December 21, 2020 |James Messi
Choosing a Cryptocurrency Exchange: What to Look for
With so many available options, finding the right cryptocurrency exchange in 2020 can feel like looking for a needle in a haystack. According to Coinmarketcap, there are more than 300 active platforms that you can use to trade cryptocurrency. These range from safe and serviceable companies with loads of enticing features and programs, to downright scams that are essentially vaporware. Sometimes, the differences in the overall quality of an exchange can be obscured until it’s too late.
To make your search easier and more successful, we have laid out a list of the top features and incentives that crypto traders look for before signing up for a cryptocurrency exchange. These items have been broken up into need-to-haves and nice-to-haves. The crypto exchange that you end up choosing should, at a base level, have every need-to-have listed in this article.
The need-to-haves cover the most essential areas such as the security of funds held on the exchange and the regulatory compliance of the company running the exchange. Think of the need-to-haves as prerequisites to even get your attention. Once you’ve identified exchanges that cover these bases you can revisit the nice-to-haves, and add some of your own, to see which of the remaining candidates has the most of your desired features.
What your exchange NEEDS to have
Read through our curated list of cryptocurrency exchange essentials. If you are already using an exchange, confirm that it has these. If you haven’t picked an exchange yet, narrow your search down to the ones that do.
Advanced Security Solutions
For many cryptocurrency traders, especially those lacking a deep understanding of cryptography, leaving digital assets on a reputable exchange is the best bet to ensure those funds remain safe and secured.
That brings us to our first need-to-have, which is some sort of advanced security mechanism that goes beyond the basics of sharing a private key among a few individuals or stakeholders. Before choosing an exchange, it is absolutely imperative that you personally audit the security measures put in place by that exchange.
So, what should you look for? To start, see if the exchange is partnered with a custody provider that specializes in solutions for securing digital assets. Some examples of these types of companies include Prime Trust, BitGo, and Curv.
Beaxy Exchange is currently partnered with Curv to provide traders with instiutional-grade security based on a unique decentralized model of multi-party computing. Curv eliminates the need for private keys, replacing them with multi-party computation (MPC) protocols that enable transactions to be securely signed in a distributed manner that eliminates any single point of failure.
A Trustworthy Reputation
From the perspective of a cryptocurrency exchange, reputation can make or break your business. That’s because cryptocurrency traders rely heavily on recommendations from their peers. There are still a lot of shady actors in the world of crypto trading and exit scams or hacks by exchanges are still too common. So it’s important that you do ask around or take a deeper look at the reviews posted online about an exchange before signing up.
Liquid Order Books
Liquid order books make buying or selling an asset easier and more cost effective. For a book to be liquid, you should be able to close a small or medium sized position without moving the order book significantly. Maintaining deep order books with good liquidity is a fundamental necessity of a cryptocurrency exchange. Choosing an exchange with adequate liquidity will result in entries and exits with better prices and faster execution.
What Other Traders Look For
We’ve collected responses from cryptocurrency traders to find out what they want the most. The goal of distributing the responses is to give you insights into how other traders approach crypto and illuminate tools that you didn’t know were available.
High-Quality Mobile App
During the last cryptocurrency bull market in 2017, the overwhelming majority of crypto traders took place on a computer. Now, in 2020, the share of volume done on mobile applications is increasing. This is mainly due to a lack of quality crypto trading apps in 2017. Since many exchanges have spent the last three years developing and improving their mobile apps, naturally traders have been making that switch towards convenience. To help fill the appetite for convenient, on-the-go trading, Beaxy Exchange built Trender, an exclusive trading tool that automates technical analysis on your favorite assets and allows you to enter and exit trades with the swipe of a finger.
Fiat Currency Support
We all know that there’s no money like Bitcoin but there are times when only fiat will do and you need to cash out on a portion of your cryptocurrency. Having access to an exchange that supports deposits, withdrawals, and trades in and out of fiat currencies makes the process faster, cheaper, easier, and less risky.
Recurring Buy Function
One of the best, and most reliable strategies for acquiring cryptocurrency to be held long-term is dollar-cost averaging or DCA. DCA accumulation is when someone creates a position with consistent small purchases instead of buying all at once. Due to cryptocurrencies’ volatile nature, prices fluctuate substantially in the near-term. To avoid buying at a higher average price, many crypto investors buy small amounts once or twice a month, every month. You can save on time and trading fees by using an exchange with a recurring buy feature that will automate this process for you. Enter the amount of cryptocurrency you want to buy, specify how often you want to make that purchase, and check back in ten years!
Wrapping it up with a Bow
To sum up, first rate security and a decent reputation are key determinants for a virtual space where you want to keep valuables so do a quick check before you deposit and don’t hesitate to ask the team directly (their response time will let you know how they will perform later on when it may matter more). After those bases are covered, start looking for features that fit your style as an investor or trader. Having a mobile app where you can check your balances on the go is a huge plus. If you are a more active trader, make sure there are liquid books on the pairs you care about; if you are more of an investor, the DCA option might be a good fit and could add up to a sizable decrease in costs in just a few months. Ultimately any investor or trader will want to convert some portion of their digital assets into fiat currency – to avoid being nickel-and-dimed out of all your profits through exchange fees, network costs, and surcharges, it may be desirable to have a two-way fiat conversion option built into your exchange. Beyond all these considerations, the most important one is to avoid waiting any longer to jump into the digital asset space. What better way to explain your investment to Aunt Karen than to make her a stakeholder in digital gold? Happy Holidays!