Today, there are many crypto exchanges in the world. Each of them has advantages and disadvantages. We explain how to choose the right site
The cryptocurrency attracts traders with the volatility of the exchange rate. It can fluctuate by tens or even hundreds of percent a day. For example, on March 12-13, the bitcoin price collapsed by more than 50%. The Ethereum course also behaved.
This volatility in price has made digital assets a favorite tool for speculators. Users trade cryptocurrencies in order to generate quick profits. The most convenient place for this is stock exchanges. Each has its own set of advantages and disadvantages. We have prepared detailed instructions that will help you choose a convenient and reliable trading platform.
The first steps
1. When choosing an exchange, first of all, it is important to find out whether it has an official representative office in Russia . This can simplify and speed up the problem solving process. For example, if the user's funds disappear, if the account is hacked or temporarily blocked, and so on.
2. It is important to pay attention to the interface . It should be clear and user-friendly. If this is not the case, the user may, without understanding the toolkit of the trading platform, make a technical mistake that will lead to the loss of funds. This becomes most important during sharp jumps in the price of a cryptocurrency, when a trader must make quick decisions in order, for example, to sell a falling asset or buy it.
3. When looking for a site, it is important to take into account the number of trading pairs , as well as what cryptocurrencies are represented on it. On the one hand, the more digital assets there are, the more opportunities for trading and investing. On the other hand, sites can add tokens for little-known projects – this is one of the ways to make money. Accordingly, if a company lists dubious coins, it exposes the user to the risk of investing in a token issued by scammers.
4. In addition to the interface and the list of cryptocurrencies, you should study the tools that the exchange offers. For example, is it possible to place a stop order on the trading floor? This is an application that allows you to buy or sell a cryptocurrency if its price reaches a certain level.
An example . The user bought bitcoin at $ 10,000. Then his rate rose to $ 10,500. A stop loss order can be placed at the buy point, and then close the exchange and go about his business. If the price of the coin falls to the specified level, the system will automatically sell the asset and the trader will not lose anything.
Staking is another useful tool. Some exchanges allow you to receive passive income for storing coins. Its size can vary from 1% to 15% and exceed this value. However, it should be borne in mind that making a profit with this method is not guaranteed. A user who holds a cryptocurrency for the sake of staking, even having received 15% of the number of his coins as a reward, may lose on a fall in its rate. Staking is possible on such popular platforms as Coinbase, Kraken, Binance, KuCoin, Poloniex and others. The stakingrewards.com service will help you choose the most profitable platform.
Another tool that some exchanges provide is savings or lending . Analogue of a bank deposit with a yield of up to 8% per annum. The safest way to do this is to use stablecoins, the rate of which, for example, is pegged to the US dollar. These options are available on Binance, Poloniex and others.
Novice traders looking for quick money can consider exchanges that allow users to trade with margin, leverage . With its help, the client can take control of the company's funds. This opportunity is available on Bitmex, ByBit, Binance, OKEx, Deribit, Kraken and many others.
However, it is highly discouraged to use margin leverage for non-professionals. To carry out such operations, the user leaves his capital secured. If the borrowed amount is lost, the exchange will take the pledged funds to pay off the debt.
Registration and withdrawal of cryptocurrency
Generally, people ignore the user agreement. When registering on stock exchanges, this is absolutely prohibited. If you do not know the conditions under which the site operates, you may lose your funds.
5. Be sure to read the terms of registration on the exchange. They can contain a lot of critical information. For example, a company may not provide services to users in your country. Or trading on the exchange will be available only after passing verification (KYC). The same condition is often required for withdrawing funds.
An example . The exchange attracts clients with a promotion from the "sign up and win $ 200" category or other similar methods. The user creates an account on the trading platform and transfers funds to it. When it becomes obvious that there is practically no trading on the platform or other negative nuances become clear, a novice trader decides to change the exchange. But it turns out that this is impossible without going through the identity verification procedure, which, in turn, stretches for days, weeks and months or does not pass at all without explaining the reasons.
