New cryptocurrency exchanges seem to pop up like dandelions in a suburban front lawn. Every day, a new exchange touts it has the lowest prices, fastest trades, and best opportunities. How can you be sure that the exchange you’re on is the right one for your unique needs?
Vetting the Exchanges: What to Look For
Cryptocurrency exchanges offer a place to buy, sell, and trade cryptocurrencies. Bitcoin, the granddaddy coin in the crypto world, is almost always an option on exchanges, with Ethereum and LiteCoin close behind. Exchanges may offer one or dozens of coins to choose among. Most exchanges also enable you to link a bank account, savings account, or credit card to a digital wallet so that you can transfer fiat currency into the exchange and have it ready to snap up the coin of your choice when it reaches a desirable price. Premium exchanges will also be able to issue debit cards which will allow you to convert cryptocurrency to fiat at the point of sale, and withdraw at ATMs.
There are several hallmarks of a good cryptocurrency exchange. Ask the following questions:
- In what jurisdiction does the exchange operate? Some countries offer greater protection through regulation for customers.
- Who owns or manages the exchange? If you can’t identify who or what is behind the exchange, or even tell where they are located, be careful. It’s easier to walk away from a problem if no one can find you online.
- How is their customer service? If you have a problem or question, is your request answered promptly or does it languish in a support queue for days or weeks? When it comes to your money, you want an exchange to be responsive to your needs and concerns.
- Verification process: How extensive is their verification process? Little to no verification requirements should be a red flag.
- Account limits: What are the limits on transactions, trade volume, withdrawals, and deposits? Are they set daily, weekly, or monthly?
- Does it enable you to easily transact business? Some exchanges have holding or waiting periods to process buys or sell when purchasing cryptocurrency with a bank account or credit card. Depending on the exchange, it may be hours or days. Your cryptocurrency price is locked in the moment you click buy or sell, but the actual transaction may not be complete (and money in your wallet) for a while. Is the time period acceptable or do you need it faster?
- What fees does the exchange charge? Exchanges charge a fee for their services. This is typically a percentage of the transaction price. Fees vary. What are you getting for the fee and is it reasonable? If you conduct frequent transactions, a lower fee is better since fees can quickly add up.
- How long has the exchange been in business? This is a tricky question because, in the world of cryptocurrency, few businesses have been around a ‘long’ time. But do look for exchanges with a history of problem-free transactions.
- Pay attention to reputation: Check out message boards, articles, and other information to help you assess the reputation of a potential exchange. Follow the news so you are aware of industry trends, rumors, and breaking news.
- Can you trade the coin you want? Of course, in the end, you want to be able to easily buy and sell the coin of your choice. Bitcoin and Ethereum are so ubiquitous you can almost always find buyers and sellers. Lesser known or newer coins may be trickier to find on an exchange. It may take some time to find an exchange that’s right for your needs.
By Jeanne Grunert – Editorial Director @ iAM Marketing