How do I find the right crypto exchange?
As a good cryptocurrency investor, it is extremely important to get solid crypto exchanges on board for your investments. It is similar to finding the right house bank for all future money transactions, payments, and services.
Which bank offers me a good service for a low cost or fee? Would I rather trust a regional bank or an international bank with an online presence only? Which services do I want to use at all?
Do I want to take out a loan or invest my saved money? Would one bank account be enough for me or would I prefer to manage my liquid capital through multiple accounts?
You will now realize how time-consuming the search for the suitable crypto exchange can be.
To make sure you don't lose track when jumping into the exciting world of cryptocurrencies, we've summarized the most important points for you to compare crypto exchanges:
What criteria are important when comparing crypto exchanges?
- Choice of cryptocurrencies
- Deposit/withdrawal options
- Awareness of the stock exchange
- Transaction fees
- additional services
We at invest-base.com have made it our task to filter out and compare the most popular stock exchanges based on the criteria already mentioned above:
Choice of cryptocurrencies
Before choosing a crypto exchange, you should definitely take a close look at the cryptocurrencies offered there. You will definitely notice that almost all exchanges have Bitcoin and Ethereum listed.
This is mainly because Bitcoin has the largest market capitalization in the crypto market and because Bitcoin has been around for more than a decade. It is therefore also called the mother of all cryptocurrencies.
Ranked second among all coins is the cryptocurrency Ethereum. In the crypto ecosystem, apart from the mother Bitcoin, one always speaks of so-called Altcoins. Altcoins translated means “Alternative Coins”, meaning they are alternatives to the cryptocurrency Bitcoin.
The majority of all exchanges have listed the top 10 coins with the highest market capitalization. However, if you look into the top 100, not every exchange will have one of these altcoins listed.
For this reason, we recommend that if you want to buy or sell cryptocurrencies with small market size away from the top 100 rankings, you should get information from listing sites such aswww.coinmarketcap.com or www.coinpaprika.com.
On these platforms, you can find out all the important information about pretty much any cryptocurrency quickly and clearly. There you can see the currently traded price, market capitalization, news, social media activities and on which exchanges the respective cryptocurrencies are already listed.
If you want to get started as a crypto investor and register with a solid crypto exchange from the very beginning, then be sure to check out our exchange comparison. There, we have compared the most popular crypto exchanges and their listed coins for you.
Deposit and withdrawal options
Every trading exchange in the crypto sector offers its clients a wide variety of deposit and withdrawal options. When looking for the right trading exchange for cryptocurrencies, it is advisable to look at FIAT on- or offramps.
In cryptospace, traditional currencies such as EUR, USD, YEN are always referred to as FIAT currencies. On-ramps or offramps, simply explained, are virtual ramps where buyers or sellers want to exchange their currencies from the traditional financial system into cryptocurrencies.
Most crypto exchanges offer deposit options via SEPA transfer or credit card transfer. Many crypto exchanges also have partnerships with well-known payment services such as Paypal, Skrill, Klarna, etc.
The main differences of these payment services are the duration of the transfer and the fees to be paid. While you have to wait an average of two to three banking days for a SEPA transfer, crypto purchases with credit cards are done in minutes. It should be noted that SEPA transfers are generally offered free of charge, but payments with credit cards are charged with fees of 1-3% on the purchase price.
You have to be especially careful when paying out crypto tokens in FIAT money, as not all crypto exchanges offer payouts in all FIAT currencies such as EUR, YEN or dollars. To make sure you understand what I mean, crypto exchanges based in America only offer payouts in dollars to bank accounts. In such a case, a customer living in the euro zone would rather look for an exchange that offers payouts in the domestic currency EUR, so that no additional costs arise here and payout problems can be avoided in advance.
Awareness of the stock exchange
The level of awareness of a stock exchange is also an important aspect that should be taken into account when choosing a stock exchange. Trading exchanges that have not yet really established themselves in the crypto market are still subject to additional risks (risk of default, lack of liquidity, security).
There are enough trading exchanges that have already made a name for themselves in the crypto scene.
Registering with better-known exchanges offers an investor more security as well as other advantages, which may not be immediately apparent at first glance.
