How to Pick the Right Cryptocurrency Exchange
There are currently more than 500 cryptocurrency exchanges in operation, many of which offer an impressive range of features and excellent tools for traders.
But with so much choice, it’s easy to be overwhelmed with options, which can lead to choosing an exchange that isn’t as good as it first appears on the surface.
Fortunately, with a few quick tests, you can find the right platform for you without having to sift through the duds.
A Word on Security
Before narrowing down your platform of choice based on the features you find most desirable, it’s important to understand the do’s and don’ts of cryptocurrency exchange security. After all, cryptocurrency exchanges are there to help you turn a profit through trading—make sure they also have the right security practices in place to keep your funds safe.
The first thing you’ll want to look out for is cold storage. Most modern cryptocurrency exchanges now keep the majority of user funds in a secure offline wallet. Beyond this, you’ll also want to ensure the exchange offers at least one two-factor authentication method, ensuring your account is kept secure.
Once an exchange has passed these basic tests, it’s safe to include them in your shortlist
The cryptocurrency exchange industry is growing rapidly, which as one might expect, has attracted the attention of regulators and lawmakers, who act to ensure cryptocurrency exchanges meet minimum standards of security and engage in fair and ethical business behavior.
The easiest way to see if a platform is compliant with regulations is to check whether it is regulated or if it has a license to operate. For the most part, exchanges will have this information visible on their website, either on the landing page or in its help center/FAQ. If you can’t find any information about its regulatory status, then odds are it either doesn’t comply with regulations or is currently seeking regulatory approval.
For example, the popular cryptocurrency trading platform Norwegian Block Exchange (NBX) clearly describes that it is regulated by the Financial Supervisory Authority of Norway (Finanstilsynet). As such, you can be sure it adheres to the strict rules set out by Finanstilsynet, ensuring traders are protected.
Unfortunately, a large number of exchanges act as faceless entities that are not governed by regulations, meaning they may be operating with dubious business practices. Trading at regulated platforms helps ensure both your funds and data are well-protected.
Desirable Trading Pairs
Once you’ve determined whether the platform you intend to trade at is compliant or not, it’s then time to narrow down the search to exchanges that offer the trading pairs that you plan to trade. This is particularly important if you are looking to trade uncommon assets or want to trade crypto against fiat—since not all exchanges will offer this feature.
Only a select handful of exchanges offer fiat trading options, and most of these only support the most commonly-used fiat currencies, such as the US dollar (USD), Chinese yuan (CNY), and euro (EUR). Other exchanges may support smaller fiat currencies, such as the Norwegian krone (NOK), British pound sterling (GBP), and Japanese yen (JPY), but these are less common.
The simplest way to find out which exchanges feature your desired trading pair is by using one of the various cryptocurrency exchange tracking platforms, such as CoinGecko or CoinMarketCap.
A list of Ethereum (ETH) markets, as shown by CoinGecko.
On these platforms, you will be able to select from the list of available cryptocurrencies and find a near-complete list of exchange platforms that support the asset, and the range of trading pairs they offer. Here, you’ll be able to find the list of exchanges that offer the trading pair you require.
Like any other industry, the cryptocurrency exchange industry is fiercely competitive, and exchanges are always looking for ways to one-up the competition to bring in more traders and keeping their current customers happy.
One of the most common ways this is achieved is through reward systems, which see customers earn either cashback, bonuses, or other rewards by trading on the platform or inviting users. Exchanges can vary considerably in the generosity of these programs, so if you’re a high volume or high-frequency trader, it might be worth factoring these rewards into your exchange choice.
Image: Norwegian Reward
Platforms like Binance and Bitfinex offer volume-based fee discounts for large traders, whereas OKEx and Coinbase offer a small cash bonus for referring new users. NBX goes one step further than most and offers Norwegian Cashpoints as a reward for trading—which can be redeemed for flights with Norwegian Airlines.