5 Important Factors to Look for When Choosing a Cryptocurrency Exchange

It is fair to say that the world economic climate has changed with the current pandemic crisis that is sweeping the globe in Covid-19, otherwise known as ‘Coronavirus’. As tragic as the health crisis is, it is impacting on world economies and could be the pin that pops the balloon.

Of course, we are referring to the economic debt that has been steadily climbing since the last global financial crisis in 2008. Out of the ashes, we saw the emergence of Bitcoin and blockchain technology as a solution to the flaws with the current financial system. If you’re looking for crypto investment opportunities, take a look at QDAO DeFi.

As a result, we could see Bitcoin rise and fulfill what it was actually designed to do — provide an alternate to fiat currency that is digital, decentralized in nature and available to everybody with an internet connection and a smart device.

In these uncertain and challenging times with the Coronavirus pandemic, where the majority of us are in isolation or working from home, could now be the right time to learn and invest in cryptocurrencies?

If so, make sure you keep reading the following considerations before you search for an exchange.

5 Important Factors to Look for When Choosing a Cryptocurrency Exchange

If you believe in the Bitcoin narrative, then you will need a reputable and safe cryptocurrency exchange to invest in the digital currency. In this article, we will highlight 5 important factors that you should be aware of when selecting an exchange.

1. Available in Your Country

It might appear obvious, but not all cryptocurrency exchanges are available worldwide and supported in each jurisdiction. This is largely due to financial regulations that heavily govern the cryptocurrency market.

For example, a cryptocurrency exchange based in Australia that accepts AUD, NZD and USD deposits, does not allow an investor that resides in New Zealand to deposit funds even though NZD currency is accepted.

To be safe, it is best that you contact the exchange helpdesk or FAQ’s to ensure two things. The exchange accepts your local fiat currency and supports deposit from your country. Otherwise contact the exchange or your local bank for more information.

2. Trading Fees

An important consideration for investors and traders is an exchange that offers with low and competitive trading fees. High trading fees can eat into your native currency deposit by taking off a percentage each time. This fee applies each time you buy, trade and sell a cryptocurrency.

Over time, this can add up to a sizeable amount for investors. Particular for investors that do not hold the asset for a long time such as traders. Even so, high frequency day traders can accumulate these without knowing and could be the difference to becoming a profitable crypto investor.

Furthermore, you should also check the spread fees. We do caution that cryptocurrency exchanges will not always disclosure their hidden charges. The spread fee can be as high at 5.2% which will be applied in addition to the trade fee which adds up.

3. Available Cryptocurrencies

You will find that most of the cryptocurrency exchanges allow investors to buy, trade and sell the major coins such as Bitcoin, Ethereum, Litecoin and Ripple.

However, if you intend to invest in a lesson known altcoins, you need to check if the exchange offers trading in this digital asset against your local fiat currency. It is common for exchanges list out the available cryptocurrencies on their website. Also, there needs to be adequate liquidity to fill orders which you can check by using CoinMarketCap and filtering by liquidity.

4. Reputation

The cryptocurrency space is still relatively new compared to the traditional financial markets which are heavily regulated and monitored in most countries. Since the inception of blockchain technology, there have unfortunately been many exchange hacks, thefts and security breaches that have resulted in users to lose their funds. In 209 alone, there were 7 major exchange hacks that result in millions of funds lost.

So, before you sign up for a cryptocurrency exchange, it is important to conduct research and your own due diligence using Google. Just search the name of the exchange + “SCAM” for example. This will reveal any security breaches that have occurred in the exchange’s lifetime.

In addition, it’s best to not keep your new digital assets on the exchange for too long. The majority of your funds should be kept in your possession on a hardware wallet which is like having your own bank account in your back pocket.

5. Security

Following on from the above, another important factor when deciding which cryptocurrency exchange to select is the platforms security measures. Given that the majority of exchanges are centralized in nature, this means that your funds are stored on the platform at some point in time therefore reliant on their security measures.

If you visit the website, you should be able to find what security measures are in place. At a very minimum, the exchange should offer:

• Cold storage wallets for a minimum 90% of client funds
• Transfer crypto funds direct to a hardware wallet
• Multi-signature authorization for withdrawals
• Two-Factor Authentication
• SSL Site Security Certificate

It is also important to browse forums and social media to see if other users have been experiencing issues with the exchange.

Conclusion

With the Covid-19 pandemic looking more and more likely as the tipping point of global markets, investors all around the world will be searching and waiting to invest in safe-haven assets such as Bitcoin.

For beginners, it can be a daunting task to purchase your first Bitcoin and knowing which exchanges are safe and legit. That’s why it’s essential to consider these 5 factors when choosing a cryptocurrency exchange. If you want further information, be sure to check out hedgewithcrypto’s research on the best exchanges to buy and sell cryptocurrency.