10 Things to Consider Before Selecting a Cryptocurrency Exchange

The internet is full of cryptocurrency exchanges, and many more could be coming in the future. But which type of cryptocurrency exchange would be the best for you? Would it be a centralized cryptocurrency exchange (CEX)? Do you think a decentralized cryptocurrency exchange (DEX) would be the best for you? Or, do you think a hybrid cryptocurrency exchange (HEX) would do a good saving and trading job for you?

More importantly, even if you select a CEX, a DEX, or a HEX, which one among the many cryptocurrency exchanges under each type (CEX, DEX, and HEX) would be the best for you to choose and use, and why? What would you consider before selecting a cryptocurrency exchange? Or, would you just select anyone?

If you select a cryptocurrency exchange without considering some important things, you could be taking a big risk that would make you eventually lose your cryptocurrency investment. It would be better—especially if you are inexperienced or a first-timer in cryptocurrency investing—to carry out some research on cryptocurrency exchanges before selecting a cryptocurrency exchange.

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There are many cryptocurrency exchanges, and each cryptocurrency exchange has its own advantages and disadvantages that investors should consider before selecting one, or more of them—in case there is any interest in diversifying an investment portfolio.

This article provides information about some characteristics of cryptocurrency exchanges you have to consider in order to be in the best position to select a cryptocurrency exchange that would serve you well. The following are 10 important things you should consider before selecting a cryptocurrency exchange:

1. The level of security

Because cryptocurrency exchanges or platforms are always under constant surveillance and attacks from hackers and fraudsters, security is a major issue in the cryptocurrency industry.

Therefore, make sure the cryptocurrency exchange of your interest is registered under, at least, one government and has a high level of security which you can conduct thorough research for before making a decision.

11 Major Risks Associated with Cryptocurrencies

To be in the best position to choose a legitimate and secure cryptocurrency exchange, it may be important to search for the cryptocurrency exchange’s online reviews on sites like Reddit, or search for related news articles on reputable sites Forbes.

When evaluating a cryptocurrency exchange’s level of security, some other security features you may look for should include one, two, or all of the following:

  • The presence of cold storage method for storing most of the cryptocurrencies on the cryptocurrency exchange. It’s advisable to select a cryptocurrency exchange that can store your funds offline via cold storage method, in order to reduce the risk of online hacking.
  • The presence of two-factor authentication (2FA). It’s advisable to select a cryptocurrency exchange that has a two-factor authentication method that can tighten up the level of security on your account by requesting for your identity to be confirmed using a combination of two different methods (password, email, phone, etc.), instead of only one.
  • The presence and proof of a cryptocurrency reserve. It’s advisable to select a cryptocurrency exchange that conducts audits and verifies that the total amount of cryptocurrencies in its possession is at least equal to the sum total of the cryptocurrencies that are spread across all customers’ balances under its watch.

 2. The extent of transaction limits

Many cryptocurrency exchanges have daily deposit and withdrawal limits. If you’re the type of investor who likes making a lot of deposits and withdrawals each day, then it’s advisable to look at the transaction limits placed on the cryptocurrency exchange of your interest. Although the restrictions placed on the number of transactions may not be an issue for you, you still have to keep transaction limits in mind when choosing a cryptocurrency exchange, especially if you have great financial goals to achieve.

3. The types of trading options

If you’re an advanced or very active trader, then trading options would likely be very important to your financial goals. Depending on your degree of risk tolerance, it’s advisable to find out whether the cryptocurrency exchange of your interest would allow you to access certain order types or margin trading that can make some types of investment goals more attainable. However, before you get involved in such trading activities, try to understand the risks involved so that nothing takes you by surprise in case of any unfortunate outcome.

4. The payment method(s)

Different cryptocurrency exchanges have different payment platforms or methods which assign their respective fees for transfers regarding cryptocurrencies. Some exchanges require investors or traders to use PayPal, bank transfer deposit, or credit and debit cards, or a combination of payment methods. It is advisable to consider the payment methods accepted by a cryptocurrency exchange and take note of the one(s) that would be convenient and easier for you to pay through.

