Cryptocurrency has grown quite rapidly over the past few years as more people join the wave. Both major institutions and enterprising millennials are trying to learn what they can about this incredible technology. Despite a recent drop in value but with an already promising rebound, cryptocurrency, particularly Bitcoin, is still considered one of the most valuable currencies in the world. (2)
Are you interested in investing in crypto like the rest of the world? Well, although it’s praised for all the benefits, it brings to investors, any slight mistake in this industry can lead to a lot of losses. For one, the market is currently filled with scammers who are always looking to take advantage of the ignorance exhibited by beginners.
Therefore, it’s imperative that you learn the nits and grits of trading and anything related to crypto before getting into this business.
First, you’ll need to find Australian crypto exchanges —or exchanges from any given region—that fit your needs. After all, this is the platform you’ll be using to trade your traditional currency for crypto coins like Bitcoin and Ethereum.
So, how do you go about choosing a crypto exchange? Read on to learn more!
How does cryptocurrency work?
Before going any further, it would be prudent to understand how this digital currency works. Cryptocurrency, basically, is a virtual currency designed from computer files and secured by cryptography. This technology ensures that digital coins cannot be counterfeited or double-spent.
So, how does the whole system work? Unlike traditional currencies where there is a central institution like banks or governments, cryptocurrency relies on decentralized networks. That means no single authority is tasked with making rules. Everyone in the network has control over their money and will need to chip in when there are suggested changes.
When trading crypto, especially for beginners, you’ll need to use an authorized exchange. It’s worth noting that there are centralized and decentralized crypto exchanges, but the former is your best option if you’re just getting into crypto trading. One advantage is that centralized exchanges are pretty straightforward and don’t require many complex skills to sell or buy digital currencies.
However, there are many such exchanges in the market; how will you decide which is the best one for you? Below are some factors you should keep in mind:
Authenticity and security
As mentioned earlier, the building blocks of cryptocurrency are computer files. Since these files are developed using complex encryption techniques, they’re still vulnerable to hacking.
In fact, over the past few years, there have been many cases of scamming and people losing billions to hackers in the world of cryptocurrency. Of course, as you’d expect, this has made many prospective investors quite skeptical of this form of investment.
Therefore, if you’re trying to find a cryptocurrency exchange as a beginner, the first thing you should consider is security. Remember, this is what will determine the safety of your money going forward.
So, what are some of the things to look for in terms of security? The website’s security protocol should give you the first hint. Does the exchange use HTTP or HTTPS? The latter is more secure because it encrypts all standard requests of HTTP.
Another thing that says a lot about the exchange’s security level is the two-factor authentication policy. It might seem simple, but this feature can go a long way in ensuring the security of your funds and personal data. The fact that you’ll be the only one with access to your account gives you much-needed peace of mind.
Apart from security, you’ll also need to check the company’s authenticity. Many crypto exchanges are only in the market to engage in fraudulent activities. As such, you should ensure that you don’t get caught up in the middle of such scamming. To do so, you must confirm the company’s credentials as presented on their website. Who are the founders? Where is it located? Is the institution licensed, and can you verify the license number? All these are important questions that’ll need answers before you take the next step. (1)
Transparency
Another critical factor that you must consider is the transparency of the crypto exchange. It’s worth noting that many cryptocurrency exchanges rely on cold storage to secure all their crypto tokens from hackers. However, some exchanges may take advantage of this technology to scam their unsuspecting customers. (2)
Therefore, as a trader, one of the essential questions you should ask any crypto exchange before trading with them is the location of their cold storage. A genuine company will give all the necessary details, including the address of the repository. Any form of hesitation in that regard is a red flag.
Transaction fees
Like any other trade, you would want to work with a crypto exchange that offers favorable and reasonable transaction fees. While at it, be sure to inquire about any changes in case of a delay. Every exchange has a unique policy when it comes to such transactions. Some work with “fixed pricing,” which means the final price charged for the coins you purchase will remain the same even after long delays.
Others, however, charge the market price—which can either be higher or lower—of the coins at the time of delivery. Therefore, if you purchased them at a lower price, you might be forced to pay more if the value will have risen by the time the transaction is completed.
Supported payment methods
Every crypto exchange has various options when it comes to payment methods. However, not all of these modes are ideal for you, especially if you’re from a country with strict financial restrictions. Therefore, before you make your final decision, it would be wise to check all the available payment methods and whether they’re supported in your country. As a rule of thumb, whichever crypto exchange you choose should have at least two payment methods that favor you. (1)
Conclusion
Despite the dropping value of Bitcoin, there are still many people interested in joining the cryptocurrency industry. If you’re one of them, you might want to consider the factors discussed in this article before choosing your preferred crypto exchange. Among the main factors to keep in mind include security, authenticity, transparency, transaction fees, and the available payment methods. Make sure that all these factors meet your needs before making the final decision.
References
- 1) “Cryptocurrency Exchanges: What They Are And How To Choose”, Source: https://www.investopedia.com/tech/190-cryptocurrency-exchanges-so-how-choose/
- 2) “What Is Bitcoin And How Does It Work?”, Source: https://www.forbes.com/advisor/investing/what-is-bitcoin/
