What is a cryptocurrency exchange?
Cryptocurrency exchanges have seen a huge boom in popularity over the last few years along with the exponential growth of cryptocurrencies.
While you might know of cryptocurrencies as "digital currency" you'd logically think that a cryptocurrency exchange would simply be a place to buy and sell crypto. And you'd be right.
But let's dig a little deeper.
Crypto exchanges provide a way for traders to access the current market prices of various cryptocurrencies, as well as convert them back into fiat currency.
The majority also allow and encourage users to trade cryptocurrencies for other cryptocurrencies without the user having to convert it to fiat money (like USD) in the middle.
When selecting a crypto exchange, it is important to consider your own interests and goals in order to find one that best suits your needs.
Hold on, what are cryptocurrencies?
Cryptocurrencies are digital assets that use cryptography to secure and verify transactions. They are decentralized, meaning they are not controlled by any government or central bank.
The most popular cryptocurrency is Bitcoin, but there are many others such as Ethereum, Litecoin, Ripple, and more.
Cryptocurrencies can be used for a variety of purposes including buying goods and services online, investing in projects, and trading on exchanges.
If you want to buy or invest in a cryptocurrency, the easiest way is to use a cryptocurrency exchange.
Are crypto exchanges safe?
Using a cryptocurrency exchange can be a convenient way to store and trade digital assets, but it is important to remember that it also carries significant risks.
Exchanges are often the targets of hackers, as evidenced by the Mt. Gox incident in 2014 where hundreds of millions of dollars were stolen.
Additionally, users have found that their assets can sometimes be gone completely or locked up in bankruptcy proceedings much like in the 2022 issues with FTX.
However, whilst there are a few nightmare stories, there are far more people out there who have used crypto exchanges and not found them to have any problems whatsoever.
Most of the time, using a crypto exchange is pretty safe outside the volatility of price in your assets.
however, you can take extra measures to protect yourself from many of the risks involved with trading on cryptocurrency exchanges.
You could look into cryptocurrency insurance and you should remember the old crypto adage: “Not your keys, not your coins”. This means that if you are using an exchange and they do not give you your own wallet, then you are giving them complete control over your assets.
Therefore, it is important to take extra precautions when using a cryptocurrency exchange and make sure that you understand all of the potential risks involved before investing any money.
How do crypto exchanges work?
They're really quite simple.
Once you set up an account with a crypto exchange, you can use ordinary fiat currency (like USD) to buy crypto or trade one form of crypto for another.
You could also convert your crypto back into regular currency, leave it in your account for future trades, or withdraw it as cash.
All they really are is, as the name explains, an exchange.
Crypto exchanges are simply there to facilitate the trade. They often have a lot of tools and features to help you find the current prices of the asset you want to buy/sell.
Where it gets a little different is with the centralized vs decentralized exchanges. We'll get into them in more detail as the guide continues. But as a quick overview here's what you need to now.
A centralized exchange sits in between the buyer and seller and acts as an intermediary.
In these examples, we're talking exchanges like Binance.
Centralized exchanges make money through fees or commissions and you're best off thinking about them as the stock exchanges in Web3.
Decentralized exchanges have no such intermediary. They facilitate a trade between two people. As there's no intermediary, they rely on smart contract protocols to set the rules of each trade.
As there is no intermediary, they're generally for more advanced traders. Good examples of a DEX would be something like Uniswap.
What's the difference between CEX and DEX?
Centralized exchanges (CEX) are the most popular type of trading platform for investors, as they function much like an online brokerage account.
CEXs match buyers and sellers via an orderbook and allow users to trade digital assets with ease.
However, since these exchanges are centralized, they have control over user funds while trading is taking place. This can be a risk for some traders, as it leaves their funds vulnerable to potential hacks or other malicious activities.
The other issue some people do not like is, as these exchanges are regulated by the financial authorities of the countries they operate it, they require detailed KYC (know your customer) data. You'll have to give them images of your photo ID and personal details to use them.
