Crypto exchanges or crypto trading is a form of substitution between buyers and sellers, where bitcoin and cryptos are the primary constituent. Generally, this practice is done with the usage of altcoins or fiat currencies.
Trading digital assets will be the future of the financial world within a very limited span. Therefore, it is important to stay aware of the different cryptocurrency exchange practices that are prevalent worldwide!
Simplicity in Investment
A lot of stigma surrounds bitcoin trading even at present. This is mainly due to its volatile nature, despite providing quick, gainful returns. Hence, you can begin trading cryptocurrency through specialized platforms.
This practice is efficient and, more importantly, highly safe. Once you pick the right trading sector, the sky is the limit. The different varieties of cryptocurrency that you can buy and sell include:
- Cardano
- Ethereum
- Dogecoin
- Bitcoin
Some of the most popular cryptocurrency exchanges throughout the world are as follows.
- Binance
- AvaTrade
- CoinBase
- XTB
- BitMEX
- eToro
- Kraken
- Gemini
- CEX.io
- Coinmama
Working Methods of an Exchange
A cryptocurrency exchange is often compared with a brokerage firm. There are quite a few striking similarities in their operations. The exchange provides numerous facilities to perform transactions through it. These methods comprise of:
- UPI through Debit Cards
- UPI through Credit Cards
- Direct Bank Transfer
All these services are commission-based. You will have to pay a certain processing amount to access all the exchange methods. There are multiple types of cryptocurrency exchanges. Hence, it is imperative to select the best option based on your requirements.
Cryptocurrency exchanges are broadly classified into two types. They are:
- Centralized Exchanges
- Decentralized Exchanges
The prominent features of both these exchanges are discussed in detail in the table below.
| Centralized Exchanges | Decentralized Exchanges |
| Completely regulated by an overhead authority | Directly links buyers and sellers without governing body |
| The exchange plays the role of intermediary and possesses the funds similar to a bank | Exchanges are automated and function on blockchain |
| The transaction is generally faster | The transaction is comparatively slower |
| KYC verification and regulation is mandatory | KYC verification and regulation is not required |
| Vulnerable to cyber attacks | High protection is guaranteed |
The different features of both these options vary immensely. Now, we have compiled the most common types of exchanges that most customers opt for below.
Peer-to-Peer Trading Exchange
Straightforward trading between buyers and sellers occurs through this method of trading. It is also known as the P2P system. However, this system lacks fixed exchange rates. They vary from lender to lender as there is no standard regulation.
Traditional Exchange
This type of exchange can be associated with the stock exchange. It is an intermediary-based platform. Hence, the market price is given a lot of value on this type of platform.
Another notable aspect of this platform is that you can trade fiat currencies here without any difficulty. For example, you can trade your U.S. dollars in exchange for cryptocurrency on this platform.
Crypto Funds
The public gains a lot of authority through this form of exchange. It is mainly due to the large pool of funds that professionals offer in the form of assets. If you are unsure of taking the leap and purchasing a bitcoin, you can invest in them through this method.
The issue of storage is also removed from the equation now. Hence, this type of exchange is the best for newbies who are still finding their way around the world of cryptocurrency.
Brokers
Online cryptocurrency exchange usually takes place through brokers. This type of exchange is comparable to the currency exchange at airports. Initially, a price is set by the broker. The customers can trade within this limit.
Some of the popular cryptocurrency brokers include:
- Coinbase
- Shapeshift
The only concern with brokers is the exorbitant prices that you will have to pay for trading. However, if this is not a matter of concern for you, investing with brokers is a lucrative option indeed!
Important Assessment Factors to Select an Exchange
Selecting an exchange that caters to all your pre-requisites will require an in-depth analysis of all its features. Some of the most crucial attributes that you should look out for are:
- Security
- Liquidity
- Accessibility
- Resources
- Fee Structure
Security
Unlike your fiat money, there is no relevant security system for cryptocurrency. The lack of a central institution to govern your finances makes the entire system vulnerable to cyber-attacks. Hence, you can always opt for a blockchain-backed exchange system.
Liquidity
The trade volume is one of the key factors you should examine while considering a potential crypto exchange. It will offer you a lot of insight regarding the liquidity scope of the currency you exchange there. Low trade volumes will lead you to pay higher trade prices.
Accessibility
Crypto exchanges are an up-and-coming trend. Hence, they are not allowed free trade in all regions. You can check out the accessibility of the exchanges at your location and base your decision upon that.
Resources
Cryptocurrency, blockchain, digital assets are all relatively new topics in the domain of finance. As a result, everyone does not have access to resources that enlighten them about its benefits. An exchange that aims to educate its users is highly trustworthy.
Fee Structure
The fee structure of a crypto exchange is one of the first and foremost that you should analyze thoroughly before finalization. You may have to shell out some additional bucks if you want the process to be as smooth-sailing as possible.
Wrapping It Up
Bitcoin exchanges can seem to be an intimidating domain initially if you are not equipped with the essential knowledge. Nevertheless, it is as clear as can be that this branch of finance will play an integral role in the functioning of industry giants.
Performing extensive research about the different aspects associated with exchanges can be a laborious process. Therefore, you can go through this guide and gain a clear perception regarding the key information in this niche.
Selecting the best cryptocurrency exchange can be a breeze when you possess all the pre-requisite knowledge! This manual will help you finalize the best possible choice based on your stipulations.
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