How to Choose the Best Crypto Exchange for Investing in Bitcoin, Ethereum, and Altcoins

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. 

What is a Crypto Exchange?

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.

Factors to Consider When Choosing an Exchange

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:

1. Jurisdiction

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.

2. Asset Choices

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.

3. Ease of Use

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.

4. Liquidity

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.)

5. Security

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.

6. Insurance

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.

7. Fees

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.

8. Benefits and Rewards

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. 

The Top Crypto Exchanges Compared

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.

  • Coinbase. As the largest and most popular crypto exchange around, Coinbase has some distinct advantages. There’s very high liquidity, 100+ coins and altcoins, and an extremely easy to use interface. One of the downsides includes comparatively high fees and a lack of control over wallet keys. But with all cash stored in FDIC-insured accounts, you can rest assured your money is safe.
  • Gemini. This exchange is ideal for crypto traders, peer-to-peer trading, and crypto-to-crypto trading. It has a lot of flexible features; however, also comes with fees that are slightly higher than others. If you’re doing large volume trading, Gemini could be too expensive for your liking. 
  • Binance. With Binance, you get access to hundreds of different coins and very low transaction fees. If you’re someone who likes to dabble in different altcoins, this is an extremely versatile exchange. 
  • Known for its robust cybersecurity, also has a rather impressive list of cryptocurrencies. At more than 250, it might even have the deepest inventory of any exchange around. 
  • BlockFi. No comparison of cryptocurrency exchanges is complete without at least thinking about BlockFi. While they only offer a handful of cryptocurrencies, their lack of commission fees make them very popular among Bitcoin users. And with 1.5 percent back in Bitcoin on every purchase using the BlockFi Rewards Visa card, there’s definitely a case to be made for going this route.

Choosing Your Crypto Exchange

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. 

Sky Richardson