If things go wrong with centralized exchanges, they can be very bad.
Take, for example, the issues with FTX. As soon as that centralized entity declared bankruptcy, the funds people had deposited there were locked away.
This is one of the primary issues with a centralized exchange.
You're relying on this intermediary to keep things going and to keep it all above board.
Decentralized exchanges (DEX) offer a more secure alternative to CEXs by allowing users to retain control over their funds while trading.
These autonomous financial protocols are powered by smart contracts that enable crypto traders to convert one digital asset for another with all transactions viewable on the blockchain.
DEXs also provide greater privacy than CEXs, as users do not need to provide personal information in order to use them. While DEXs may be more secure than CEXs, they often lack the liquidity and user-friendly interface that many investors prefer when trading digital assets.
Our top CEX recommendations
We'd wncourage you to go through the user reviews higher up this page to find the perfect CEX for your needs. However, if you're just looking for aquick starting off point, we've linked to our favourite CEX's below.
Best CEX for beginners
All CEXs have a pretty easy on-ramp to get started with trading crypto.
However, we believe the best below to be the best for absolute beginners who are not only looking for a decent user expericne, but might also want a little help when it comes to the education on using their platform.
Binance is the biggest crypto exchange in the world.
They have an incredibly simple user experience for buying cryptocurrency and decent education materials to help you understand not only their platform, but how cryptocurrency actually works.
They also boast...
- Low fees
- Incredible liquidity
If you're looking to get into crypto trading, Binance is a great starting place.
If you want to read user reviews of Binance, you can check them out here.
However, the one con is that Binance in the US has a separate operation, Binance.us.
OKX is another great choice for a centralized exchange.
They have an easy to navigate interface and a number of features to help you make the right choices with your cryptocurrency.
For example, with OKX you get...
- Low trading fees of 0.10% or less for most trades
- High-interest staking opportunities
- Easy to buy cryptocurrency using a card, bank account, or digital wallet
The only issue they're not yet available in the US due to regulations.
If you want to read user reviews of OKX you can find them here.
If you're US based, then you might want to check out...
Coinbase is another very large, very popular crypto exchange.
They have an easy to use interface and a lot of cryptocurrencies available for you to buy and trade.
A few of the key features of Coinbase inlcude...
- Easy to use for cryptocurrency beginners
- Support for a large number of cryptocurrencies
- Opportunities to earn cryptocurrency
With that out of the way, let's look at the pros and cons of centralized crypto exchanges.
Pros of centralized crypto exchanges
Centralized exchanges might be considered to be less secure, but they do offer a number of benefits that make it easy to get started buying and selling cryptocurrency.
Easier fiat<>crypto transactions
Centralized exchanges typically support fiat to crypto on and off-ramps, meaning that they allow you to buy bitcoin with US dollars or other fiat currencies.
This process is often referred to as “converting” fiat money into cryptocurrency. Similarly, these exchanges also offer crypto to fiat conversions so users can convert their cryptocurrencies back into a fiat currency of their choice.
This process is not only made super simple by the centralized exchanges, but it's highly useful for those who want to cash out their profits from trading cryptocurrencies or those who need access to funds in a different currency than what they currently hold.
It is important for users to be aware of any fees associated with these conversions before making any decisions about which exchange they will use for their conversion needs.
Generally easier to use
CEXs have made it easier than ever for users to enter the crypto space.
Their user interfaces are designed to be intuitive and easy to use, even for those who are new to the world of cryptocurrencies.
For example, Binance offers a lite version of their platform which allows users to make basic trades without needing to understand complex terms like ‘going long or short’. This makes it much simpler for newbies to get started with trading cryptocurrencies.
CEXs also provide a familiar experience for traditional investors who may be looking to transition into the crypto space.
Many CEXs function in a similar way as online brokers, allowing users to buy and sell assets quickly and easily. This makes it much easier for experienced investors who are used to traditional markets to make the switch over into cryptocurrency trading.
Overall, CEXs have made it much simpler for both newbies and experienced traders alike to enter the crypto space with ease.
