Which Crypto Exchange Is Right for You?

Emogi Coin
Nov 4 · 3 min read

If you are going to participate in the cryptocurrency economy, chances are you’ll need to select an exchange on which to buy and sell coins. After all, exchanges comprise “ 90% of all value sent by services,” according to Chainalysis. But not all exchanges are the same, and the best one for you will depend on the type of user you are.

Source: Kraken.com

Retail Exchange

Perhaps the most common type of exchange you will run into is a retail exchange. These trading platforms are centralized and can support all types of users, from novice to sophisticated traders. Some of them have also integrated features that are conducive to institutional investors, such as custodying of assets, something that U.S.-based Coinbase offers.

Something to look out for when selecting a retail exchange is whether or not it provides a fiat on-ramp and off-ramp. This makes it possible to deposit funds in your local currency, such as the U.S. dollar, and withdraw funds straight to your bank account. While buying and selling crypto on these exchanges is simple by design, regulators are watching their every step for know-your-customer and anti-money laundering compliance. In addition to Coinbase, a couple of the most popular crypto exchanges that support fiat on-ramps and off-ramps are Bitstamp and Kraken.

Peer to Peer Platforms

A key difference between an exchange and a peer-to-peer platform is how trades are handled. While centralized exchanges handle trades “centrally in an order book,” P2P platforms support “trades between individuals,” as Chainalysis explains. On P2P platforms, trades are negotiated directly between the buyer and seller. Users generally post the amount of crypto they are looking to purchase or offload, and then the individual interested in taking the other side of that transaction can respond, after which time you can negotiate the terms directly.

According to Cryptolinks, fees tend to be much lower on P2P exchanges vs. retail exchanges and can range anywhere from zero to 0.7%. Chainalysis points out that P2P exchanges are especially popular in jurisdictions without robust banking infrastructure, including Latin America and Africa, as well as in troubled markets such as Hong Kong.

Decentralized Exchange (DEX)

Decentralized exchanges are widely expected to be the future of crypto. DEXs provide the technology to facilitate trades directly from one wallet to another. There are pros and cons.

DEXs tend to be more sophisticated than centralized crypto exchanges and therefore can be difficult for a beginner investor to navigate. If you happen to send funds to the wrong wallet, you’re pretty much up a creek without a paddle. Also, DEXs are still getting their footing and the transactions tend to be slower than they would on a centralized trading platform.

The beauty of a DEX, however, is that since they don’t hold your funds, there is no risk of losing money to a hack. You control your own wallet and private keys, and transactions can be extremely private.

Crypto exchanges continue to evolve, with major companies such as Binance recently expanding into derivatives trading and Kraken having launched its pro mobile trading app on iOS and Android. So as you evolve as a crypto investor, keep in mind that the exchanges continue to do the same. (CJ)