What is a Cryptocurrency Exchange?
If you want to get into cryptocurrencies, then you’ll need to be familiar with exchanges. In general, exchanges are where you will buy, sell, lend and trade cryptocurrencies for other cryptocurrencies or for fiat currencies.
In this Cryptocurrency Exchange Guide, we’ll be covering three major types
- Trading Platforms
- Peer-to-Peer Platforms
- Brokerage Services
Different exchanges have different functions, tools, and services. They offer varying degrees of safety and may or may not require identity verification.
What types of Exchanges are there?
Cryptocurrency Exchange Trading Platforms
If you’re interested in trading, then the platforms will be your go-to. Most will require identity verification and maybe a bit more, depending on where you live. These operate like a Forex platform. Generally, they are free to join, but you will be charged a fee-making deposit, trades, and withdrawals.
Trading platforms connect buyers and sellers and usually offer a variety of tools and resources for trading and analysis. You can place buy and sell orders facilitated by the exchange trading platform. Most platforms will charge a small fee for this service.
This may present some challenges if you are new to trading and/or cryptocurrencies. Because they do so much more than sell Bitcoin, it can be overwhelming at first. But, if you are intent on being a crypto-trader, this is the best place and, usually, a MUCH cheaper place to buy coins! So, if you’re new, we recommend finding a quality crypto Trading and Analysis course with good support from instructors. It will not only help you make sense of all the options, but it will also greatly improve the probability of making profits.
Keep in mind that when selling, you are creating a sell order. It may take some time before your coin sells. You are not selling to the exchange. You are putting your coin up for sale. It will only sell when a buyer buys it.
Direct Peer-to-Peer (P2P) Trading
Where a trading platform facilitates the trading of a coin, Direct P2P platforms allow individuals to transact directly. You’ll meet with others in a ‘virtual marketplace’ where you can make individual agreements to exchange your cryptocurrencies.
The market does NOT determine prices. Prices are set and agreed upon directly b the individuals involved. This is not recommended for anyone new to cryptocurrencies. You’ll want to be very familiar with the market before getting started here.
Also, consider that the P2P virtual market comes with much more risk. You’ll be making individually negotiated deals with people you do not know.
Brokers or brokerage platforms
Brokerage services are the easiest and usually the safest way to buy cryptocurrencies, but it comes with a premium price. Brokers set the price of the coins, which is usually higher than the market price.
The benefit is that it is usually safer, easier, and faster than through a trading exchange. However, you’ll need to ensure you’re dealing with a reputable brokerage service and that they aren’t overcharging based on current market rates.
A brokerage service may be best for you if you’re just interested in quickly, easily, and safely buying cryptocurrencies for storage and shopping.
Selecting an Exchange
How do I pick the best cryptocurrency exchange?
There are a few things to keep in mind when choosing an exchange. The first step was to decide what type of exchange. We covered this above.
Now that you’ve decided whether to use a trading platform, a P2P virtual market or a broker, you’ll want to consider the following.
- Where do you live and what exchanges support your country?
Not all exchanges will be available in your country. So, before moving forward, first narrow your options by your location.
- How do you intend to pay for your cryptocurrency?
Different exchanges accept different payment methods. Some only sell the coin for coin. Some only accept credit cards and some work with banks. You’ll want to ensure that you are willing and able to make payment by a method they accept.
- How much will it cost you?
Different exchanges have different service fees. Generally, fees may be applied to deposits, transactions, and withdrawals. The fees charged and how high the fees are can greatly impact your total costs.
- Is there going to be an exchange rate applied?
Even if you find an exchange with low fees, you’ll want to check their exchange rates. Some will offer lower fees but higher exchange rates. This is usually a “hidden” fee. Users see low fees and buy, only to get hit with an absurd exchange rate.
- How many cryptocurrencies do you want to buy?
If you’re new and starting conservatively, this probably won’t mean as much. However, you’ll want to check the exchange Buy Limits to move larger funds. Buying limits depend on the payment method and the level of identity verification. Higher levels of identity verification require more personal information (usually).
- Is the exchange trustworthy?
Check the exchange’s history. How long have they been around? Who are they? What is the general opinion of the crypto community? Are they trustworthy?
Assuming something will go wrong because it might, what sort of support is offered? What do others have to say about their support? Do they reply with satisfactory responses? And so on…
There are a lot of cryptocurrency exchanges. The following exchanges have good overall reputations and have been recommended within the community.
We’ll list the Top Trading & Brokerage Platforms. Some of the Exchanges offer both. They have listed as such based on their main and/or most popular offering.
Trading and Brokerage Exchange Platforms
CEX.IO was started in 2013 and is a UK exchange registered in the United States (FinCEN), Europe (ICO) and UK (ICO).
Cex.io transactions are FOK (Fill-or-Kill). With FOK, you buy a specific amount of coin for an exact price. This is a unique feature of CEX.IO. They have 4 verification levels with 4 corresponding transaction limits.
- Basic: Buy limit = $500 per day and $2000 per month.
- Verified: Buy limit = $10,000 per day and $100,000 per month.
- Verified plus and corporate: No limits.
The certainty with FOK direct purchases brings a higher than-usual transaction fee of up to 7%. Other trades have a 0.2% fee. Bank account deposits are free but credit card adds a 3.9% + 0.25.
- Great reputation
- Fast and safe transactions.
- Price certainty.
- Strong security with 2-factor authentication.
- High buying limits available
- Verification requirements.
- High transaction fees.
Coinmama is a cryptocurrency exchange out of Israel. Available in 215+ countries and 24 U.S states. Accepts Visa or Mastercard credit and debit card payments for Bitcoin.
Coinmama fees can be upwards of 8% of your transaction amount. Plus, another 5% added for debit and credit transactions.
They have a great reputation. Transactions are very fast.
- Accept Credit and Debit Card payments.
- A very easy and safe way to buy Bitcoins and Ethereum.
- Terrific design and user interface.
- You cannot sell your coins.
- Relatively high transaction fees.
Changelly is great for altcoins. They support a variety of cryptocurrencies, including Bitcoin, Litecoin, Bytecoin, Monero, Quazarcoin, Digitalnote, Dash, Ethereum, NuBits and many more…
This is a very popular platform and is accessible almost worldwide. They also accept Visa and Mastercard.
- Fast transactions.
- Buy with cards & fiat currencies.
- Low transaction fees.
- Supports numerous altcoins.
- High liquidity and trading limits.
- Slow transactions (about 5-30 minutes).
Coinbase is probably the best known and certainly one of the largest crypto companies around. They are based in San Francisco and available in 33+ countries worldwide. They accept a variety of payment options including wire transfer, debit and credit cards, and PayPal.
Coinbase has a standard charge of 3.5% + extra fees depending on the method of payment and your location. They require identity verification and it is rumored that the monitor transaction spending even off the platform.
- Several payment, deposit and withdrawal options.
- Extremely popular and very trusted company.
- Offers both web & mobile wallets use.
- High buying and liquidity limits.
- Don’t seem to value user privacy or offer any real anonymity.
Cryptocurrency exchanges are an essential part of the crypto-world. Becoming familiar with them is a must.
If you’re just looking to buy and hold or retail shop you’re probably good with Coinmama, Coinbase or another trusted broker.
If you want to get a little deeper and start trading you have a variety of options. But, you should take the time to learn about cryptocurrency trading first. Learn to trade smart, safe and profitably!