5. The degree of liquidity

Any cryptocurrency exchange that doesn’t have a sufficient or high level of liquidity would make it difficult for many traders or investors to achieve their financial or investment goals because the speed of transactions, especially withdrawals, may be slow or compromised. Therefore, depending on your financial goals—which might likely be the same as that of many other investors—it’s advisable to select a cryptocurrency exchange that offers sufficient or high liquidity and trading volume which ensure fast and easy transactions.

6. The service fees

In order to make money and stay in the cryptocurrency exchange business, cryptocurrency exchanges usually charge their respective customers (traders or investors) certain fees for using their services; they do so by taking a certain (usually small) percentage of customers’ trade. Most exchanges charge a percentage that is lesser than 1% of the amount traded. No matter what the percentage is, it’s advisable to consider the service fee and services offered before selecting a cryptocurrency exchange.

7. The presence and level of customer support

It’s advisable to find out whether a cryptocurrency exchange has customer support; more importantly, it’s advisable to find out the level of customer support offered to customers. You can get information regarding the presence and level of customer support by contacting any cryptocurrency exchange’s customer support, or checking online forums and observing whether customers have made complaints about being locked out of their accounts or not being able to access their accounts to make deposits or withdrawals. If a cryptocurrency is associated with any such complaints, then it has poor customer support; therefore, you may have to consider other cryptocurrency exchanges.

8. The type of supported cryptocurrencies and traditional (fiat) currencies

Before selecting a cryptocurrency exchange, make sure its platform supports any cryptocurrency you’re interested in saving or trading: you should be able to store and trade your cryptocurrency on the cryptocurrency exchange of your interest. On the other hand, if you don’t have a cryptocurrency, but want to purchase anyone from the cryptocurrency exchange, then make sure that the cryptocurrency exchange accepts deposits of your country’s traditional (fiat) currency, or at least accepts deposits of any other popular traditional currency (such as the dollar, euro, or pound). 

9. The type of user interface

For the sake of having good user experience, make sure the cryptocurrency exchange of your interest has an intuitive, easy-to-use, and swift user interface. However, it has to be noted that to a great extent, having good user experience depends on the type of device you intend to use for your cryptocurrency investing activities. If you’re someone who is always moving to and fro, then an exchange that has mobile app services would make it easier or possible for you to get the best user experience which can, in turn, help you take more efficient actions on the cryptocurrency exchange.

10. The location of the cryptocurrency exchange

Depending on your location in the world, it may be easier, better, and even safer and to use a cryptocurrency exchange that is in your country, rather than a cryptocurrency exchange that’s in another country. Using a cryptocurrency exchange in your country would make it easier to buy cryptocurrencies using your countries fiat currency, and also withdraw money in your local currency after selling cryptocurrencies; in addition, in case there is fraud, or the cryptocurrency exchange is hacked and you are affected, it would be easier to file a case against the cryptocurrency exchange, especially if it is registered with the government.

9 comments

  • It depends on platform too regarding security. We know what happened with polygon.
    Thanks for a informative post.

    Liked by 1 person

    • your welcome and thanks for reading and commenting. In response to part of your comment (“it depends on the platform too regarding security”), the article had discussed something related in point number one (the level of security) where it stated that “When evaluating a cryptocurrency exchange’s level of security, some other security features you may look for should include one, two, or all of the following…”; therefore the level of security depends on the exchange as each exchange has its own level of security, some are high and some are low, while some others maybe somewhere in between.

      Like

  • I’ve read this a couple of times, and I still don’t understand it, but thank you for explaining it.
    I am old-school. I just don’t understand why we don’t just continue to use cash.
    What scares me is cyberattacks. Could you explain what would happen if suddenly people lost access to their crypto currency? I just am afraid that we are going to deep in with technology.
    Thanks. Have a blessed week.

    Liked by 1 person

    • thanks alot for your read and points of view. Have a blessed week too. Yes, by choice the world has still been going deep into the technology, because banks and traditional old-school cash systems still have their own cons/disadvantages in comparison with cryptocurrencies; you can search for disadvantages of old-school/cash systems on Google. Using cash has advantages, but people have been robbed and killed because of cash; cash has caught fire countless times, etc. Many people still don’t have bank accounts and access to financial services. So banks/cash systems have their own disadvantages which cryptocurrencies don’t have.

