factor authentications usually require entering a username and password alongside a code texted to your phone. Otherwise, at least don’t use the same passwords everywhere! You may want to try bigger exchanges with more customers in terms of security measures.
“Size matters!” exclaims the CEO of EZ Exchange, a company that specializes in helping small business owners go through the IPO process. Their platform helps supply businesses with the tools they need to facilitate their public displays of financial information (their own public financial statements aka INC 500 data) and file detailed documentation online with the SEC while navigating all of the red tape! It’s important to think about which avenues you want to take if you are a startup as large as Coinbase (which is one of the most popular cryptocurrency exchanges for apps like Robinhood).
The pros of going down this route include an easier time raising capital by adding more credibility to your brand image, but there can be drawbacks as well since now you must share some of your sensitive business practices with the general public. Hopefully this is ok with you since it’s part of what comes along with being a publicly traded company.