What Is a Crypto Exchange?
So what exactly is a crypto exchange? It's a platform that congregates crypto buyers and sellers.
It matches the buy orders with those who are selling crypto. So crypto exchanges are match-making platforms, much like stockbrokers work to facilitate the buying and selling of stocks.
They allow you to convert fiat currency, like US dollars, to crypto.
You can also make crypto-to-crypto transactions. For example, you can buy Ethereum using bitcoin.
All of the above exchanges are known as centralized cryptocurrency exchanges. These are considered financial institutions in the US.
To allow users to exchange fiat for crypto, centralized exchanges (otherwise known as CEXs), must follow strict rules set forth by the SEC (Securities and Exchange Commission).
A prime example is the KYC requirement. KYC stands for Know Your Customer.
To use a centralized exchange, you need to verify your identity using your government-issued ID card as well as your social security number, among other personal details.
These measures are in place to help prevent things like fraud and money laundering.
How to Choose a Crypto Platform
Before getting into our comparison of the best crypto exchange 2022 has to offer, it's important to learn how to choose a crypto exchange.
There are numerous factors to consider before signing up and buying crypto for the first time. Here's what you need to compare between the various platforms.
There are thousands of cryptocurrencies currently circulating the web. But crypto exchanges are very selective about the specific cryptocurrencies offered on their platforms.
Because regulations in the US are so strict, US-based exchanges offer far fewer coins than exchanges that focus outside the US. Still, an exchange with more than 150 coin offerings is considered a lot.
When choosing an exchange, consider the variety of cryptos offered. Make sure the exchange you are using has the coins you want to purchase.
Most crypto exchanges allow you to make ACH transfers from your bank and wire transfers. Some also allow you to purchase using a debit card.
Exchanges charge varying fees to fund your account. Some will allow ACH transfers free of charge like Coinbase does. However, using a debit card often incurs fees of up to 4% on crypto purchases.
Make sure the exchange you choose has accessible and affordable (ideally free) funding options.
Aside from funding fees, you'll also be paying trading fees. Each time you make a purchase or sale of crypto, you'll pay a commission to the exchange for helping to facilitate the transaction.
Fees per trade can range from less than 0.1% to more than 4%. If you make a lot of trades, choosing a low-fee platform is a must.
Many applications allow you to buy and sell cryptocurrency, but they don't let you actually take ownership of it.
For example, E-Toro is a popular investing app. But it's geared towards stocks, not crypto.
It allows you to buy crypto, but you cannot withdraw the crypto to your own wallet. It has to remain in the custody of E-Toro, meaning that they're the ones who really own it, not you.
Popular platforms like Robinhood and Paypal also allow you to buy crypto but not withdraw it to your own crypto wallet. While this is fine for beginners, it's not ideal for crypto enthusiasts.
If you're worried about the rising number of hacks and scams int he crypto pace, you might also want to examine whether or not the cryptocurrency exchange you choose offers cryptocurrency insurance.
Some exchanges have built in insurance which will cover your assets in case the exchange itself suffers some form of hack or scam that leads to loss of assets.
However, if you want more comprehensive insurance, check out our list and information on the best cryptocurrency insurance providers. This is what you want to look at if you have a lot of assets and are looking after them yourself.
How to Trade Crypto
Need some tips for trading crypto? Most crypto exchanges function more or less the same.
To use a particular exchange, you'll need to sign up to create an account. To do this, you'll need to provide your personal information, including your address and current job information.
You'll also need to submit a photo of your government-issued ID as well as your social security number.
Once you submit your information, it will enter the verification process. Sometimes this takes a few minutes; other times it takes a few days.
Once verified, you can fund and use your account. Most people will link their bank accounts in order to make free ACH transfers, rather than paying for wire transfers or debit card purchases.
The Best Crypto Exchange for You
Choosing the best crypto exchange isn't easy. In 2022, there are many excellent options, each with its own unique benefits.
The good news is that you aren't limited to just one. You can try as many as you want before deciding which one is your go-to platform for crypto trading.