      Now, to the explanation: If people lose access to their cryptocurrencies as a result of forgetting their passwords or private keys, or because of the weak security system on a cryptocurrency exchange, then the cryptocurrencies are likely gone, temporarily or forever; either the cryptocurrencies will be locked up forever or taken by someone else.

      Although it is unfortunate that there have been cybers attacks, the attacks haven’t affected most of the exchanges, and thus it hasn’t affected every body; there are who people have been saving cryptocurrencies for over a decade and have made millions and billions of dollars by saving cryptocurrencies between the time they were equal to zero dollars at their inception, and today when they are now worth thousands ($3000 (ethereum) and even $50,000 (bitcoin)) of dollars.

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      • Thank you for your detailed explanation. It seems as if that both cash and cryptocurrency have risks. I guess I am just confused, as well, of how it gets made. For example, do people’s paychecks get converted to cryptocurrency?
        I guess I am getting old. It seems as the world is just getting way too complicated. The more “improvements” the more problems that are created.
        Anyway, I enjoy reading your blog.

        Liked by 1 person

        • you’re welcome… I deeply appreciate your read and time… really both cash and cryptocurrencies have risks; although I am aware cash has its own risks/cons, I had written about 11 risks associated with cryptocurrencies (https://motenv.wordpress.com/2021/06/15/major-risks-with-cryptos/), not to scare anyone, but to make people aware that cryptocurrencies, and most things in life, are associated with both advantages and disadvantages. And it is important to understand how to manage risks associated with cryptocurrencies: https://motenv.wordpress.com/2021/06/17/crypto-risk-management/.

          Generally, there are a lot of reasons to invest and benefits of investing in cryptocurrencies “on a long-term basis”: https://motenv.wordpress.com/2021/05/24/why-invest-in-crypto/.

          I had wanted to send these links earlier, but thought the information may be too much and overwhelm you, but from your recent reply, I felt the urge to send them to you in case you develop interest to invest in cryptocurrencies. It may be important to go towards the end of the following article and read “5 benefits of cryptocurrencies that differentiate them from traditional/fiat currencies”: https://motenv.wordpress.com/2021/05/12/what-is-cryptocurrency/.

          Except for your age which I am not aware of, you don’t look as old as what I may consider to be old 😃…and quite a number of old people still dive into new-school and have been investing in cryptocurrencies.

          How it (cryptocurrency) gets made? Most cryptocurrencies are “mined” while some others aren’t actually mined. You can read about Bitcoin mining and get a general idea of the cryptocurrency mining process here: https://motenv.wordpress.com/2021/05/10/bitcoin-mining-definition-and-how-it-works/.

          If you are interested, you can read about the new (not-so-new) pi cryptocurrency/coin which is free to mine and acquire on phone now, but will stop being mined after it is launched on exchanges hopefully by the end of this year: https://motenv.wordpress.com/2021/06/12/pi-crypto-network/. Pi cryptocurrency/Network is the only cryptocurrency that has a market/economy where goods and services are currently being traded (bought and sold) with pi coin at the current rate of 1 pi coin = $100—even though it is yet to be officially launched on cryptocurrency exchanges. So, one could imagine what would happen after it is launched; the value could rise incredibly.

          Now, to your question, “do people’s paychecks get converted to cryptocurrency?” No, they don’t. People get cryptocurrencies by making a request to buy cryptocurrencies on cryptocurrency exchanges such as Coinbase, Luno, Kraken, Bitfinex, Qurrex, etc. It’s simple to order and buy cryptocurrencies. When people make a request, they are presented with cash payment options (credit cards, bank deposits, etc.) and they can make a choice and follow further instructions to buy cryptocurrencies and have them on the exchanges. I prefer transferring cryptocurrencies from other exchanges and saving them on a cryptocurrency account that they have to open/register on https://www.blockchain.com/ which is completely safe in my opinion, even though a number of other exchanges are safe.

          Liked by 1 person

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