Increased number of features
CEXs usually come with a variety of different features that aren't just for trading A for B right now. You can also use the better crypto exchanges to invest longer term in currencies. Here's a few examples of the more advanced features centralized exchanges often provide.
One of the most popular features offered by CEXs is margin trading. This allows users to borrow funds from the exchange in order to increase their buying power and potentially earn larger profits on their trades.
Crypto derivatives trading is also available on some CEXs, allowing users to speculate on the price movements of various digital assets without actually owning them. Exchange staking is another feature that allows users to earn rewards by holding certain digital assets on the exchange for a set period of time.
Finally, margin lending is an option that allows users to lend out their funds in order to earn interest payments from other traders who need additional capital for their trades.
All of these features make CEXs an attractive option for both experienced traders and those just getting started with cryptocurrency investing.
Trading volume and liquidity
The primary advantage of centralized exchanges is their high trading volumes. These platforms are highly liquid, meaning that assets can be exchanged quickly and easily.
Binance regularly records more than $30B in daily trading volumes.
This makes it an ideal platform for both newbies and experienced traders alike.
For newbies, these active platforms essentially guarantee that their assets can be exchanged seamlessly at any time.
For experienced traders, CEXs provide a way to move relatively large amounts of funds in and out within minutes.
Cons of centralized exchanges
While centralized exchanges make it much easier to invest and trade cryptocurrencies, they're not without their drawbacks.
Know your customer (KYC) can be a pain
Strict Know-Your-Customer (KYC) policies are a common requirement for users of centralized exchanges.
These policies require users to provide personal information, such as a photo of their face and a valid identity card, in order to buy and sell cryptocurrency or make withdrawals.
This can be an issue for those who value their privacy when trading, as it requires them to share sensitive information with the exchange.
Also, in our personal experience sometimes you can be waiting weeks or months for your KYC to be approved. I submitted my KYC documents to one of the large crypto exchanges and it took them 3 months to approve me to use the platform.
By that time, I'd already moved on to use a different platform.
Centralized point of failure for hackers
Cryptocurrency exchanges have become prime targets for cybercriminals looking to get their hands on digital assets.
Over the years, we have seen several infamous crypto exchange hacks that have resulted in billions of dollars worth of losses.
These attacks are often sophisticated and well-planned, making it difficult for exchanges to protect user funds from malicious actors.
Exchanges must take extra precautions to ensure the security of user funds.
This includes implementing robust security protocols such as two-factor authentication, cold storage wallets, and regular system audits.
Additionally, exchanges should also provide users with a secure platform to store their digital assets and offer insurance policies in case of any unexpected losses due to hacking or other malicious activities.
By taking these steps, exchanges can help protect users from becoming victims of cybercrime and reduce the risk of large-scale financial losses due to hacks. Thankfully, some of thelarger platforms have added insurance into their own platforms for their users.
You don't control your crypto
The wallets used on centralized exchanges are custodial, meaning that the exchange holds authority over your crypto.
This means that if the exchange is hacked or goes bankrupt, you could lose all of your funds.
The phrase “not your keys, not your coins” has become a popular mantra among cryptocurrency users.
It emphasizes the importance of using non-custodial wallets to store crypto assets. Non-custodial wallets give users full control over their funds by allowing them to store their private keys themselves.
This eliminates the risk of losing funds due to an exchange hack or bankruptcy since only the user has access to their private keys.
By following this advice and using non-custodial wallets, traders and investors can ensure that their crypto remains safe and secure at all times.
That clears up the centralized approach to crypto exchanges.
However, we've not yet covered decentralized exchanges.
Here's a little info on them.
Our top DEX recommendations
As you now know, DEXs are a little different to CEXs and the recommended entires here are also different.
Best DEX for traders
In our opinion, one decentralized exchange is better than the rest.
If you're talking about decentralized exchanges, most people will immediately think of Uniswap.
It's a great decentralized exchange that is the first choice for many.
