If you have decided to purchase cryptocurrency, you can’t just go get it from a bank. You would first have to pick an exchange, register to create an account, and then exchange your fiat currency for the cryptocurrency of your choice. In some cases, you can’t even purchase directly with dollars; you first have to exchange it for a coin like ETH to then be able to make a trade on an exchange. Read on to learn more about cryptocurrency exchange for beginners.
What Is a Cryptocurrency Exchange?
Cryptocurrency exchanges are platforms where users can buy and sell virtual currencies, but they also serve as a place to store these currencies and a means of discovering market prices. This is usually the first point of call for crypto newbies.
Users used to have to mine for cryptocurrency or arrange for transactions through several different online and offline channels if they wanted to obtain crypto. These days, you can choose from hundreds of different cryptocurrency exchanges, each of which offers its own collection of digital assets, fees, and security measures. However, remember that certain platforms aren’t geared for newbies and can be quite overwhelming for anyone who isn’t already well-versed in trading. Finding an exchange and digital asset that work for your budget, risk tolerance, and other factors is all up to you.
Types of Cryptocurrency Exchanges
If you’re interested in stepping into the world of cryptocurrency trading, you’ll need to understand the different types of crypto exchanges that exist.
The most popular form of cryptocurrency exchange is the centralized exchange, which relies on a trusted third party to facilitate trades. Users have faith in this intermediary because of the security, monitoring, and partner discovery services it provides. Since cryptocurrencies are often thought to be decentralized and do not require any form of central authority, this idea may be confusing to some investors.
Decentralized cryptocurrency exchanges use distributed ledger technology (Blockchain) to eliminate the need for a trusted third party. Peer-to-peer exchanges utilizing smart contracts are a relatively novel method of exchanging cash without the involvement of a central authority.
Popular Crypto Exchanges
More than 6,500 different cryptocurrencies and more than 300 different platforms exist. It is necessary to find the finest crypto platform for beginners before making a final decision. Key cryptocurrency exchanges include Coinbase, Kraken, Gemini, and Binance.
Features of a Good Cryptocurrency Exchange
Upon doing your research, you can decide which crypto exchange works best for you and is suited to your trading requirements, but here are the major features to look out for:
The security of an exchange is a significant selling point, so you would want to ensure that you’re using a trustworthy platform to store your assets. In the event of theft or hacking, several services will insure your digital currency. Think about the availability of additional safeguards, such as a two-factor authentication system, when deciding on an exchange.
Some may be swayed by the choice of cheaper costs, but it’s crucial to know exactly what those fees are covering and how they’re being assessed. There are occasions when paying a larger charge will give you greater protection and simplify the process of converting cryptocurrency. You may find that the platform charging the higher cost is better in every way.
Liquidity is an often-overlooked feature of cryptocurrency exchanges. The greatest way to maximize the value of your Bitcoin investment is to be able to sell it when you want to. This requires liquidity, which tends to be higher on the better-known cryptocurrency exchanges.
Other Factors to Consider
Other factors that can point you in the right direction include ensuring that the exchange is accessible from your location and that it offers the coins and storage options you require. This guide should help you locate the ideal platform for you and start you on your trading journey.