Cryptocurrency is a digital currency that can be used to buy and sell goods and services. The value of the cryptocurrency has been steadily increasing, which means it’s an excellent time to trade in your traditional currency for some crypto cash.
According to a survey, cryptocurrency’s market size will reach $1087.7 million by 2026 and Bitcoin alone had a market capitalization of $1072.21 billion on February 21st, 2021.
Indeed, cryptocurrency exchange investment will bring enormous profits. But deciding on the best cryptocurrency exchange is a bit difficult for many people. There are many different options out there, each with its pros and cons.
This blog post will discuss the cryptocurrency exchange type, the top cryptocurrency exchange, and the factors you should consider while choosing them. So, let’s get started.
What is Cryptocurrency: All You Need to Know with 10 Interesting Facts
Types of Cryptocurrency Exchanges
There are two main types of cryptocurrency exchanges: centralized and decentralized.
(A). Centralized Exchange
A centralized exchange is run by a company, which has complete control over your funds. It allows users to buy and sell cryptocurrencies using fiat currencies (like the dollar). These exchanges are popular because they’re simple for beginners, but many people dislike them because of their lack of transparency regarding storing other users’ funds.
(B). Decentralized Exchange
A decentralized cryptocurrency exchange allows users to trade cryptocurrencies directly with each other without an intermediary. These exchanges are more private because they don’t store user information, thus making them famous for trading illegal goods and services. However, these platforms have been known to lack liquidity due to low volumes on their books.
Top Cryptocurrency Exchange of Market
1. Coinbase
Coinbase is one of the most popular cryptocurrency exchanges because it’s simple to use and allows users to buy cryptocurrencies using fiat currency (like the dollar). It also has a mobile app that makes buying, selling, sending, and receiving digital currencies easy.
It supports Bitcoin, Bitcoin Cash, Ethereum Classic, Ethereum & Litecoin. Fees are around 0.25% to 0.50%.
It is one of the most popular exchanges used by beginners because it’s easy to use and offers high liquidity, which means that there are always buyers and sellers for cryptocurrencies on its books. The company has also recently rolled out Coinbase Commerce, allowing merchants to accept cryptocurrency payments in Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), and Litecoin (LTC).
People who trade on Coinbase are required to verify their identity. The company follows strict regulations, which means that it only deals with fiat currency for legal purposes. As a result, your transactions can take some time to be approved by the site.
Pros:
- Easy to use for beginners
Offers high liquidity and low fees.
Cons:
-Only offers Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) & Bitcoin Cash(BCH)
- Slow verification process because it follows strict regulations.
2). Gemini
Gemini is a New York-based exchange that only deals with Bitcoin and Ethereum. It’s one of the few cryptocurrency exchanges, which allows users to make withdrawals in fiat currency (like U.S. dollars). The company also offers FDIC insurance on all deposits up to $250,000 per user.
People who trade on Gemini are required to verify their identities because it follows strict regulations.
Pros:
- Allows users to deposit and withdraw in fiat currency (U.S. dollars)
Offers FDIC insurance on all deposits up to $250,000 per user.
Cons:
-Only offers Bitcoin (BTC), Ethereum (ETH) & Litecoin (LTC)
- Requires users to verify identities because it follows strict regulations.
3). SoFi
SoFi is a financial services company that has recently launched its cryptocurrency exchange. It’s an easy-to-use platform, which offers high liquidity and low fees for users who trade in multiple cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) & Dashcoin.
People who wish to make deposits or withdrawals on SoFi must verify their identities because it follows strict regulations.
Pros:
- Offers high liquidity and low fees for users who trade in multiple cryptocurrencies like Bitcoin (BTC), Ethereum (ETH) & Litecoin(LTC).
Cons:
-Only offers four cryptocurrency options.
-Requires users to verify identities because it follows strict regulations.
4). Webull Crypto
Webull is a New York-based cryptocurrency exchange that offers users up to 300 different digital currencies on its platform. It’s also one of the few platforms, which make buying and selling cryptocurrencies easy for beginners because it has a user interface similar to popular stock trading platforms like Robinhood.
People who wish to buy or sell cryptocurrencies on Webull must verify their identities because it follows strict regulations.