A few of the key features of Uniswap include...
- Huge number of supported cryptocurrencies
- Automated market maker
- Concentrated liquidity
- Active liquidity
- Multiple fee tiers
- Range orders
- Non fungible liquidity
However, if you don't like it for whatever reason, there's one more recommended choice.
Pancake swap has to be the #2 recommendation here.
A lot of traders of alt coins like to use Pancake swap.
it has many of the same features as Uniswap and, often, the choice really comes down to personal preference.
I personally prefer Uniswap as I found there to be more issues with the coins listed on Pancakeswap.
Pros of decentralized crypto exchanges
Generally speaking, centralized exchanges are great for people who are looking to start their journey into crypto.
The advanced features like margin trading is also good for those of us who want to action more complex and sophisticated trades. But there are also a number of benefits to using decentralized exchanges as well.
Security is strong
This is because DEXs are non-custodial, meaning that users’ private keys and funds remain in their own wallets instead of being held by the exchange.
This makes it much harder for hackers to target the exchange and access user data or withdraw funds.
Another benefit of decentralized exchanges is that there is no need for identity checks, which eliminates the risk of leaking private user data.
This means that users can remain anonymous while trading on a DEX, providing an additional layer of security.
Since all transactions occur directly between two parties without any third-party involvement, there is less chance of fraud or manipulation.
All in all, decentralized exchanges provide a much higher level of security than centralized exchanges due to their non-custodial nature and lack of identity checks.
Better privacy for users
Privacy and anonymity are two of the most important aspects of using a decentralized exchange. With a decentralized exchange, users do not need to provide any personal information or go through an identity verification process.
All that is required is for the user to connect their wallet and sign a transaction. This means that users can remain anonymous while trading on the platform, as no personal data is collected or stored by the exchange.
The lack of identity verification also makes it much harder for hackers to gain access to user funds as they would need to know the private keys associated with each account in order to do so.
This provides an extra layer of security for users who want to keep their financial activities private and secure from prying eyes.
Wider range of crypto
Unlike centralized exchanges, DEXs are not limited to the agenda of a central entity, allowing users to find and invest in projects they are interested in. T
his provides traders with the opportunity to become early adopters in new projects that they may have otherwise missed out on.
For those who don't mind doing their research on new projects, a DEX is the ideal place to start trading. Not only do these platforms offer access to a wide variety of coins and tokens, but they also provide users with more control over their funds as well as greater security due to the lack of a central authority.
The only issue is that the greater number of currencies could mean that there are more risky currencies that are not good investments. Remember to always do your own research.
Cons of decentralized exchanges
The key pro of decentralized exchanges is the security elements. However, they're not the perfect solution.
Here's where they may fall short of your needs.
Liquidity for larger investors
Liquidity is an important factor for any investor, especially larger ones.
DEXs have been gaining traction in recent years, but they still cannot compete with the largest CEXs when it comes to liquidity.
This means that large orders can face unplanned additional costs called “slippage” due to insufficient liquidity.
Furthermore, institutional investors may struggle to deal with DEXs that do not submit to similar regulatory requirements as CEXs.
To address this problem, new aggregator protocols have emerged specifically to help larger investors avoid liquidity problems when using DEXs.
It's still not completely clear whether or not this will level the playing field in terms of liquidity.
The growing popularity of DEXs may be due to their success in avoiding certain regulatory hurdles.
DEXs are not subject to the same know-your-customer (KYC) or anti-money laundering (AML) standards as centralized exchanges (CEXs).
This allows them to operate autonomously, without having to act as a financial intermediary or counterparty.
It's great for the DEX as they get to operate with less oversight from the bodies created to protect consumers.
however, this could be a risk for investors as there's no one to make sure the DEX is operating as it should be nor is there any real recourse should things go wrong for you.
Impermanent loss is a major problem for decentralized exchanges (DEXs).
It occurs when liquidity providers contribute to a pool of assets, but are unable to withdraw the exact number of tokens they put in.
