How To Choose A Cryptocurrency Exchange
News | August 10, 2021, 9:25 AM | The content is supplied by a Guest authorThe first thing you have to learn about investing in cryptocurrency is that this isn't like investing in gold, where all you have to do is lie back and check prices once in a while. While the yellow metal's prices are pretty much stable, cryptocurrencies are not. They're known for having stomach-churning price swings. Their prices can drop as much as 30% within 24 hours. However, cryptocurrencies always bounce back after such precipitous price drops. (1)Due to this volatility, many people consider trading or investing in cryptocurrencies a bit daunting. But although cryptos could sometimes be volatile, they can be extremely profitable. For example, Bitcoin, the first cryptocurrency, started costing just a fraction of a cent when it first appeared in 2009. In April 2020, its price was USD$7,000. A year later (April 2021), Bitcoin was at USD$64,000. (1) Investing in Bitcoin today is easy, but that wasn't always the case. At the start, you can only get this digital money by either mining for them or if you buy them directly from another person. But now, there are hundreds of cryptocurrency exchanges where you can buy all kinds of digital coins. As there are a lot of them, this article can help you how to choose which one is suited for you.
An Overview of Cryptocurrency ExchangeThese are platforms where people engage in buying and selling various cryptocurrencies. Investors such as yourself can also trade one digital money for another, for example, Bitcoin for Cardano or Ethereum. You can also buy cryptos outright on these platforms using fiat money, like Australian or US dollars. It's similar to a stock exchange but for digital money. A conventional stock exchange, however, is more regulated than a cryptocurrency exchange. These platforms are websites or mobile apps that allow users to buy and sell digital coins using credit cards, wire transfers, or bank accounts. You can also trade exclusively in cryptocurrencies if you want. There are exchanges where you can withdraw using your virtual 'wallet,' which is something you'll need if you want to sign up for an exchange. Cryptocurrency exchanges are scattered all over the world, and looking at the best crypto exchanges in Australia, you're in luck. There are a lot of excellent exchanges in your geographical location.
Using A Cryptocurrency ExchangeTo join an exchange, you have to create an account to register. Anyone can sign up, although you'd have to get verified first. An exchange's verification process may differ from another exchange, but basically, you'd be asked to provide basic information about yourself, then wait for a confirmation e-mail to activate your account. After your account has been activated, you can then follow the registration process.Upon completion of the KYC (Know Your Customer) process and account verification, you can begin transferring funds, which could either be fiat money or cryptocurrency. You should also download a cryptocurrency wallet that you can use to store, send, and receive different kinds of digital money. (2)
How To Choose a Suitable Cryptocurrency ExchangeChoosing a crypto exchange that's right for you can affect your foray into digital money investment. Below are a few tips on how to choose an exchange to help you be a successful crypto investor:
- Exercise diligence Before anything else, you should know that scammers and fraudsters on the Internet are as common as grass. So, beware. Make sure that the exchange offers legitimate services by checking its physical location. If the address is bogus, cross it off your list. For businesses that offer services like these, transparency is important. They should cultivate people's trust, so they should welcome scrutiny, not evade it.Another reason you should know its physical location is that digital currencies often have different legal standings in some countries. You'd want your investment legally protected. Additionally, if problems crop up about your account and regulators would need to be involved, it's better if you know where the exchange's physical address is.
- Level of security Another thing you need to make sure of is an exchange's security level. The blockchain technology used in cryptocurrency transactions is pretty safe, but what happened in Mt. Gox and Coincheck are two very scary reminders for investors to vet an exchange's security protocol. (3)For instance, one of the most concerning issues in today's digital currency industry is the pump and dump activity, which is illegal. A registered and reputable exchange has rules and regulations in place to prevent this from happening, so find out if your exchange of choice has these safeguards in place. Moreover, an exchange where registration is too easy and doesn't require much in terms of verification and identity authentication should set off alarm bells. That should give you an idea of how much, or how little, they value security. You should also use a 'cold' wallet, which refers to a cryptocurrency wallet that you can download. A cold wallet can be kept on a storage device, such as a USB flash drive or smartphone. And because this wallet is offline, you can be sure that it's safe and secure from hackers. Just don't lose it. (4)
- Purchasing methodsCryptocurrency exchanges don't have the same methods of purchasing digital currencies. A few platforms accept bank transfers and debit and credit cards, while some are fine with PayPal. Others, meanwhile, only use digital money for buying. So, before registering on a platform, find out which purchasing methods are accepted. You should also decide which payment options you'd be most comfortable with. For ease of trading, however, choose an exchange that accepts fiat money.
- Supported cryptocurrenciesBitcoin, Ethereum, and other popular digital coins are supported by almost all crypto exchanges. But there are more than 4,000 cryptocurrencies, and not all have Bitcoin's prices. There are digital currencies out there that cost cents, and if you want to invest in them, make sure that the exchange you're signing up on trades them. Dogecoin, for example, cost just cents before and wasn't too well-known. Fortunately, it experienced a surge in early 2021 and made a lot of people rich. (5)That doesn't always happen, however. But the fact that it can happen means it sometimes pays to take an interest in cheap and lesser-known cryptos. You don't have to go with the more popular and expensive digital coins, like Bitcoin or Ethereum. With a platform that trades different cryptos, you can have a lot of choices. You can also diversify your portfolio and not concentrate on just one.
- FeesTransaction fees also differ among various exchanges. Take time to understand a platform's fees and how they're structured. That way, you won't get hit by hidden fees. A platform that offers a standard transaction fee, or a platform that has more flexibility, is best for an investor just starting out.
ConclusionA cryptocurrency exchange is where all crypto trading happens. There are hundreds of them, and unfortunately, a few that might be suspect. So, if you want to succeed in investing in cryptos, make sure you'll register on a safe and reputable one. The tips listed here can help you decide not only on a safe crypto exchange but also one that's suitable for you. References
- "Boom and bust: How Bitcoin prices have swung wildly since 2010", Source: https://economictimes.indiatimes.com/markets/stocks/news/boom-and-bust-how-bitcoin-prices-have-swung-wildly-since-2010/whats-behind-the-big-bitcoin-crash/slideshow/82790287.cms
- "Understanding How a Cryptocurrency Wallet Works", Source: https://cryptocurrencyfacts.com/what-is-a-cryptocurrency-wallet/
- "$530 million cryptocurrency heist may be biggest ever" Source: https://money.cnn.com/2018/01/29/technology/coincheck-cryptocurrency-exchange-hack-japan/index.html
- "What's a crypto wallet (and how does it manage digital currency)?", Source: https://www.computerworld.com/article/3389678/whats-a-crypto-wallet-and-does-it-manage-digital-currency.html
- "Why is dogecoin's price spiking—again? The crypto has surged 14,000% in 2021", Source: https://www.marketwatch.com/story/why-is-dogecoins-price-spiking-the-crypto-has-surged-11-000-in-2021-11620151738