Don’t Throw Your Money At Just Any Crypto Exchange: Follow These 5 Steps

Published in

FinanceX

5 min readOct 25, 2018

In the cryptosphere, the trading of cryptocurrencies can be considered an artform. The trader, an artist, and the exchange, the performing stage.

Highly educated and skilled traders, like elite artists of other disciplines, commit full-time to their passion often making profits in the most unlikely situations. The rest of us? There’s a wide spectrum of cryptotraders from the long-term investor that has almost forgotten to the enthusiastic yet erratic small time trader trying to make profits here and there.

Regardless of where you are on the spectrum, there are undeniable qualities in a cryptoexchange that all traders ideally want. This article covers the 5 most important features of a cryptoexchange every trader should consider before depositing money and beginning the journey.

1) Safety and Security

Easily the most important features of any exchange are safety and security. I’m sure you’ve heard the horror stories. Large scale hacks have led to many sleepless nights for affected investors as more than $1 billion has been stolen in 2018 alone.

Before choosing your “performing stage,” exercise due diligence. Carefully study the company, their activity, how they started and what their vision is. Do your best to background check the founding and development team: What are their expertise? Do they have a shady past? Are they transparent? Analyzing the company and the team is arguably just as important as the security features on the platform.

Next, check the basic security features on the exchange: 2FA (Two-Factor Authentication), cold wallet storage, KYC (Know Your Customer), and notifications of logins to your account. These are essential basic features, but many crypto exchanges still don’t use all of them. Traders need to be careful with this.

2) Fees

When it comes to transactions, fees are almost unavoidable. Banks often charge ridiculous fees for unheard of immoral reasons that was in no way transparent to the customer. Unfortunately, this is not unique to banks. A lack of transparency in many crypto exchanges fools users in to believing fees are either lower than what is stated, or that the fees stated are the only fees that exist. Reading reviews will often expose this.

Tradings fees are often lower for the maker (the seller who creates the sale) and higher for the taker (the buyer who benefits from the sellers sale). For simplification, some crypto exchanges choose one flat trading fee mostly ranging from 0.2% all the way up to 2%. We advise traders to avoid any exchange charging in excess of 1%. With the options available now this is unnecessary in most situations.

If you’re interested in moving coins between exchanges, watch out for transfer fees. Sometimes hard to avoid, there are some platforms out there that don’t charge for transfers. It’s rare here in Vietnam, but some exchanges support local currency trades at a low fee, such as FinanceX (0.3%), Fiahub (0.5% with 0–5 BTC), and Aliniex (0.6% with 0–10 BTC).

3) Listed Coins

What’s an exchange without BTC? If you find one let me know! If such things exist, they are few and far between. What adds real value to a cryptoexchange is the availability of other coins/tokens. for the average investor this may not be a problem as they won’t stray too far from bitcoin. But, if a platform doesn’t have the hot cryptocurrencies of the time, educated investors will go elsewhere to find them.

Binance recently delisted worthless coins to reduce the clutter and provide customers with only the major and most popular coins. It’s a good idea to thoroughly research coin stocks to diversify your investment portfolio. Avoid putting all your eggs in one basket. Significant profits may be waiting for you with lesser-known coins only well-read crypto investors know about. Get out there and find them!

4) Liquidity

No matter how many coins are listed on an exchange, if the place is a ghost town it’s extremely difficult and painfully slow to buy the coin you want at the market price. Liquidity is important as it provides more competitive prices, faster and easier transactions, keeps current customers on an exchange and attracts even more customers creating a positive feedback loop.

Large platforms with high liquidity can also minimize the effects of shark’s behavior as they have less power to manipulate the market. You can check the liquidity of an exchange by viewing the number of transactions that day and the total volume is always interesting, too.

5) Ability to Deposit/Withdraw Assets

A major weakness of crypto exchanges is their support of local currency, or fiat. In most cases, an exchange will provide customers with one option to enter the exchange with local currency, but often even some of the major sites only support coin-to-coin trading, Binance for example.

Traders need to find an exchange where they can directly deposit and withdraw using their local currency to avoid extra fees charged for transfers, and for the convenience of quickly cashing out. Reading reviews online, you see first hand customer experience of depositing and withdrawing money. Try to avoid the long wait times of some exchanges.

The future of cryptotrading needs to have fiat-to-coin trading pairs. A new trading platform, FinanceX exchange, plans to provide customers with this option on a global scale.