The cryptocurrency exchange is the main hub of activity in the blockchain industry. All activities involving the circulation, purchase, conversion and sale of tokens and coins pass through such venues, centralized or decentralized. However, the abundance of cryptocurrency exchanges on the market makes it almost impossible to select not only the best one, but even find a suitable one that would fit all the requirements of each individual trader.
Many early cryptocurrency market participants who had accumulated some of the earliest cryptocurrencies eventually realized that demand for them is growing among the rapidly expanding blockchain sector and decided that it was time to start capitalizing on the new phenomenon. The desire to sell Bitcoin led to the emergence of the first crypto exchanges. Others willing to buy Bitcoin started joining the earliest, primitive exchange platforms, injecting liquidity into the new market. Such a peer-to-peer format of interaction eventually led to the development of the modern crypto trading platform.
But as time progressed and the entire sector developed, the digital assets exchange outgrew the primitive functionality of simple buying and purchasing, evolving into a holistic trading platform offering a vast variety of instruments that often have nothing to do with exchange operations. With market participants being spoiled for choice, it becomes clear that a set of criteria must be applied before selecting the best crypto exchange.
Selecting the Best Crypto Exchange
Crypto trading requires a specific set of tools that have been largely copied from trading and exchange platforms found on the stock markets of the traditional financial sector. Since stock exchanges have been around for ages, it was not so difficult for the developers of crypto trading platforms to realize that the instruments applied to fiat can be translated to digital currencies. Considering the fact that digital currencies are highly correlated with fiat dynamics and the same laws of economics apply, mimicking digital currency trading to stock trading was the logical conclusion.
But for selecting the best one suitable to each individual trader, one must examine multiple exchanges based on factors that will determine the profitability of future trading operations.
The first factor to take into account is the safety measures of the exchange. The innumerable instances of hacks and breaches in decentralized space highlight the fact that there is no decentralization to speak of at all and single-access points of failure on trading hubs, DeFi platforms and other services are the result of their reliance on human error. The flaws that hackers exploit for gaining access to users’ funds are due to the fact that such venues are centralized and employ custodial storage of funds. As such, when selecting a venue for crypto operations, users must examine their previous history for possible breaches or failures in terms of coding. The security of the exchange will determine the level of risk the user will bear if they decide to entrust their funds to its internal storage. And since the largest players in the space employ custodial storage, retaining users’ private keys, thus rendering them vulnerable to external threats.
The next factor to consider is the availability of gateways. Bank transfer options are still the most straightforward way of purchasing digital currencies. Bitcoin exchange relies on the price of the coin in relation to the US Dollar, thus directly impacting the user’s bank account. Most large exchanges have established channels, off-ramps and on-ramps with VISA and MasterCard, as well as local gateways, or digital ones like PayPal. The choice of exchange must depend on the means the user considers most convenient for their crypto purchase and future cash out operations.
Convenience comes next as a decisive factor. Every exchange has its own interface, cluttered or streamlined. Given the fact that most new entrants into blockchain space will be unfamiliar with trading, the user-oriented and comprehensive nature of the trading venue is vital for retaining users and slowly easing them into the many instruments necessary for gradually expanding crypto trading operations. If the service is tailored for professional traders, its interface will contain numerous charts for technical analysis, exploiting the fact that such users are experienced and used to such an array of information. New users will find navigating cluttered interfaces challenging. Convenience also relates to the overall user experience, which can be illustrated by the number of steps necessary for performing an operation, or the simplistic and intuitive nature of the design and dashboard.
Commissions are not less important when selecting a crypto exchange. Every trading platform charges a fee on each order for facilitating the process and hosting it. Though seemingly negligible at first glance, the 1, 2 or 3 percentage fees off of every trade eventually pile up into a considerable sum. And since professional traders are seeking profits, it is in their interests to opt for platforms that charge the lowest commissions in conjunction with the most favorable exchange rates.
Users must also consider the presence of a support service, the adaptation to local realities. Though the majority of the largest biggest trading platforms have long localized their websites to multiple countries with translated interfaces, some retain the English-centric approach. This poses a potential inconvenience for traders from countries that are not supported on a specific trading venue. The customer questions ansering service and its promptness in responding is just as vital. Since situations of transaction lag or even hacks may arise in the course of trading, users must have the comfort of knowing that any issues they address to the support service will be resolved swiftly and in their favor.
Lastly, the presence of a comprehensive and informative learning section is helpful. Having instant access to guides, explanatory materials and FAQs greatly enhances users’ adoption of crypto assets on the exchange and retains their attention. If users are forced to seek knowledge and answers on external channels, the exchange will likely lose its appeal as a user-oriented venue. It is also likely that users may migrate to another exchange that offers educational materials on the spot.
The place where crypto users trade is a lot more than just a venue for conducting operations. The majority of the largest players of the market provide a wide range of instruments, including launchpads, native wallets, NFT storage and display sections, even entire ecosystems operated by internal tokens. Such versatility makes crypto exchanges hubs of blockchain industry activity, but their abundance also poses a challenge for users. Selecting the best crypto exchange is a matter of taste and preference, rather than a straight-cut list of top contenders.