Cryptocurrency Exchange Overview
Let’s dig a little deeper into the cryptocurrency exchange overview. There are an ever increasing amount of cryptocurrency exchanges appearing every year as new players recognise a global market which is largely untapped and as some established players post record profits: Binance is More Profitable than Germany’s Biggest Bank. A cryptocurrency exchange allows the exchange of one type of currency for cryptocurrency.
These exchanges I use personally based on my needs and location. Yours will most likely differ depending on your requirements and where you are in the world. As always, do your own research! (DYOR)
Crypto to Crypto Exchanges
The following exchanges allow only the trading of crypto to another crypto and not into fiat (paper) money. The status of these exchanges may of course change since the published date of this article.
The benefit of crypto to crypto exchanges is simply in avoiding heavy government regulation and censorship. Governments do not have jurisdiction(control) over decentralised currencies and find it harder to influence exchanges which do not trade directly in their centralised national currencies.
Binance is the largest crypto to crypto exchange by volume and profitability. Their site is easy to use and despite a huge amount of new requests to use their service, I was able to signup relatively quickly compared to other exchanges at the beginning of 2018. CEO Changpen Zhao runs a great company and has remained (as far as I can tell) transparent about several issues in the past. A good source to follow on twitter.
Bittrex in general has had a good reputation so far. I use them as my secondary exchange to avoid having all of my coins on one exchange and therefore spreading the risk. Their interface is simple but fairly easy to use.
Bitmex is a more complex exchange which trades derivatives. This is typically for day and experienced traders. All contracts are bought and sold in bitcoin. Some features include leveraged trading and position funding. Trade in small amounts to begin with on this exchange, there is a lot to learn. You have been warned!
Kucoin is another Asian based exchange similar to Binance which lists some altcoins not available elsewhere.
Fiat to Crypto Exchanges
Coinbase is a notable American exchange but it’s important to find a local exchange that will support your national currency
Luno is my primary exchange when it comes to exchanging crypto into South African Rands and visa versa. It’s not the best exchange out there and their spread between the bid and ask can sometimes be quite high. That being said, their service is quite good and I haven’t had any problems with transfers so far.
Decentralised Exchanges (DEX)
The major problem with the exchanges listed above is of course that they are centralised. If there is a bad actor in the organisation, a disgruntled employee or an executive who has an opportunity to run off with your coins then this presents a big risk. A number of decentralised exchanges exist such as Bisq. The obvious benefit here is no central point of control, they cannot be censored by governments or organisations.
The drawback so far is low liquidity in many of them since they not presently as well developed as centralised ones. Also, there aren’t many options if you make a mistake. No central customer service to return funds.
A Note on Security
2 Factor Authentication
2 Factor authentication provides a link between your phone and a secure online site like the exchanges listed above. In situations where your password has been stolen a hacker would still not be able to gain access to your account because they would need your phone as well. Google provides an authenticator app which will generate a 6 number password every 15 seconds for a specific site like Binance or Luno. The site will require your personal password and this number generated password before allowing access to anyone.
Users should avoid any and all requests asking for money (usually in the form of bitcoin or ether) in return for larger sums of currency presented as giveaways. These are almost always scams and are quite prevalent on social media platforms, particularly twitter.
Storing Your Coins
As mentioned in my previous article on digital currency storage to take some security precautions like only storing coins on exchanges when necessary and then distributing them across several exchanges to spread your risk.
What is your favourite exchange and what has your experience so far been trading in crypto?