Crypto exchanges are digital platforms that allow you to buy, sell, and trade cryptocurrencies. They allow traders to buy their desired cryptocurrency and then trade it for more benefits. Some of the exchanges are so in demand right now because of their instant facilitation of crypto trading. Some of them allow you to purchase crypto using your own credit card or bank account. Crypto exchanges can sometimes be referred to as an intermediary that acts between a seller and a buyer of crypto assets while making money through transaction fees and commissions.
When it comes to deciding on the best crypto exchange, there’s no definite answer to it. This is because different exchanges offer different services and satisfy a particular set of users. Thus, you have to evaluate your interests and the services offered by the exchange in order to find a crypto exchange that aligns with your goals.
How Does It Work
As mentioned above, crypto exchanges act as an intermediary between the sellers and buyers. In other words, they match the buyers with the sellers. If you want to access a crypto exchange, you have to register yourself on that platform (create an account). You may need to verify your account, including the KYC process, to attain complete access to the exchange platform. Then, once your account has been verified and you have transferred some initial funds, you can place your first crypto order. Different crypto exchanges offer different services such as order books, tracking, etc.
Types Of Crypto Exchanges
- Centralized exchanges: These exchanges use a third party to carry out their transactions of crypto currency and even fiat currency. The third party is trusted to provide security and monitoring to the users. They are also responsible for finding trading partners for the users. It is user-friendly and more reliable.
- Decentralized exchanges: There is no intermediary in this type of exchange. The transactions are carried out on blockchain on a peer-to-peer basis by using smart contracts. It is more secure as it does not have as many hacking risks as the centralized ones. It has low liquidity and does not allow fiat currency transactions.
Features Of Crypto Exchanges
This includes a list of features that a good crypto exchange should have:
- Security: The first and foremost thing to consider while choosing a crypto exchange is to look for their security features. Now, cryptocurrency is not backed by any central or government institution, but this does not mean that you won’t be given any guarantee for your investments. Some exchanges provide you with insurance, while some follow regulations of a certain authority. For example, the LCX exchange is compliant with eight security regulations under the Financial Market Authority of Liechtenstein.
- Accessibility: This is also another important factor. Sometimes you are not allowed to trade on certain exchanges, maybe because of national or state regulations. For example: China has banned all crypto exchanges within its boundaries. So be careful about the accessibility of your exchange.
- Liquidity: Your chosen exchange should have enough trade volume to retain relatively liquid holdings, meaning you can sell your assets when you want. The crypto market is quite volatile and prices may go up at any second. At that time, if you are trading on an exchange with a large trade volume, you’ll get the best price for your crypto.
- Fees: All exchanges come with a transaction fee. It is not necessary that a high fee exchange is a bad deal as it will offer you more protection and insurance. The exchange fees can be a percentage of your trade or a fixed price. Thus, you should be aware of how much the exchange is charging you for your transactions.
- Coins offered: All the crypto exchanges do not offer all the cryptocurrencies that exist around the world. Therefore, before choosing your exchange, analyze what coins they are offering and what coins you are interested in.
Conclusion
Crypto exchanges not only provide trading services but they also offer storage for your crypto and price discovery through the trading activity. Today, numerous exchanges are available with easy user interfaces and secure platforms. It totally depends on you what kind of exchange you want but try to go for a platform that is compliant with security regulations so that you can trade without worrying about any irregularities.
