The Essential Checks to Make When Choosing a Crypto Exchange

Nigel Green, CEO of deVere Group, asserts that "crypto is unquestionably the future of money. However, you must start out on the correct foot. This is undeniably the case, particularly given the fact that many investors are still feeling the effects of their losses from the crypto market crisis in May.

Over 20,000 tokens are presently in use, and use of cryptocurrencies increased globally by more than 880 percent last year. In fact, according to TripleA, there are already more than 320 million cryptocurrency users globally. It is more important than ever for investors to consider where and how to deal in cryptocurrencies in light of this exponential growth. That entails picking on the best cryptocurrency exchange as well as your platform use strategy.

Taking Care

Green, who heads one of the biggest independent asset management, fintech, and financial advice firms in the world, says:

"The difficulties some of the top cryptocurrency exchanges are now having underline the need to take your time when making your decision. Don't always choose the products with the flashiest TV advertising and famous advocates. You should examine for security, liquidity, fees, history, and user experience.

The CEO is alluding to the current wave of exchange freezes brought on by Terra's demise and the loss of roughly $40 billion in investor funds. The algorithmic stablecoin UST lost its peg to the U.S. dollar, and the price of LUNA plunged by 98%, causing the crypto market to fall in May. The end outcome was the market capitalization's first decline under $1 trillion since January 2021.

As a result, cryptocurrency exchanges including CoinFLEX, Zipmex, and Vauld stopped accepting deposits and withdrawals. While Bitcoin (BTC) and Ethereum (ETH) remain blocked, CoinFLEX later let customers to withdraw up to 10% of their assets, and Zipmex has started withdrawals for other altcoins.

You should check to determine whose business owns the exchange, Green said. Is it a reputable company? Is it a multinational corporation capable of managing complex concerns across several jurisdictions? Is it skilled in both conventional and fintech financial services? Is there a competent customer service division to address any difficulties promptly and successfully? Are there news and learning materials available?"

List of coins for sale

It's vital to understand that not all exchanges provide every digital asset given that there are tens of thousands of cryptocurrencies in use. Users should consider which currencies best fit their interests and if the exchange offers an appropriate menu.

For instance, Kraken allows you to trade more than 160 currencies, while a well-known exchange like Coinbase provides more than 526 crypto-to-crypto trading pairings. According to Green, while looking at a platform's list of currency offerings:

"Since each exchange has a unique set of features, most expand to their list of currency offerings often. However, the exchange shouldn't be in the business of introducing every new cryptocurrency, since this plainly exposes customers to dangers that are evident, preventable, and may be expensive.

He advises platforms to do their homework before listing any new coins, saying that consumers "should check this is part of the exchange's policy." Notably, there are exchanges that let users trade less popular currencies that have trouble being listed. These exchanges are often headquartered abroad. However, not all exchanges are regulated to the same degree.

Prioritizing security

Users should spend time carefully researching any cryptocurrency exchange they are thinking about using since reputation matters when it comes to these platforms. What are the opinions of other people on the conversation? Have there ever been any security issues? If so, how was this addressed in the conversation?

Some crypto exchanges need formal identity, such a passport or driver's license, to establish a new account, while the majority provide basic security measures like two-factor authentication. The deVere CEO says that some additionally demand authentication numbers when you purchase, sell, or make significant account changes.

During a significant security breach in December 2021, hackers stole tokens from BitMart valued at around $196 million. A user can be on the lookout for extra features like the exchange mobile app from Crypto.com, which supports biometric login and uses facial and fingerprint identification to verify identity. Instances like this highlight the importance of selecting a crypto exchange with strong safeguards in place against such cyberattacks.

However, in order to further improve security and deter criminal actors, prominent exchanges like Kraken and Gemini often ask users to provide government-issued identity when registering a new account.

The Overall Situation

Comparing costs is another crucial step since you could have looked through the top exchange options and reams of data to get the best service without considering how the exchange would affect your everyday investment.

Even if an exchange has a stellar reputation and no record of frauds or hacks, you'll discover that it has high deposit costs for fiat money and cheap transaction fees for cryptocurrencies. Therefore, it is essential to examine several fee structures that are each geared toward a certain investment type.

For instance, costs will be less important than other features targeted at regular traders if you are a day trader who doesn't want to pay high individual transaction fees or if you just want to purchase a little quantity of cryptocurrency. The percentage you pay often decreases as the amount of your transactions increases, and fee levels are typically dependent on your overall trading volume over a 30-day period.

Based on your investment strategy, think about how the fees might affect you. Do you want to be extremely active, performing trades every day? If so, using an exchange with reduced transaction costs could be the best course of action. In the words of Green, "Liquidity is significant. You should be aware that you may easily convert conventional currency into cryptocurrencies and vice versa. The better the trade volume, is a nice way to look at this.

Overall, according to the CEO of deVere, selecting the best cryptocurrency exchange "may take time, but your future self will thank you for it."