For those just getting started in the world of crypto investment, the process can seem complex and daunting. With a wide range of industry-specific terms and alien sounding investments just where do you get started? Here is a handy guide to taking your first steps into crypto and reviews of some of the exchanges you can use:
What is crypto?
A cryptocurrency is a currency that exists purely digitally. To verify that coins are genuine, that privacy and security are protected and to ensure that a limited supply of new coins can potentially be minted, these currencies take advantage of cryptography (mathematical rules). The appeal of these currencies centers around the fact that there is often no central issuing authority or government to interfere with the money supply. The most popular crypto coins are Bitcoin and Ethereum.
Although there are a range of ways to trade cryptocurrencies, this process is often carried out via a cryptocurrency exchange. These exchanges are platforms that allow you to buy and sell a range of digital currencies with Euros, Pounds, Dollars and other digital assets.
There are a range of exchanges out there some of which are open to the public and some of which offer a more exclusive or invite only. Some are truly international and others are more localized. They vary greatly in ease of use, functionality and some even have the facility to transfer crypto through built-in chat features like Telegram.
Picking the Best Cryptocurrency Exchange
Depending on your trading needs will greatly affect your choice of cryptocurrency exchange. Here are some of the key features you will need to keep in mind when picking a cryptocurrency exchange:
Exchanges have to make money and as a result, almost all of them charge fees in the event you wish to do business on their platform. You should do your research before committing to a specific exchange making sure you understand their charging structure.
Security and ID Requirements
Most exchanges require at least some form of identity verification, be this a driving license, passport, recent utility bill or connection to a bank account before you can trade on it. As a rule of thumb: the more stringent the identity verification process the more reliable and secure the exchange is.
Not all exchanges are created equal and often the price of a crypto can vary significantly between exchanges. The price of a crypto on any individual exchange can be as important to profit or loss as exorbitant exchange fees.
Whilst some relatively unknown exchanges may seem to offer the world in terms of functionality, available currencies, and low fees – they also come with increased risks. It is best to stick with one of the top exchanges if you want to minimize the risk of losing your investment through fraud or a hack attack. Some of the top exchanges have now struck deals with insurance providers to protect customer assets in the event of a catastrophic attack.
If you wish to be able to transfer funds out to your local bank it is important that you find an exchange that operates and supports your geographic region. Some exchanges focus on the United States others in South America or Asia. Make sure that you can transfer funds out into your local currency for the best results.
Choosing a secure site
is an absolute must. Exchange hacks occur frequently and this year
alone there has been around $1 billion US dollars stolen from
exchanges in hack attacks. Notable attacks include Mt Gox and
You should remain constantly aware that when your funds are held inside an exchange that you do not have complete control over the coins in your exchange wallet unless you are in possession of the private keys. With most exchanges, you are trusting the exchange to keep the private keys safe from hackers and other bad actors.
You should never keep more in your exchange account than you are prepared to lose. In the event you are planning to hold (or hodl) a certain cryptocurrency for a prolonged period of time you should probably consider keeping your private keys in cold storage (offline), for extra security you can use a hardware wallet to secure your funds. It should be noted that your exchange account and wallet should never be your primary wallet, it is not intended to do that.
You should also take advantage of all the added security features on the site. Turn on two-factor authentication. If possible install an app like Authy or Google Authenticator. The mobile phone option that texts you a code is not as secure as you might think. There have been a number of sim-swap attacks allowing a would-be hacker to co-opt your phone number and gain access to your account. Even the cybersecurity expert and crypto enthusiast John McAfee feel victim to this kind of attack.
Coinbase is probably the most trusted of cryptocurrency exchange platforms around. It is one of the largest digital asset exchange platforms in the world. Their platform supports around 30 countries (mainly in Europe) and has over 20 million registered users although some reports suggest that the active user base is much smaller and Coinbase has a lost significant amount of traders since Bitcoins all-time high price. Traders on the platform can buy and sell Bitcoin, Bitcoin Cash, Litecoin, Ethereum and Ethereum classic on their platform. There are multiple methods of funding your account from bank transfer to secure credit card depending on your geographic location. Users require a link to a valid bank account in order to start trading and you will have to register a photographic ID with them. Coinbase has been accused of having high fees compared to some of its rivals.