Pros:
- Offers up to 300 types of digital currencies on its platform, including Bitcoin (BTC), Ethereum(ETH) & Litecoin(LTC).
Easy-to-use for users who have experience with popular stock trading platforms like Robinhood.
Cons:
-Only offers cryptocurrency options.
-Requires users to verify identities because it follows strict regulations.
5). Robinhood Crypto
Robinhood is a financial services company that offers zero-fee cryptocurrency trading to users. It’s one of the few platforms, which make buying and selling cryptocurrencies easy for beginners because it has an interface similar to popular stock trading platforms like Webull.
People who wish to buy or sell cryptocurrencies on Robinhood must verify their identities because it follows strict regulations.
Pros:
- Offers zero-fee cryptocurrency trading to users.
Easy-to-use for beginners who have experience with popular stock trading platforms like Webull.
Cons:
-Only offers four cryptocurrency options, including Bitcoin (BTC), Ethereum(ETH) & Litecoin(LTC).
-Requires users to verify identities because it follows strict regulations.
6). TradeStation Crypto
TradeStation Crypto is a platform that’s owned by the well-known online brokerage TradeStation. It offers cryptocurrency trading for beginners and professional traders alike. People who wish to buy or sell cryptocurrencies on TradeStation must verify their identities because it follows strict regulations.
Pros:
- Offers high liquidity and low fees for users who trade in multiple cryptocurrencies like Bitcoin (BTC), Ethereum(ETH) & Litecoin(LTC).
Easy-to-use for beginners and professional traders alike.
Cons:
-Only offers four cryptocurrency options, including Bitcoin (BTC), Ethereum(ETH) & Litecoin(LTC).
-Requires users to verify identities because it follows strict regulations.
How to Choose the Best Cryptocurrency Exchange?
Choosing the best cryptocurrency exchange can be difficult for beginners and professional traders alike. Many options are available, but not all offer the same features, which makes choosing one difficult.
Below, I’ve listed the factors you should consider when choosing the best cryptocurrency exchange for yourself. Let’s take a look.
1. Jurisdiction
Choosing the best cryptocurrency exchange for you largely depends on where it’s legally situated. For example, Coinbase is a US-based company that follows strict regulations and requires users to verify their identities. It offers three types of cryptocurrencies, including Bitcoin (BTC), Ethereum(ETH) & Litecoin(LTC).
On the other hand, Gemini is a New York-based company that the Winklevoss twins co-founded. It follows strict regulations but doesn’t require users to verify their identities because it’s legally situated in the U.S. state of New York, which has less stringent policies for cryptocurrency trading platforms than many other jurisdictions worldwide. This exchange offers the same four types of cryptocurrencies as Coinbase does.
Choosing a cryptocurrency exchange that follows strict regulations will make it easier for you to buy and sell digital currencies. Still, if you’re located in an area where such policies aren’t enforced, there’s no need to follow them, resulting in higher fees and slower transaction times due to increased volume.
2. Ease of Use
Choosing the best cryptocurrency exchange for you should be easy because if it’s not, then that means there are too many complex functions that can potentially make trading difficult.
Many beginner traders find Coinbase to be a good choice because of its user-friendly interface and simple design. However, some people want more advanced features, so they choose Gemini instead.
When deciding which cryptocurrency exchange to use, it’s essential to consider whether you’re a beginner or professional trader because the features offered by each type of platform will vary. Beginners should avoid using exchanges that require them to set up multiple trading accounts. In contrast, more experienced traders who want higher limits and access to advanced features like margin trading can benefit from using these platforms.
3. Understand Liquidity’s Role
It’s essential to choose the best cryptocurrency exchange that provides ample liquidity for your preferred digital currencies. Liquidity measures how easily you can buy and sell cryptocurrencies like Bitcoin (BTC) and Ethereum(ETH) at their current market prices without influencing the price much.
Choosing an exchange that offers high levels of liquidity ensures that there will be enough buyers and sellers on the platform to make it easy for you to buy or sell cryptocurrencies without affecting their prices.
