Even if you do not intend to become a professional trader, it is a good idea to understand the basic terminology of the crypto market. There are many nuances related to the choice of the site and risks – let’s analyze them in detail.
On cryptocurrency exchanges you can earn much more than on the stock or currency market, but the risk of losing the invested money is also greater.
Define your goals
What do you want to do on the exchange – trading or investing?
Crypto exchanges are divided into centralized and decentralized exchanges.
A centralized exchange operates as an online service and controls the personal accounts of all users, often there is a requirement for identity verification. Centralized exchanges have obligations to traders and investors to pay profits on transactions with trading deposit (trading deposit is a certain amount of money that a trader deposits into his own trading account), but exchanges also charge commission for transactions.
The most well-known and largest centralized crypto exchanges that traders who have decided to get into crypto trading can look at are Binance and FTX.
Decentralized exchanges are technical platforms operating on the blockchain, they only allow direct transactions between participants. In this case, your personal data and assets are not stored anywhere and are not tied to anything. Some of the most popular in the crypto world are Uniswap, PancakeSwap, and Compound.
Decentralized crypto exchanges have no controlling and verifying body in the form of administration. And here there is a higher risk to run into fraudsters: to buy a fake smart contract – even bitcoin is being counterfeited (smart contract is a computer protocol that allows to conduct transactions and controls their execution with the help of mathematical algorithms), or to invest in a dubious coin, which may be a fake project. In both cases, the investor loses money and “drains” the trading deposit.
However, here you can find a new interesting cryptoasset, which after some time may take off and will be recognized by centralized platforms, buy it at the start and earn good money.
For trading, especially for novice traders, you can pay attention to centralized platforms, and for investments you can consider both centralized and decentralized.
Important criteria for choosing a crypto exchange
When choosing an exchange for cryptocurrency trading, you need to consider the following factors:
The size of the exchange
The size of the exchange directly affects its reliability: the larger the exchange in terms of trading volume, the more users trading on it, the more stable it is. The financial stability of an exchange determines its ability to fulfill its deposit payment obligations to you. The financial stability of an exchange is influenced by several factors: the number of registered users, the amount of funds deposited by clients on the exchange, the total trading turnover, and how long the exchange has been operating on the market.
If the exchange takes a long time to pay out deposits (for example, more than a day), it may indicate financial instability of the exchange. Large, stable exchanges withdraw funds, as a rule, almost instantly.
Jurisdiction of the exchange
The jurisdiction of a crypto exchange is formally determined by the state in which the servers of the exchange’s website are located.
What coins are traded on this exchange
Find out on the exchange’s website whether it provides the opportunity to trade the coins (koins, cryptocurrencies) you are interested in. The first, main and most expensive cryptocurrency today is bitcoin. The other coins are called altcoins. In second place after bitcoin in terms of liquidity is Ethereum. Stablecoins are cryptocurrencies, the value of which is tied to one or another fiat currency (that is, conventional currency – dollar or euro) and to other crypto-assets. And also to commodities that are traded on an exchange, such as precious metals and gas: one such stablecoin is Tiberius, backed by the prices of seven precious metals.