Due to the fact that an exchange enjoys a greater reputation in the crypto sector, the selection of cryptocurrencies on the exchange is also greater. In addition, more service opportunities can be offered to all registered customers, there are more sweepstakes, more promotional promos, and more cooperation deals with other crypto services.
The security of one's capital always plays an important role when investing. Especially when investing in cryptocurrencies, every investor should proceed with caution, as with digital assets a lack of security on an exchange can quickly lead to a total loss without even having been exposed to the price fluctuations.
If one's own crypto assets are managed on the exchange and not in one's own wallet, there are already possible points of error or attack. One should keep in mind that crypto exchanges are really just companies that manage or store customer funds in the form of tokens.
As a customer, it is difficult to assess the security precautions that prevail there. In addition, trading exchanges in the crypto space are popular targets for hackers. If a hacker is successful, all he has to do is transfer the managing crypto assets away, which would be done anonymously in minutes via blockchain technology.
Another point of attack already arises during the registration process. Users of exchanges must register with a private email and password. Lightweight passwords are often used here, and further security measures such as 2-factor authentication are dispensed with for the sake of convenience.
Here, a hacker only needs access to the private mail account to reset the password at the exchange in order to steal the user's exchange balance.
2-factor authentication is a MUST on exchanges and provides additional security besides your own password. Generally, when assigning passwords, you should use longer, not yet used, passwords with special characters, capital letters and numbers. The access data to an exchange should not be stored digitally or physically in paper form in a public place.
„Not your keys, not your coins!“.
This means that if you have your Coins on an exchange, for example, you are no longer the owner of your Coins and thus have the following risks in addition to crypto and blockchain risk:
When you hodl your crypto assets on the exchange, you need to be aware that the crypto exchange owns the private key or seed to your wallet and you only have account access to the platform. You yourself do not hold the key to your crypto assets. If the exchange has maintenance issues or even goes offline, you will no longer be able to access your crypto assets.
Stock market hacks and security issues
Crypto exchanges are key points of attack for hackers and must always be concerned about the security of their own customer funds. At the same time, the customer of an exchange is required to keep his login data safe and to secure access with additional security tools (e.g. 2-factor authentication, strong password).
Disclosure of your data (KYC)
KYC is a term from the traditional financial world and translates as “know your customer”. Many people want to trade cryptocurrencies anonymously, however, registering on a crypto exchange requires the user to provide their personal information to the exchange.
Censorship possibility through stock exchanges
A crypto exchange offers an interface between blockchain and traditional financial system for customers. Customers can trade coins on the exchange. However, you are acting with a company that makes decisions for its customers, employs its own people, and operates for profit. The exchange can decide on deposits or withdrawals, adding and removing cryptocurrencies, and freezing customer accounts at any time.
Change in law by regulator
Since a crypto exchange is a company with employees and a headquarters, it is subject to the laws of a country. The regulator of that country can adjust laws regarding cryptocurrencies at any time, so clients and their exchange funds from certain countries can be regulated or blocked.
The optimal way to store your cryptocurrencies is always in a wallet to which only you (!) have access and are also in possession of the associated private key. Of course, with many different crypto investments, it is a challenge to manage so many different wallets and private keys. Even after purchases and sales, the tokens must always be transferred to one's wallet or exchange via the blockchain. See our blog post on custody in ledger technologies for more information.
Stock exchange transactions are generally divided into two types:
- Deposit or withdrawal in local currency (e.g. EUR, USD, YEN, etc.)
- Deposit or withdraw via the blockchain with cryptocurrencies (e.g. BTC,
ETH, XRP, DFI, etc.)
Depending on the deposit option or the country of origin of an exchange, the deposit or withdrawal fees with FIAT currencies may vary significantly (see the “Deposit or withdrawal options” paragraph above).
Deposits to an exchange with cryptocurrencies are usually charged only the transaction fee of the respective blockchain, which is charged when sending from your outgoing wallet . So, if you want to receive cryptocurrencies from an exchange ,deposits there are usually free of charge.
However, based on the exchange, fees for withdrawals via the blockchain vary widely. In addition, when depositing or withdrawing coins , you must also observe minimum amounts.