This is because the ratio of different tokens held in the pool changes as trades occur, and it cannot promise all providers their exact tokens.
As the ratio adjusts to reflect current wider market prices, the pool will contain more of whatever token is losing value and less of the one that gained value.
This means that liquidity providers will end up withdrawing more of the token that lost value and less of the one that gained value, compared with their starting assets.
This can be a significant issue for DEXs since it reduces incentives for liquidity providers to participate in these pools.
If they are not able to get back what they put in, then there is no reason for them to provide liquidity. This could lead to reduced trading volumes on DEXs, which would be detrimental for users who rely on these platforms for their trading needs.
Efficiency and speed
DEXs not as fast and efficient as CEXs.
This is because most blockchains have scalability issues that limit the number of transactions that can be processed at any given time.
DEXs can become congested during periods of high trading activity, leading to slow transaction speeds and higher fees.
CEXs vs DEXs - who wins?
Both come with benefits and drawbacks.
There is, unfortunately, no one size fits all answer for this.
Generally speaking CEXs are better for beginner investors looking to enter the space.
DEXs tend to be better for those with experience and higher risk tolerance.
How to choose a cryptocurrency exchange
Choosing a crypto exchange isn't as easy as picking the first one you discover and trying them out.
I mean, you can do that, but I wouldn't recommend it.
There's a few key considerations you need to make before making your decision.
Because not all crypto exchanges offer the same features, benefits, and use cases. The one you choose should be specific to you and your needs.
You'll understand more as you continue to read this entry to the guide.
I will say I'm not giving you simple generic checklists that have hard yes and no answers. You'll need to think about how these areas pertain to you and your life and how they'll affect this decision.
I'll also take a moment to explain that this is not financial advice and we do not recommend any specific currency or exchange. Do your own research and act once you have the right information to make a decision you are comfortable with.
Areas of operation
Jurisdiction is an important factor to consider when choosing a cryptocurrency exchange.
Before signing up, it’s important to make sure that the exchange you’re eyeing serves customers in the state and country in which you live.
This is because there are a lot of rules and regulations at play here, so if the answer is no, then you won’t be able to use the exchange in question.
In addition, some exchanges have website addresses specific to each country. For example, U.S.-based users might have to visit “exchange.us” instead of “exchange.com”. The primary example here is Binance vs Binance US.
The jurisdiction of an exchange reflects not only their target market but also where they are allowed to do business due to certain cryptocurrency rules and regulations.
Ease of use is an important factor to consider when choosing a crypto exchange.
For those who are new to trading, the complexity of some exchanges can be intimidating.
Order books and charts with lots of information can be overwhelming for someone just starting out.
To make things easier, many cryptocurrency exchanges offer “basic” and “advanced” views so users can choose the layout that best suits their needs.
Additionally, there are some exchanges specifically designed for beginners that have simplified interfaces and fewer features to avoid confusion.
For those who are more experienced in trading, ease of use may not be as much of a concern.
However, it is still important to find an exchange that has all the features you need and is easy to navigate. Many exchanges offer tutorials or other resources to help users get familiar with their platform before they start trading.
Taking advantage of these resources can help ensure that you have a smooth experience when using the exchange.
While not a hard and fast rule, our recommendation for newer traders is to start out on a centralized exchange that has a large user base.
These exchanges usually have a larger user base because they're easier and faster to use.
Security should be one of the top considerations.
Exchanges have been subject to numerous security issues in recent years, and holding coins on an exchange means trusting someone else with your money.
If the exchange gets hacked or an employee steals coins, investors can end up losing their funds entirely.
To determine which exchanges are the most secure, you should look for those that have been around for the longest time, have the most customers, and have had the least amount of problems.
Seriously, a quick Google search with something like "[EXCHANGE] hacks" will tell you a lot about their history.
You should also check out what kind of security features each exchange offers.
These might include two-factor authentication, cold storage wallets for storing large amounts of coins offline, and other measures such as encryption and regular audits.
