An investor or trader has to consider various factors while choosing the right cryptocurrency. The priorities of investors will be different when selecting a crypto exchange. Most of them consider the ease of use, liquidity, and also whether the chosen exchange operates smoothly in the area they live. These are considerations that will save you a lot of money and time.
Crypto exchanges are regarded as platforms that help traders and investors to buy, sell, or exchange their cryptocurrencies with fiat money. They are more like brokerage accounts. Crypto exchanges do their best to smoothen the trading process so that they can retain and attract users to their platform. You may use a web browser or smartphone app to access these crypto exchanges. Users can connect to a crypto wallet or try using the custodial wallet of the exchange to carry out trades.
Here are some factors you may check while selecting a crypto exchange.
- Jurisdiction
The first thing to do is to find out whether the crypto exchange you chose operates in the country and state you stay in. Avoid those exchanges that do not follow the rules and regulations of your country if you do not want any legal burden.
- Easy to use
You must consider your familiarity with crypto trading before choosing an exchange. Beginners may easily get intimidated by crypto exchanges with complex interfaces and order books along with a lot of charts and data. However, they should choose an exchange that is beginner-friendly. Some exchanges offer both basic and advanced options for the users to select their level. The rest are mostly designed to help newbies enter the crypto market to avoid any confusion.
- Choice of assets
Make sure that your chosen exchange has assets you are interested in. As numerous cryptocurrencies are available in the market, no exchange can cover all the trading pairs. While all of them will have popular cryptocurrencies like Bitcoin, Ethereum, Dogecoin, etc, there are low chances for cryptocurrencies that are less popular. Investors looking for less-traded exotic coins have to go for small exchanges. So you must have to research to find such exchanges.
- Liquidity
Liquidity allows traders to execute trades any time they wish. So an exchange must have high order volumes in their order books at a particular time of the day. To reach that volume, the exchange must either have more users or those users who currently hold a large volume of crypto assets on this particular exchange and frequently trades them. When the available orders are fewer, it is hard to find available trading partners. Liquidity is extremely important in highly volatile situations, which is a part of the crypto market. When the liquidity is less, volatility will be exacerbated and there will be huge price falls and rises.
- Security
Many exchanges have faced security issues in the past few years. Therefore, you have to choose an exchange with top security features. Mostly, exchanges give their security practice information on their websites. You may also choose an exchange that has stayed long in the market to avoid security issues.