In case one has not reached the minimum quantity requirement when making an exchange deposit of Coins, it may happen that the exchange will not credit the balance. In this case, the transaction is stuck in the blockchain and is not credited to the wallet by the exchange.
In such a case, a further transaction mustbe made via the blockchain, so that the coin quantity in total exceeds the requirement of the exchange.
For exchanges, you should also consider the minimum coin amount for blockchain payouts. These can be very high in some cases. If one does not possess the required payout size, either more coinsmust be purchasedor one can switch to a cryptocurrency with a low minimum payout size.
Some crypto exchanges additionally, besides buying, hodling and selling cryptocurrencies, offer other attractive services. These additional services may vary from exchange to exchange. This is mostly related to the level of awareness, number of coins and size of the exchange.
For example, a popular additional service among customers is the cryptocredit card. Some crypto exchanges have collaborations with credit card companies (Visa, Mastercard) to offer this special added value to their customers.
If a customer wants to use this service, he or she is then issued a credit card (usually free of charge). These crypto-credit cards are used to buy products or services in the real world, with the amount deducted from the crypto balance on the exchange in the background.
Many customers would like to generate cash flow, passive income or interest on their invested capital in addition to investing – preferably in an uncomplicated manner and, if possible, packaged into a single investment.
The ever-growing crypto sector DeFi (decentralized finance) lends itself to this. The number of exchanges that DeFi offers its customers as an additional service is constantly increasing. With DeFi, customers can not only buy cryptocurrencies to speculate on price gains, but also get additional coins in the form of interest.
The exchange earns this interest by mining or staking the coins provided by the customer or by lending them to other customers as loans. The return generated as a result is credited to customers as interest. Similar to the concept in the traditional banking system, where customers' savings deposits are passed on to other customers as loans.
Crypto savings plans are also popular, where customers can buy cryptocurrencies with a monthly savings rate. The exchange puts together a package with different cryptocurrencies of a range, ranking or the same characteristics. Customers can invest in these coin packages with a variable amount on a monthly, quarterly, semi-annual basis by means of a debit order through the exchange.
This is especially interesting for long-term investors who do not want to spend a lot of time on the actual investment and automate their purchases.
Know your Customer (KYC for short) simply translates to “know your customer or get to know your customers”. Many are already familiar with the term from the financial or banking sector. With the KYC, financial companies are required to screen their customers based on personal and business data.
The purpose of this review is to identify customers who engage in money laundering and terrorist financing. This means that customers in the financial sector must fully legitimize themselves before using a financial service at an institution.
Here, only an identification document is asked for and the verification is usually processed relatively quickly. During the use of financial services, audits may still occur, for example, if a customer receives irregular money transfers or if large amounts are credited.
Here, financial companies have monitoring programs running in the background and if a customer falls out of the predefined scheme, the customer needs to be able to prove its unscheduled cash flows. These rules affect not only fintechs and banks, but also centralized crypto exchanges.
In contrast, with a decentralized crypto exchange, it is possible to trade without KYC, as here you interact with the cryptocurrencies in a pool on the blockchain during the trading process. Want to know more about decentralized exchanges, check out my blog post on comparing centralized and decentralized exchanges.
As you realized while reading the post, as a cryptocurrency investor, you should definitely think about which exchange you want to be a customer of. It is often necessary to register with several exchanges in order to meet one's own needs (such as the coin or service offering).
When deciding on the right stock exchange(s), many factors play an important role, such as the fee schedule, deposit and withdrawal options, awareness of the stock exchange, security of one's own capital, possible use of services and, of course, trust in the respective stock exchange.
I would like to highlight and emphasize the topic of security and trust. Exchanges offer a buyer or seller of cryptocurrencies many options, and security should be the top priority.
Even when holding or hodling cryptocurrencies on exchanges, the trust must be there. Always keep in mind that you are leaving your own capital (i.e. your private key to your wallet) to the exchange if you want to hold or store your assets there.
The spirit of cryptocurrencies is to cut out middlemen, institutions, high authorities and return the power and ownership over digital money to the holders.
If you follow all the points discussed, you will save time, money and avoid unnecessary mistakes when building your assets. I wish you much success!