Crypto exchanges are your gateway to make the most of the incredible returns as promised by the crypto world. Whether you want to buy or sell or just stake crypto, you will need to sign up with a cryptocurrency exchange. But finding the right crypto exchange is no cakewalk- it’s not that you can just sign up with the first crypto exchange you come across online. In other words, not all crypto exchanges out there would be equally credible. Most of them might claim to provide a credible experience, but not all of them would be equally trustworthy. However, if you invest little time, and look closely, you will be able to find certain signs that will help you to find out the most credible cryptocurrency exchange out there.
Before getting into the discussion about finding the right cryptocurrency exchange, it must be mentioned that there are two major kinds of crypto exchanges out there. One is centralized cryptocurrency exchange that is governed by one single point of authority aka the owner. Centralized exchanges aka CEXs follow KYC protocols to keep imposters at bay. But, these platforms will also act as custodian of user funds. The other is decentralized cryptocurrency exchange. Decentralized exchanges operate in a decentralized environment and these platforms do not hold custody of user funds. These portals also charge lesser fees than CEX counterparts.
Factors to check in a cryptocurrency exchange
This is certainly the most crucial factor to keep in mind while looking for the best cryptocurrency exchange.
You will know that a cryptocurrency exchange can be banked on if the platform offers all or most of the security measures mentioned below.
2-FA aka 2-Factor Authentication brings in an extra security layer over the traditional password-protected barrier.
- Cold wallet
Cold wallets are offline wallets and hence secured from virtual hacking threats. Since 2021 to the Q3 of 2022, the cryptocurrency exchange scene has witnessed (cumulatively) around $150 million-worth of losses. In fact, the most esteemed cryptocurrency exchange platforms have faced hacking attacks in the past.
The traditional cryptocurrency exchange wallets could not guarantee high-profile security. Thus, traders are always advised to store their holdings in a hardware offline wallet. Good thing is, these days, some of the major cryptocurrency exchange platforms too have adopted cold wallets to ensure optimum storage security for the members.
- Insurance backup
Sometimes, hackers are too smart for the security options adopted by a cryptocurrency exchange platform. This is not to blame the cryptocurrency exchange- but no matter how hard an exchange tries to keep hackers at bay, there are always a few hackers who manage to get the better of these platforms.
Bottom line is- even if you sign up with a cryptocurrency exchange that has all the advanced security measures in place, your funds are probably not 100% secured. Thus, some leading crypto exchanges today offer insurance protection. The insurance backup helps a cryptocurrency exchange to pay back all the stolen funds to the users if the platform ever finds itself in such a dire situation.
The goal is not just to find a cryptocurrency exchange with all security measures in place- but mostly to sign up with a one that has all the backup plans in place to protect the users in times of mishaps.
Large range of assets
Bluechip legacy coins generally call for a higher entry point and might be unaffordable for most of the new traders. Beginners generally wish to start small. A responsible cryptocurrency exchange usually comes up with a vast and versatile portfolio of both big and small crypto assets to cater to all kinds of traders. Thus, if you are a novice investor, make sure that your chosen cryptocurrency exchange is able to offer low-budget yet highly potential altcoins too next to legacy coins.
High liquidity is extremely important especially when you are trading in a crypto market- a market that is defined by frequent fluctuations in price. You have to make sure that your chosen crypto exchange is able to offer high liquidity.
Check the 24-hour-long trading volume of the exchange to get a fair idea about the liquidity aspect of the portal. There are crypto exchange resource sites online that offer complete data on the trading volume of a crypto exchange.
If you know even the slightest bit about crypto you know by now why it is always dubbed as “Wild West”. Well, the crypto industry has earned both kudos and flak for its incredible market volatility and that is mostly caused by its unregulated environment. Crypto exchanges are not rigorously regulated like conventional stock exchanges and hence pose safety issues.
However, some of the major crypto exchanges today have come under the SOC wing to introduce a decent level of regulation in their operations. So, look for a crypto exchange that holds both SOC 1 and SOC 2 accreditations. The SOC 1 certificate assures that the reporting control and fiscal operations of the exchange are functional and as per standards. The SOC 2 certificate takes care of the tech infrastructure of a cryptocurrency exchange. If your chosen exchange has earned the SOC 2 certificate it means its confidentiality measures, network availability, and security controls are in perfect working condition.
You will know that you can trust on a cryptocurrency exchange when the platform is transparent about audit. It’s good if your chosen crypto exchange allows disclosure of auditing reports. But, you must also make sure that the auditing has been conducted by an independent and unbiased audit agency only.
Hopefully these tips will be able to guide you to land up with a reliable cryptocurrency exchange. But there is just one more major factor that you should check before you start the registration process- geographical limitation.
A simple search of “crypto exchange” online will bring up hundreds of names but then not all of them accept traders from your country. Even the global crypto exchanges do not allow traders from every single country of the world. Thus, when you proceed to sign up with a cryptocurrency exchange, make sure beforehand that the platform operates with traders from your geographical region.