Once registered with
Coinbase you are able to use Coinbase Pro. Coinbase Pro has more
advanced trading features such as margin trading and market, limit
and stop orders. It also has lower fees than Coinbase.
Coinbase has recently announced they are investigating supporting new coins such as Stellar and BAT tokens. Although no timescale has been given for this move.
Binance is a relatively new exchange but has grown to have one of the largest daily trading volumes in a short space of time. Its key benefit is that it has a wide range of cryptocurrencies available to trade with and has both a basic and advanced view depending on your level of skill. It is credited with having low fees and they will allow you to withdraw up to 2 Bitcoins per day without photo identification.
Binance does not support any form of fiat currency transfer in or out of the site.
Binance have issued
their own utility token that can be used to pay transaction fees and
provides a discount
KuCoin is a new
exchange based in South Korea. They have a similar operating strategy
to Binance. They list new alt coins very quickly meaning it is an
ideal place to purchase cryptocurrencies just after ICO’s have
occurred allowing the potential for greater profits by getting in
early. The interface is easy to use and very clear.
KuCoin also has their own token (KCS) which allows holders to receive a share of the profits of the platform. By holding this coin you receive a fraction of each of the different currencies that people have traded with on the site.
LocalBitcoins is a
slightly different type of cryptocurrency exchange. Due to the nature
of how it works it operates in almost all cities around the world.
The idea is that rather than trading anonymously on an exchange that
you can find people who live near you and meet them in person to
perform an exchange. You can also use their escrow facility to do
bank transfers knowing that the 3rd parties bitcoins will be held in
a LocalBitcoins 3rd party account whilst the transaction is
completed. Registering, buying, and selling Bitcoin is completely
free. LocalBitcoins users who create advertisements are charged a 1%
fee for every completed trade.
Traders are given a star rating in the same way as Uber. Both buyers and sellers are rated and you are expected to rate each other each time you perform a trade.
Coinmama is a large Bitcoin brokerage that enables people to purchase cryptocurrency with their debit or credit cards. Coinmama is registered in Slovakia but is owned by New Bit Ventures Limited that is headquartered in Israel. Coinmama does not provide a platform for trading in cryptocurrencies nor does it allow users to sell cryptocurrency. Instead, all purchases of cryptocurrency by customers are transferred directly from the company’s own holdings, making transactions more secure than some of its competitors. Users can acquire up to $5,000 US dollars of coins per day or up to $20,000 per month.
Users were previously not required to upload a government issued ID but they are required to verify a phone number and email address. But this has now changed.
CEX.IO is one of the first cryptocurrency exchanges. It’s a London-based exchange founded in 2013. It can only be used to buy Dash, Bitcoins and Ethereum. There are extensive ID verification requirements and you can make purchases with credit cards, debit cards, wire transfers or SEPA transfers.
The service is not available in multiple US states, only supporting 24 states.
The platform has been accused of charging exorbitant fees of up to 7% of the transaction cost.
Once you start a trade
the platform calculates the price of the transaction and freezes the
exchange rate for two minutes.
Bitrex is an established cryptocurrency trading platform. It is sometimes criticized for its complex interface but this is due to the number of things the platform can do. One of the site’s major strengths is the depth of the variety of its crypto listings. Bittrex currently lists hundreds of coins and also offers users hundreds of cryptocurrency trading pairs, with the site showing over 450 BTC pairs.
The site is let down by the fact that it does not offer fiat to crypto pairs to the average customer. Users can purchase Bitcoin, Ethereum, or USDT via bank wire transfer. For this to take place an “enhanced verified” account is necessary along with a purchase amount worth a minimum of $10,000 US dollars.
Picking the right cryptocurrency exchange varies depending on your needs as a trader. All the exchanges listed above have slightly different value propositions and you may need to register with more than one. Not only does this spread the risk but opens up the unique trading options across multiple platforms. Situations can change rapidly in the world of crypto and it is always a good idea to keep up to speed on news and rumours regarding specific exchanges.
Always pay special attention to the security, fees, reputation, and ID verification processes that sites offer and remember that geographical location can also play a big part in the risk posed by a cryptocurrency exchange.