For example, Coinbase offers high levels of liquidity for Bitcoin (BTC), which means that if you want to buy or sell BTC quickly, it will be easy because there are plenty of people buying and selling. On the other hand, SoFi Active Investing is a less liquid platform for cryptocurrencies like Ripple(XRP). If you plan to buy or sell XRP on SoFi Active Investing, you might need to wait until someone wanting the opposite has been found.
Choosing an exchange with high liquidity is essential. Still, it isn’t always necessary because some exchanges offer low levels of liquidity for specific cryptocurrencies that most people don’t want to trade in, resulting in lower transaction fees and faster transaction times.
4. Asset Choices
Choosing the best cryptocurrency exchange for you should also include your asset choices and how much money you want to spend on transaction fees.
While some exchanges like Coinbase and Gemini only offer Bitcoin (BTC), Ethereum(ETH) & Litecoin(LTC), other platforms such as Webull Crypto give users access to a wide variety of cryptos, including Bitcoin Cash (BCH), Ethereum Classic(ETC) and Monero(XMR).
The number of assets available for trading on an exchange will vary depending on the platform and decentralized or centralized. For example, decentralized exchanges like EtherDelta don’t have many assets because they only list ERC-20 tokens.
However, a centralized exchange like Binance offers over 400 digital currencies. It has a low transaction fee of 0.05%, significantly lower than the fees on other platforms such as Coinbase Pro at 0.25%.
To find out whether or not an exchange lists your desired cryptocurrencies, you can refer to their list of supported assets. If the cryptocurrency you want to trade-in isn’t listed then it’s best not to use that exchange because there might be a high likelihood of errors occurring when depositing and withdrawing.
5. Transaction Fees
Transaction fees are a crucial decision factor for most cryptocurrency traders.
Different exchanges charge different transaction fees based on the asset being traded, what type of account you have and whether or not you’re a maker or taker for that particular trade.
For example, if you wanted to sell your Bitcoin (BTC) holdings for Ethereum(ETH), Coinbase would charge you 1.49% for this transaction. If you’re a beginner, it’s advisable to use exchanges that don’t charge transaction fees because these platforms will only take the cryptocurrency you want to trade-in.
6. Trading Fees
The exchange charges users for using their platform depending on whether the exchange is centralized or decentralized.
On centralized exchanges like Coinbase and Gemini, users are typically charged a percentage of the total transaction amount as fees for buying and selling cryptocurrencies. These fees can range from 0% to around 1.49%, depending on what you’re trading in and who your broker is. However, some exchanges charge 0% trading fees, the most notable of which is Robinhood.
On decentralized exchanges like EtherDelta and Kyber Network, users are charged gas fees every time they order using Ethereum (ETH). One thing to note is that these fees can significantly vary depending on whether or not you’re placing a market or limit order — limit orders on Kyber Network have a gas fee of 4711, for instance.
There are transaction fees on some decentralized exchanges as well, such as Bibox and DDEX. For example, the trading fee on Bibox is 0.1%, which is significantly lower than that of exchanges like Binance with its 0.1% taker fee and 0.05% maker fee.
7. Customer Support & User Experience
Customer support is an integral aspect of any cryptocurrency exchange, but unfortunately, not many platforms have the best support systems in place for their users.
It’s easy to find reviews about certain exchanges on social media sites like Reddit. Still, you should never solely rely on these platforms to determine whether or not a cryptocurrency exchange is reliable.
As mentioned earlier, customer support can vary depending on what kind of account you have with the exchange, which cryptocurrencies you wish to buy and sell, and if you’re a maker or taker.
8. Exchange Trustworthiness & Security
Of course, if the exchange you’re using is trustworthy and provides secure transactions for its users — but what makes an exchange reliable?
Some of the main aspects include:
The number of cryptocurrencies supported by the platform. The location in which it’s registered and whether or not they have a license to trade users’ chosen cryptocurrencies. Suppose your chosen cryptocurrency is available for trading on the exchange. If the transaction fees are fair and what kind of trading pairs they offer users.
With that being said, it’s essential to be wary of exchanges that have many negative reviews on trusted platforms such as Reddit or those with a high amount of stolen user funds.
9. Customer Retention
It’s not always easy to retain customers, but some exchanges have been able to do so because of their reliability and ease of use.
