As the cryptocurrency mania grows every day, more people are becoming curious about the capabilities of this technology. Whether it’s an individual, enterprising giants or financial institutions, everyone is scrambling to cash in on the craze of this digital currency. In order to invest in cryptocurrencies, the first thing to do is find a cryptocurrency exchange. Cryptocurrency exchanges allow you to buy, sell, trade, and store cryptocurrencies. In simple terms, they are like banks that let you buy, sell, or store currencies and handle trade transactions on your behalf. However, unlike banks not all exchanges are reliable to safeguard your investments. There are many factors to consider when selecting an exchange to handle your trade or investments. Here are some things to take into account when choosing a cryptocurrency exchange.
Check the Local Laws and Restrictions
While cryptocurrencies are international and decentralized, the exchanges that buy or sell them have regional bases. They need to follow the local laws and regulations. Hence, majority of exchanges have a limited scope of the countries they can serve. For example, an exchange that operates in Europe may not be able to handle American customers. So, before signing up on any exchange, ensure that is accessible and legal from your country.
Check Security and Authenticity of Exchanges
Cryptocurrency exchanges store many digital assets in one place. This makes them a lucrative target for hackers, phishing scams, and exit scams, etc. Hence, security and authenticity is important while choosing an exchange. Reliable exchanges will have a safe web address, two-factor authentication, transparency in data, insured funds, user-friendly approach, and cold storage wallets. Some exchanges even reveal its owners, headquarter and cold storage addresses, publish its audit information, etc. Look for these details before choosing an exchange.
Trading Volume and Liquidity of Exchanges
Another important factor to consider is the trading volume and liquidity of exchanges. Trading volume is the number of transactions an exchange does. Liquidity is the ease of buying or selling in the market. High trading volume means high liquidity in the market. This allows you to transact faster and easily without dealing with price volatility. However, liquidity may vary with different trading pairs. It is better to check the trading volume and liquidity to make an informed decision.
Automated Trading Bots and Software
Cryptocurrency prices rise and fall dramatically all the time. It is important to always stay alert and ready in order to make profits in trading. To facilitate this, many exchanges give users the option of automating their trades with trading software. Cryptocurrency Trading software like cryptosoft uses various indicators to recognize trends and automatically execute trades. All these bots implement various trading strategies based on algorithms and offer more speed and precision in trading.
Currency Pairs Available In Exchanges
Currency pairs are another important factor in choosing an exchange. You need to check which coin pairs the exchange offers before making a choice. If you’re going to simply swap Bitcoin for USD and vice versa, any exchange can do it for you. However, if you’re looking to diversify your portfolio with different coins, it might be harder than you think. Most exchanges don’t offer a wide variety of coins while some charge higher fees for offering a wider selection. Check and compare various pairs offered to make an informed decision.
Trading Fees of Exchanges
Direct cryptocurrency transfers from one blockchain address to another are almost free. However, if you use an exchange for currency trading, it will certainly cost you. Trading fees often depend on the frequency with which you trade. Low transaction fees on buying and selling can mean more margin and relatively more profits. Compare the trading fees of various exchanges before settling on one. Choosing the correct exchange can make a huge difference in the world of cryptocurrency trading.