Trading Tips: 3 Things to Consider When Choosing a Cryptocurrency Exchange
In recent years, cryptocurrency trading has soared in popularity. Put simply, cryptocurrency trading is all about speculating on price movements with derivatives like spread bets and CFDs. Spread bets and CFDs enable traders to speculate on cryptocurrency price movements without actually taking hold of the underlying coins. Traders can go long (or buy) if they think a cryptocurrency is going to rise in value, or alternatively they can short (or sell) if they think a cryptocurrency might fail.
That being said, buying and selling cryptocurrencies through an exchange allows traders to take direct ownership of the coins. By creating an exchange account and digital wallet, traders can even put up the full value of any assets to open a position. This type of leverage is not otherwise available when buying cryptocurrencies directly.
Cryptocurrency exchanges are not without their challenges though, and aspiring traders often have to get to grips with the technology and data involved pretty quickly. Some exchanges even make use of limits to restrict how much traders can deposit, and it is also no secret that exchange accounts can be costly to maintain. So, let us discover 3 factors and features that you need to take into consideration when deciding which cryptocurrency exchange might be right for you.
When trying to choose the best cryptocurrency exchange, it is important to assess the reputation of a few different exchanges. Although the cryptocurrency market is still relatively new, there are already some exchanges that have proved their worth more so than others. Nefarious activities such as hacking scandals and exit scams have all left some exchanges with a less than glowing image.
With this in mind, doing your research is fundamental. You need to know that the exchange that you are using is reputable to ensure that your cryptocurrency is in safe hands. Furthermore, reading online reviews like this Binance vs FTX guide or this Binance review is a fantastic place to begin. You might even want to take a look on social media platforms to see what the users of your chosen crypto exchange have to say. Anything alarming, or an abundance of complaints, should be a cause for concern.
2. Location Restrictions
Did you know that cryptocurrency exchanges are restricted to a limited geographical scope? Essentially, in order to use a currency exchange, it must be legal to trade cryptocurrencies in your area. Correspondingly, before signing up to an exchange, double check that crypto exchanges are accessible and legal from within your country. Both cryptocurrency and blockchain are still evolving with regards to legislation and other policies and so some countries are already beginning to crack down on how traders are able to access exchanges.
On the whole, there are two important factors to consider. Firstly, your chosen exchange must have secured the proper licensing and certifications to trade. Secondly, the respective cryptocurrency and blockchain regulations in your country must be adhered to at all times. It is almost always best to choose an exchange based in a jurisdiction in which you are familiar and in which you feel confident that you could access legal support. Comparatively, depositing cryptocurrencies in highly politicized or anti-crypto territories could potentially harm your financial standing.
Last but certainly not least is security. Each exchange has its own chosen security methods. At the very least, your chosen cryptocurrency exchange should offer two-factor authentication (2FA). Any less than this, and there is a chance that the exchange might not be acceptable by the security standards of today. Losses and hacks can cost traders billions and therefore you have to put security first before engaging with a cryptocurrency exchange.
Centralized exchanges are sometimes targeted by phishing scams and other dangerous hacks. Decentralized exchanges however take pride in security and anonymity. Traders can sign up without sharing any personal information and by generating a private recovery seed. This involves a list of words in a specific order that stores all the information needed to recover a cryptocurrency wallet. By cutting out the middlemen, exchange users are directly connected and can place and fill orders quickly and safely.
Ultimately, using a cryptocurrency exchange can be overwhelming at first. When trading and purchasing crypto, always put safety and security first and be sure to do plenty of research to ensure that you are making the right decision for your trading goals. Above all, remember to store your cryptocurrency safely and do not be afraid to reach out to a cryptocurrency expert if you need further help or support with navigating the exchange process.