As cryptocurrencies witness the most formidable price surge, even the most traditional financial brokers, investors, and traders are accepting the digital currency as a brand new asset class. That is the reason cryptocurrency exchanges are currently seeing an increase in new users signing up on their sites. This raises the question–which crypto exchange is the best one for traders?
We picked probably the most mainstream and best exchanges based on user reviews to ensure that you have the information to make the right choice. Let’s take a look at our rundown of the best cryptocurrency exchanges in 2021.
Compare the Best Cryptocurrency Exchanges
We assessed a wide variety of elements including usability, value-based costs, service quality, UI, customer care, and different factors to select the best cryptocurrency exchanges you can trust.
Understanding Cryptocurrency Exchanges
A cryptocurrency exchange is a platform where you can buy Bitcoin and other digital assets using your fiat money. The exchange enables you to deposit funds in your account using conventional payment methods such as debit or credit card, wire transfer, and e-payment methods. You can then purchase a cryptocurrency against your deposited money at the market rate. This type of platform is ideal for long-term investors who want to own and have complete control over their crypto coins. They can sell, exchange, and trade these coins whenever they want. However, they require a crypto wallet to securely store their digital assets.
A cryptocurrency exchange allows trade in cryptocurrencies for the benefit of its customers permitting them to own and hold the coins. They may charge a predefined fee as commission and you will also have to pay the blockchain network costs. To use the services of a cryptocurrency exchange, you need to register and make an account on the platform.
- Registering Your Account – This includes giving your essential data, for example, name, contact number, email address and password. At this point, you need to make sure your password is strong and a mix of upper and lower case letters, digits and special characters. Most of the best cryptocurrency exchanges will verify your account for security purposes.
- Making Your Initial Deposit – Once you have gone through the registration and verification procedure, the time has come to make your initial deposit. Most of the exchanges have a minimum deposit limit while a few don’t. You can deposit your funds using a variety of payment methods including bank transfer, credit card, debit card and e-payment method.
- Start Buying – After you have deposited your funds, you can begin to buy cryptocurrencies of your choice. It is suggested that you acquaint yourself with the UI before making a purchase.
During the registration process, many cryptocurrency exchanges will request that you submit more documentation for security reasons. You can submit an official document that substantiates your identity such as a driver's license or a utility bill. This is normally done by crypto exchanges that adhere to Know Your Customer (KYC) and Anti-Money Laundering (AML) legislation.
Ensuring compliance with these regulatory guidelines helps them prevent illicit and morally sketchy activities on the exchange so you can have a risk-free trading environment.
There are different types of cryptocurrency exchanges that you should be aware of.
- Centralised Exchange (CEX) - The exchange is responsible for security, maintaining functionality and upgrades. It is easier to use and offers more liquidity. Most of the crypto exchanges are centralised.
- Decentralised Exchange (DEX) - On a decentralised exchange, the service itself doesn't control anything and it is run by smart contracts. Transactions are settled on the blockchain and all coins are owned by the traders.
- Instant Exchange - It is an app that allows traders to exchange their cryptocurrency tokens quickly.
- Hybrid Exchange - This type of exchange combines the user-friendliness of CEX and the security of DEX to deliver the best of both worlds.
- Fiat Exchange - These exchanges allow trading in fiat currencies such as US dollar, Euro, etc.
- Pure Exchange - These exchanges allow trading in cryptocurrencies only.
You have to bear in mind that crypto exchanges aren’t forced by law to comply with KYC and AML guidelines so you may find some services on the web that will guarantee absolute anonymity and also charge lower fees. Just keep in mind that these features come at the expense of putting your data and cryptocurrency funds at risk. Users should not depend on such unregulated platforms.
How to Choose a Cryptocurrency Exchange?
Before you select a cryptocurrency exchange, you need to ensure that you have considered various features such as:
- Adherence to Regulation - If you need to buy and trade cryptocurrencies through a safe platform without putting your assets at risk, select an exchange that maintains adherence to KYC and AML guidelines.
