If you want to buy, sell and invest in cryptocurrencies, you need to use a cryptocurrency exchange.
But with so many different exchanges offering unique features, applications, and options, it’s not always easy to know which one to use. Let this article serve as a simple guide.
We’ll explain what a crypto exchange is, some of the different factors to consider when choosing an exchange, and the pros and cons of some of the major exchanges, like Coinbase, Binance.US, BlockFi, and others.
In the simplest terms, a crypto exchange is a designated platform where you can buy and sell cryptocurrencies. You can also use the exchange to trade crypto, which is basically the process of converting one type of coin into another (like converting Bitcoin into Ethereum). Furthermore, you can use an exchange to turn the U.S. dollar into cryptocurrency (and vice versa).
A crypto exchange works much like a stock trading platform such as Fidelity or Schwab, except instead of buying and trading stocks or mutual funds, you buy and sell cryptocurrency. The exchanges reflect the current market prices for each cryptocurrency. Depending on the exchange, different coins will be listed. Some of the smaller altcoins only exist on specific exchanges, while you’ll typically find staples like Bitcoin and Ethereum everywhere.
There’s no “perfect” exchange; however, there may be one that’s more conducive to your wants and needs than others. For example, if you want to buy a specific coin, you may need to choose a particular exchange. Or if you’re interested in specific strategies, like staking coins, you may need to go with a different exchange. So much depends on your own individual needs.
There are literally dozens of popular crypto exchanges on the internet. With so many to potentially choose from, it’s helpful to have some criteria for comparing, contrasting, and evaluating. Here are a few important factors to consider right from the start:
As long as you’re going with one of the major exchanges, this isn’t going to be an issue. However, we need to mention it anyway. That’s because, in order for the exchange to work for you, it has to be accessible in the country and state where you live.
Some exchanges have different website addresses that are designed for specific countries. Binance, for example, has a Binance.US exchange that’s designed for U.S.-based users.
If you’re interested in buying and selling specific assets, make sure the crypto exchange you select supports these coins. Coins with a high market cap are available on most of the popular exchanges. However, lesser-traded altcoins might only be available on smaller niche exchanges.
If you’re reading this article, it probably means you’re new to crypto. And if you’re a new trader, it’s helpful to use a crypto exchange that’s intuitive and user-friendly. While complicated interfaces, charts, graphs, and extra tools might seem cool, they’re for more experienced investors. You need something that just gets the job done. Dead-simple crypto exchanges include Coinbase, Square, Binance, Gemini, and BlockFi.
An exchange’s liquidity refers to the number of trades that are happening on the platform at any given time. There needs to be enough liquidity – i.e. a high volume of orders flowing through the system – in order for you to be able to buy or sell in real-time. If liquidity is too low, it could be minutes or even hours before a trade goes through (which hurts your ability to jump on specific prices). Low liquidity means investors miss out on potential profits. (It also leads to greater price volatility.)
The importance of security can’t be overstated. When you’re storing coins on an exchange, you’re basically trusting the fact that the exchange will protect that money from a hacker.
Most of the big exchanges have very secure and transparent policies listed on their websites. However, many of the smaller exchanges are less open about their security (and might not have the same level of infrastructure in place). Make sure you consider this during your evaluation.
Speaking of security, some exchanges will insure some or all of your funds. This is a great safety net, should something happen. Large exchanges like Coinbase, Binance, Gemini, FTX, and Bittrex all offer varying levels of insurance.
Exchanges might not require a monthly charge or account fees, but they have to make their money somehow. They do this by charging small trading fees on transactions. If you’re going to be doing a lot of buying and selling, it’s worth comparing these fees to see how much each exchange will cost you.
Finally, consider the benefits and rewards associated with different exchanges. Some exchanges will offer you signup bonuses, free crypto, or even interest earned on certain coins when you keep a minimum balance. We don’t recommend choosing an exchange just for the rewards, but this can provide a nice point of differentiation when all else is equal.
Now that you’re familiar with some of the different factors to consider in a crypto exchange, let’s take some time to evaluate several of the most popular exchanges.
It should be clear by now that there’s no perfect ranking system for cryptocurrency exchanges. The one that’s best for you is highly dependent on your unique wants and needs. Use this article as a starting point. Pick a couple of exchanges that seem like they’ll work for you and do some additional research and due diligence. Eventually, you’ll find the right one.