By researching these features carefully before investing in any cryptocurrency exchange, you can help ensure that your funds remain safe and secure.
But to double down, we'd also recommend you look at...
Crypto exchange insurance
Insurance is an important factor to consider when investing in cryptocurrency.
You can find a third party insurer to help secure your assets. But that's going to cost you some extra money.
Many exchanges offer insurance policies that can protect investors from losses due to hacks, employee theft, and other catastrophic events.
Coinbase is one of the most popular exchanges that offers various types of insurance.
Binance is another option that has a built in insurance fund for potential issues.
Investors should research the details of any exchange’s insurance policy before entrusting their funds with them.
Insurance policies vary from exchange to exchange, so it’s important to understand what type of coverage is offered and how much protection it provides.
Knowing the details of an exchange’s insurance policy can help investors make informed decisions about where to store their money and provide peace of mind in case something goes wrong.
Honesty and transparency
This si a huge one for us as we focus on trust in the Web3 space.
Transparency is an important factor to consider when choosing a crypto exchange.
It’s essential for investors and traders to know exactly what they’re getting into before committing any funds.
This means understanding elements like...
- The fee structure
- How long it takes to complete trades and transactions
- Jurisdictions the exchange operates in
- How secure the exchange is
- The history of issues and hacks they may have experienced (and how they've dealt with it)
If an exchange is evasive about these details or fails to provide clear answers, it could be a sign of a lack of transparency and should raise red flags.
Given the number of scams and hacks that have occurred in the crypto space, it’s essential for investors and traders to take transparency seriously.
You should thoroughly research any potential exchanges before committing their funds.
This includes reading reviews from other users, asking questions on forums or social media platforms, and checking out any relevant regulatory information.
one of the biggest issues we see with the negative reviews of crypto exchanges here is to do with their customer support.
If you're investing your hard earned money and something goes wrong, you want to know that there is someone who is able to help you.
Newer users might have questions regarding the basics of crypto and how the exchange works, and it’s good to know that they can get quick help if needed.
Investors should look into the reputation of an exchange’s customer support service to ensure that they respond quickly and that customers seem generally satisfied. Quick responses with no resolutions help no one.
Crypto markets move quickly, so waiting days for a response from customer support could have real financial consequences.
It’s also important to make sure that the exchange makes customer service a priority.
This means having multiple channels for customers to reach out with their issues, such as email, phone, or live chat.
It also means having knowledgeable staff who can provide helpful advice and solutions in a timely manner.
This is important, but becomes more important the more often you trade or the larger amounts you trade.
Exchanges make money by charging fees on most or all transactions, so it’s important to understand what you’re being charged for each transaction.
Some exchanges have their own native “exchange tokens” that can be used to get discounted trading fees.
For example, if a Binance user holds Binance Coin (BNB) in their Binance wallet, they would likely pay lower fees than someone who doesn’t hold any BNB.
But, don't be drawn in simply by the token. Take the time to look at the fee structure and think about what it might do to your funds.
If you're paying high percentages on every trade and you trade a lot, even a marginal discount from holding an exchanges coin won't help too much.
It’s important to do your research before signing up with an exchange and making any trades.
Make sure you understand the fees associated with each trade and whether or not holding a certain token will give you access to discounted rates.
Liquidity refers to the amount of orders available in the order book, which allows traders to make trades at any time.
Without sufficient liquidity, it can be difficult or impossible for traders to find a trading partner and execute their trades.
This is especially true during times of high volatility, when prices can experience dramatic rises and falls.
In order for an exchange to have enough liquidity, it must have either a lot of users or users who hold large amounts of assets and trade them frequently.
If there are only a small number of orders available, then there may not be enough trading partners available.
This can lead to wide spreads between bid and ask prices, making it difficult for traders to get in and out of positions at favorable prices.
Basically, if you need to move fast to secure a good price but liquidity is low, you could miss the boat and lose money.
Asset selection and variety
This builds on from liquidity.
