Shortlisting some of the best cryptocurrency exchanges in 2021 is easy because there are so many of them, but finding the exchange you desire is a difficult task. Cryptocurrency exchanges are central to the thriving of cryptoverse because they enable the digital currencies to flow into many more hands.
It must be frustrating looking for a preferred exchange because that means signing up to each one and testing it out. Fortunately, we did that job for you, and this guide will shortlist a few exchanges that can help you to identify the one that suits your needs.
Our Top Picks of The Best Cryptocurrency Exchanges
Days of crawling the internet and testing out different cryptocurrency exchanges yielded a handful of interesting candidates. Here is a list of some of the best cryptocurrency exchanges.
What Is the Purpose of a Cryptocurrency Exchange?
A cryptocurrency exchange is a platform that enables users to trade fiat money for digital currency and vice-versa. This platform makes purchasing Bitcoin and other altcoins easy by gathering together a large pool of crypto enthusiasts. The trading platforms also offer a secure environment in which you can access various cryptocurrency trading pairs at affordable trading fees.
The working of a crypto exchange depends on whether it is centralised or decentralised. A centralised exchange performs functions such as monitoring transactions and securing crypto assets on behalf of traders. Contrariwise, a decentralised cryptocurrency exchange–popularly known by the acronym DEX does not play a part in transactions. Instead, trading is on a peer-to-peer basis, and the transfer of funds and crypto-assets goes through an escrow system.
Sometimes exchanges are split into smaller sub-categories such as fiat versus pure crypto exchanges, instant and derivative exchanges. Fiat crypto exchange is the one that accepts both fiat currency and digital assets as a payment medium, while a pure crypto exchange only accepts digital assets. An instant exchange supports instant buying/selling of crypto, and a derivative exchange offers traders access to crypto derivatives and margin trading.
Users need to first open an account before using an exchange. The registration process is often simple and fast, where you will be required to provide the necessary identification details to comply with know-your-customer (KYC) guidelines. KYC is essential in that it helps the exchange to keep bad actors away from the trading platform. Some exchanges skip identification details because of anonymity, but they offer less security in return and transacting on such exchanges can expose a user to fraud.
How To Find The Best Cryptocurrency Exchange
Check Regulations and Security of Cryptocurrency Exchange
Always check the regulatory and security status of the exchange before account registration. This is critical because a regulated exchange with necessary security systems will assure safety for your funds, digital assets and personal information. Also, a business that holds appropriate licenses gives you confidence that you are involved in a legitimate venture.
Check Fees of Cryptocurrency Exchange
Each cryptocurrency exchange maintains a unique fee structure based on the range and quality of services they provide. You should always check the fees to make sure that you are getting the best deal. You might be surprised to find an exchange with low fees and with excellent services.
Additional Features of Cryptocurrency Exchange
Crypto exchanges have unique features aimed at attracting more customers. Some exchanges such as Binance come with an academy for educating users. Others offer users extra services such as cryptocurrency staking and asset conversion. An affiliate program is another unique feature that earns users some extra income on the side.
Is a Cryptocurrency Exchange Trustworthy?
A cryptocurrency exchange puts you in touch with people like you who want to buy/sell digital assets. An exchange functions like a market place connecting people who wish to exchange cryptocurrencies. Additionally, the exchange platform provides better security than anywhere else through multi-level security protocols and insurance protection.
A legitimate crypto exchange has licenses from reputable regulators. Also, the exchange observes finance-related regulations such as AML (Anti-Money Laundering) and KYC (Know Your Customer). Such an entity easily earns your trust because you will never worry about the security of your assets, funds and personal information.
Some exchanges go the extra mile to offer custody services, which entails safe storage of your coins. The exchanges either use a cold or hot crypto wallet or a combination of both to ensure the security of users’ funds. Others have specially built vaults for providing additional security.
Most exchanges use two-factor authentication and reputable exchanges secure on-platform transactions using SSL protocols. Users must evaluate an exchange on these features to select the most secure and safe option.
Should You Keep Your Crypto on an Exchange or Transfer to a Wallet?
Cryptocurrency exchanges offer a range of services. Some simply provide buying and selling opportunities, and others go further by providing access to the crypto derivatives market for buying/selling trading pairs. Traders need access to the crypto assets on the go. Such traders might want to store their coins on the exchange.
Note that not all exchanges offer secure crypto storage services. This is one of the features that distinguish the big players from new platforms. The big players support crypto storage also because they offer unique services such as staking. Staking entails locking your crypto assets in an exchange’s wallet in exchange for regular payments.
If you intend to hold (or HODL in cryptoverse parlance) your coins for value investing, storing them in a dedicated wallet is the better option. After all, you will not need regular access to the assets; why not put them away in a safer place?
Dedicated wallets keep your digital currency in a variety of ways, depending on your choice. You could choose a hot wallet, which is one that is accessible over the internet. The problem with such a wallet is the vulnerability to hackers’ prying eyes. The other wallet choice is a cold wallet, which is inaccessible via the internet.
Wallets can also be hardware or software wallets. Software wallets are programmes that can be downloaded onto a computer or a smartphone. Hardware wallets are physical devices resembling a USB drive that is more secure and allow portable storage of your digital currencies.
The best and perhaps safest iteration of a cold wallet is the paper wallet. A paper wallet is simply a plain paper on which a QR code carrying wallet information is printed.
A cryptocurrency exchange is probably the easiest avenue for buying and selling digital assets. The trading platforms maintain high standards of security for the safety of your coins and transactions. Additionally, some platforms offer margin trading services and staking to enable its users to earn additional revenue.
You might want to consider signing up for a crypto exchange account because of the large pool of users already using them. Getting access to a platform provides you with instant transactions. Most of the exchanges offer unrivalled convenience by providing access to the platform on any device.
Frequently Asked Questions
A cryptocurrency exchange brings together a large pool of crypto buyers and sellers. The large pool of users avails unrivalled liquidity for almost instant transactions.
Cryptocurrency exchanges have various security measures in place to ensure the safety and security of your coins. Some exchanges store the digital assets in cold wallets for additional security.
A cryptocurrency exchange allows users to exchange fiat money into a cryptocurrency or from one cryptocurrency to another. Users can also exchange cryptocurrencies for fiat money. The exchange charges fees and commissions for its services.
Transferring digital currencies from one exchange to another is as easy as transferring the assets from one wallet to another address. However, the transaction will incur a network fee and withdrawal fee (if you are withdrawing the digital assets).
You can trust a cryptocurrency exchange if it provides fast and safe transactions at affordable fees. You should also trust an exchange because it protects user accounts using various mechanisms, including two-factor authentication (2FA), HTTPS and SSL protocols, and adherence to AML and KYC guidelines.
Your email is the primary identification for your account, especially for the exchanges that offer anonymous trading services. Also, the exchanges communicate crucial information and updates via email.
Network fees are incurred each time digital currencies move through a blockchain network. The blockchain network takes the fee from the transaction amount and pays it to peers whose work maintains the network's ledger (often called miners).
Yes, this is a feature you can find on many cryptocurrency exchanges. For it to happen, you must link a bank account to your exchange account.