- Transactional Expenses - The second most significant factor is the expense of buying cryptocurrencies through an exchange. This incorporates commissions, account fees, withdrawal charges and different costs. Make sure that you are picking the one that limits your transaction costs so you can maximise your profits.
- Available Payment Modes - Depending on the country you live in, exchanges offer distinctive payment modes including bank transfer, debit and credit cards and online payment processors. Ensure that the cryptocurrency exchange you are going for has the payment mode accessible that is most appropriate for you when it comes to cost and transaction speed.
- User Interface - Another key element that you will use consistently is the UI and UX of the crypto exchange website or app. Ensure it is simple to use so you can buy and trade through the exchange in an effective manner.
- Security - Ensure that your cryptocurrency exchange has all the key safety initiatives set up including encryption, two-factor validation, and SSL certificate before you start to buy and trade cryptocurrencies on the platform.
Advantages & Disadvantages of Using a Cryptocurrency Exchange
Should I Buy or Trade Cryptocurrency?
This is a decision that you need to make yourself based on your investment strategy and objectives. If you are a long haul investor who needs to hold the coins to make big gains in the long run, buying cryptocurrency and putting it away in a crypto wallet is a superior choice. But if you just want to capitalise on the volatility of the cryptocurrency market to earn quick gains, then trading is a better option for you.
Crypto trading also allows you to use trading instruments such as futures, options, contracts for difference (CFDs) where you can trade crypto coins without actually purchasing them. This makes trading much more convenient as you don't have to deal with the challenges associated with owning crypto assets such as acquiring and managing a crypto wallet.
- Futures - They are derivative products that allow investors to wager upon the future price of cryptocurrencies. Traders have the choice to either go long, which means they are betting on a price increase or go short if they believe the price will come down.
- Options - Crypto options are traded in the same way as any other conventional trade. The investor pays a premium for the right to buy or sell an option contract on a certain date agreed upon in advance. The trader isn't obligated to follow through.
- CFDs - Contracts for difference, commonly known as CFDs, allow traders and investors to bet on the price movement of cryptocurrencies without owning the asset. The difference in the price is then compensated by the brokerage service.
Keep in mind that long term investment will require you to invest in a cryptocurrency wallet which you need to set up and manage. It allows you to hold your tokens securely. Wallets come in different forms including software, hardware and paper wallets.
3 Steps to Using a Cryptocurrency Exchange
Stage 1: Choose a Cryptocurrency Exchange
Considering the above-mentioned variables, pick a cryptocurrency exchange that accommodates your necessities in the most ideal manner.
Stage 2: Signing up/Setting up Cryptocurrency Exchange
Join and verify your account on the picked cryptocurrency exchange. Make sure that you verify your account to secure your personal information and coins.
Stage 3: Deposit Initial Amount and Start Using Cryptocurrency Exchange
The last step is to deposit the funds in your account and afterwards you can begin buying and trading on the exchange site or its smartphone app.
Cryptocurrency exchanges make purchasing digital assets a quick and convenient process. You don't need in-depth technical knowledge about cryptocurrencies to use an exchange. Users must ensure to evaluate a cryptocurrency exchange on several factors such as ease of use, security and customer support etc. Just ensure that you are choosing an exchange that delivers in terms of every aspect that is important to you.
Frequently Asked Questions
You cannot purchase and own cryptocurrencies through a broker. You can only bet on the price. On the other hand, exchanges allow you to buy any cryptocurrency and own it.
Those investors who are into ‘hodling’ – i.e. long-term investing should go for cryptocurrency exchanges as they allow you to buy and own coins.
If you are looking to make a secondary income through day trading then a broker is the right choice. On the other hand, for long-term crypto investments, exchanges are a better option.
Top exchanges adhere to Know Your Customer (KYC) regulations that permit them to keep the investment platform free from illicit practices.
It depends upon the capital you contribute, market volatility, your investment strategies and long-term growth of the coin you are invested in.
Put resources into more than one promising crypto-token, rather than only investing in one. Diversification will allow you to minimise your risk.
No, you should make it a habit to save a certain percentage of your profits.
The best cryptocurrency exchanges offer the ideal combination of security, low transaction costs, exceptional customer service, high performance and a multitude of payment methods.