When it comes to asset choices, it is important to make sure that the exchange you are using offers the assets you want to trade (and has adequate liquidity for them).
With thousands of different types of cryptocurrency in existence, no exchange can make trading pairs available for all of them.
Generally speaking, the higher market cap coins have a higher likelihood of being traded on popular exchanges.
This means that if you are looking for more exotic or lesser-traded coins, you may need to search out smaller exchanges (really you're going to want to go to DEXs for the really obscure coins).
It is important to do your research and have a wishlist handy when searching for an exchange that meets your needs.
You should also consider the fees associated with each exchange and the security measures they have in place.
Additionally, some exchanges offer additional features such as margin trading or derivatives trading which could be beneficial depending on your investment goals.
Features and leverage
Assets are one side to the trading coin, the other side is what you want to do with them. You have to make sure that the exchange you choose has the feature set to help you achieve your goals.
Leverage is a popular tool used by traders on derivatives exchanges to increase their potential profits. Leverage allows traders to make bets with more money than they have in the exchange, which can result in higher returns if the trade works out.
However, leverage also increases risk and can lead to losses if the trade goes against them.
Derivatives exchanges offer a variety of products for traders to use, such as options and futures contracts.
Options allow investors to buy or sell a commodity at a future date for a set price, while futures contracts are agreements between two parties to buy or sell an asset at a predetermined price at some point in the future.
These products provide traders with additional ways to speculate on cryptocurrency prices without actually owning any coins themselves.
You have to make sure that the exchange you want to use offers the product/feature you need.
Withdrawal and deposit limits
Most exchanges don’t have a minimum deposit requirement, but they do put limits on how much money a user can withdraw or deposit in a given timeframe.
This means that if you’re looking to move large amounts of money, you should be aware of these limits. For example, some exchanges might only allow users to withdraw $25,000 worth of fiat or crypto per day.
That being said, if you're moving huge amounts you should be able to organise something with the team and get onto their institutional plans.
It’s also important to remember that even the best cryptocurrency exchange app might have strict limits on the amount of funds that users can move within a specific time period.
This means that if you’re planning on HODLing for as long as possible, you may still want to make withdrawals at some point and should be aware of any restrictions that may apply.
Knowing these limits ahead of time can help ensure that your trading experience goes as smoothly as possible.
User experience and ease of use
You want the experience of using the exchange to be pleasant and intuitive.
A good UX should make it easy for users to navigate the interface, find what they need, and understand how everything works without getting lost in settings and menus.
The best exchanges will have a modern feel, with clear labels and instructions that are easy to follow.
They should also avoid unnecessary jargon that could confuse users.
If you find yourself struggling to use the exchange or feeling overwhelmed by its complexity, it may be worth looking into other options that provide a smoother ride for users.
Tax reporting assistance
Cryptocurrency comes with a unique set of tax reporting requirements.
When it comes to taxes, your local tax agency will want to know about profits and losses you made trading.
Just like stocks and bonds, cryptocurrency trading profits are taxable.
Unfortunately, some crypto exchanges (especially ones based outside of your jurisdiction) do not have the forms or expertise needed for you to easily report your profit/loss. .
You will need to manually calculate your gains and losses using records of all your trades throughout the year.
This can be a time consuming process as you must keep track of every transaction made during the year in order to accurately report them on your taxes.
Take a second to search through the exchange and see if they have any forms or easily exportable information to help you more efficiently file your taxes.
Highly reviewed by real users
Finally (but in our opinion most importantly), find out what other users of the platforms say.
You can read "expert" pieces like this one all day long. Generally, these are written by one person or a small tea,m of people who have similar experiences.
Which means these "expert" pieces are a little skewed.
But the combined, aggregated opinions and experiences of dozens or hundreds of users who have different use cases and needs can offer much deeper insight.
Make sure you check the reviews on third party review site (like this one) to help you find the best crypto exchange for your needs.
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.
Of course, if you want a more detailed guide on how to buy crypto using a crypto exchange, you can check out our guide on buying crypto here.
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.