6. Therefore, be sure to check the conditions for withdrawing cryptocurrency. They may also indicate, for example, that you can withdraw funds only once a day, in a certain period, as it is arranged on the BitMEX derivative platform. This can be a problem if you need money urgently.
7. When choosing a site, you should study the methods of depositing and withdrawing funds. The more there are, the more convenient it will be to use the exchange. Also, the number of options for withdrawing and replenishing money can speak of the company's reputation. As a rule, popular payment systems do not work with marketplaces that are seen in illegal activity or have confirmed complaints from customers.
An important aspect among the conditions for withdrawal is what fees the platform takes for withdrawing cryptocurrency. Of course, it is beneficial for the user that they are as low as possible.
Be sure to check
According to the aggregator Coinmarketcap, at the moment there are at least 325 trading platforms. In fact, this number could be much higher. However, only a few dozen are popular. All others have a low trading volume, low rating and a similar interface. For this reason, there is a risk that a novice user could register on a dubious exchange, resulting in a loss of capital. To avoid this, you should:
8. Be sure to check the trading volume of the exchange. The main part of the site's income is commissions that are taken from traders for making deals. If there are few of them, firstly, it increases the risk of bankruptcy of the exchange, and secondly, it will be difficult for you to trade. Even if the declared rate is higher than on other sites, you simply cannot sell or buy currencies.
You can identify the problem with the trading volume using aggregators such as Coinmarketcap, Сoingecko and others. However, this information should be approached with caution. Companies can make fake deals to inflate trade. You can check this by looking at the trading history of the platform and order books for buying and selling assets. If transactions are recorded in the trading history, but orders for the indicated amounts do not appear in the order books, then the exchange creates the illusion of trading. As a rule, fake transactions occur with a certain frequency, for example, once every six minutes, and for almost the same amount.
9. Be sure to familiarize yourself with the history of the exchange , this will help protect yourself and your capital. For example, you can search for information about whether it has been hacked or leaked user data. Even if the funds were not stolen, this may happen in the future. For example, on June 3, 2020, hackers who have access to customer data of the Canadian crypto exchange CoinSquare promised to hack it by swapping SIM cards. Last year, there was a leaked customer information on the marketplace.
More reliable exchanges
The biggest problem with exchanges is centralization. Users store their funds in several shared wallets at the disposal of the trading platform. This creates several risks at once:
- hacking by hackers;
- exchange employees can appropriate the clients' cryptocurrency;
- the exchange may crash, due to which access to the wallet will be lost.
The solution to this problem is Decentralized Exchanges (DEX). On such trading platforms, users keep funds in their own wallets, between which transactions are made. However, these platforms are only gaining popularity now. There are few clients, and therefore the trading activity is low. Examples of such platforms: Binance DEX, Poloni DEX, dYdX, WavesDEX, Uniswap, Atomex, Nash and others.
When choosing an exchange, be sure to carefully study the conditions for registration and withdrawal of funds. It is advisable to give preference to large, well-known sites: they have more income, some of which can be directed to improving the protection system; it is more difficult for their leaders to commit a crime, since the person is known to society and financial regulators.
You should definitely check on the Internet if there are any complaints among users about the trading platform, whether it has been involved in fraudulent schemes or has been subjected to hacker attacks. It is also important to make sure that the exchange has a large trading volume and does not wind it up.
From a convenience point of view, it is best to use exchanges that provide a wide range of instruments. For example, stop orders, passive income for staking coins, the ability to open deposits and other options.
And it should be borne in mind that the exchange is not a safe way to store cryptocurrency. If the user only plans to buy and hold bitcoin or other digital money, it is better to choose a cold wallet or other methods. You can read more about them in our previous article.
In the near future we will release a whole cycle of educational articles in which we will tell you what are the risks of investing in cryptocurrency, how to make money on it, and much more. Follow our materials.