Some examples include Coinbase, Binance, and Bibox — especially Bibox with its low trading fee and beginner-friendly interface. It is impressive considering the number of new cryptocurrency exchanges that crop up every month and their low trading fees.
10. Availability of the Exchange in Your Country
Not all cryptocurrency exchanges are available in certain countries — while some platforms like Coinbase and Binance have global reach, others only work with customers from specific regions.
For example, Huobi users can transact in almost any country except for the US and China, whereas Cryptopia has several restrictions for its New Zealand users.
It’s essential to consider your location before signing up for an exchange that might not be available in your country.
Final Words
There are many cryptocurrency exchanges available for people who wish to buy and sell digital currencies. Still, not all of them offer the same features, liquidity, fees & security, which make choosing one difficult for beginners and professional traders alike.
Considering the points above will help you determine which exchange will work best for you, but whether you buy Ripple on Binance or Ethereum on Coinbase, having a reliable cryptocurrency exchange is key when trading cryptocurrencies. If you choose the wrong platform, you could lose your funds — so be wary when selecting an exchange to work with.
Hopefully, this guide will help you find the proper cryptocurrency exchange for your trading needs.
If you are a person who wants to go a step further and develop your own crypto exchange, you can get in touch with a top cyptoexchange development company and give your dream wings.
Also read: 10 Ways Machine learning Revolutionizes Manufacturing
FAQs
Q- What is a cryptocurrency exchange?
A- A cryptocurrency exchange is an online platform that allows you to buy, sell and trade cryptocurrencies for other digital assets or traditional currency like US dollars or Euro. They are like websites where you can buy stuff using fiat currencies like USD or EUR (Euro) but they also allow the trading of cryptocurrencies. And most exchanges let you convert one cryptocurrency into another.
Q- How do cryptocurrency exchanges work?
A- Cryptocurrency trading works differently from traditional transactions with fiat currencies because digital assets usually don’t have a centralized institution that controls ownership of the currency. All transfers are moved peer to peer without an intermediary between the sender and receiver.
Traditional exchanges are centralized and hold funds within the system itself; hence when you buy something with dollars, your transaction is moved directly from your bank account to the merchant. But when you trade cryptocurrencies on exchanges, you deposit them in your cryptocurrency wallets linked to the exchange.
Q- Are cryptocurrency wallets the same as exchanges?
A- Cryptocurrency trading happens through exchanges or digital wallets. While both are important, the latter is more secure.
Q- How to store cryptocurrency?
A- The safest way to store cryptocurrencies is through a hardware wallet which you can purchase for less than $100 on Amazon, but it’s only compatible with specific cryptocurrencies. If that doesn’t suit your needs, you can consider a software wallet that you can download for free on Google Play, the Apple Store, or the exchange’s website.
Q- What kind of wallets exist?
A- There are four kinds of cryptocurrency wallets: Software Wallets, Mobile wallets, Web Wallets, and Hardware wallets. The most secure one is a hardware wallet because it’s offline when you aren’t making transactions.
Q- Is it safe to keep all my cryptocurrency on an exchange?
A- While exchanges allow you to trade quickly and without hassle, they’re not the safest place to store your digital assets. Most experts recommend holding onto your trading coins for a more extended period than moving them into a hardware wallet.
Q- How do I know if a cryptocurrency is reputable?
A- As it’s still a niche market, new cryptocurrencies are being created every day, but that doesn’t necessarily mean they’re trustworthy. The only way to be sure of a coin’s reputation is to look at its reviews on sites like Coin Market Cap, Bitcoin Talk, Reddit, and other forums.
Q- What is the best cryptocurrency exchange?
A- Like any other investment, it all depends on your needs. Do you need fast transactions or low fees? Are you looking to buy one currency, or would you like to trade between different ones? There’s no “best” exchange, but a few stand out from the pack based on overall user experience.
Q- Is buying cryptocurrency legal?
A- Yes. Buying, selling, and trading cryptocurrencies is perfectly legal as there are no laws in the US explicitly about them.
Q- How do I know if an exchange is secure?
A- The best way to find out how “secure” an exchange is has nothing to do with the number of security breaches it’s suffered or how many phishing websites are created each month pretending to be that site. It’s all about how the exchange evaluates its security.
