All You Need to Know About Cryptocurrency Exchanges
February 21, 2022 (Investorideas.com Newswire) Technology is developing at breakneck speed and seems to be getting faster and faster.
Cryptocurrency is now established as a viable alternative to fiat currencies. However, with the world being in turmoil and facing another bout of severe inflation, people are looking for havens to put their money into.
Here is a fun fact related to Bitcoin: The first recorded Bitcoin payment for goods happened on 10 May 2010. Two pizzas were bought for 10 000 Bitcoin at Papa John's Pizzas in Florida. At the time, the approximate value was $40. The exact same Bitcoin is now worth over $4 Billion.
We are all aware of the volatility of crypto but "on the other side of the coin", we are also aware that fortunes have been made in crypto. There are some real benefits that the crypto universe has over traditional monetary systems.
So you rushed out and bought some crypto just to make sure you didn't miss out. You are not alone. Millions of people have invested and are holding various cryptocurrencies.
Let's examine cryptocurrency exchanges, how they work, why so many exist, and their significance for all crypto holders.
What is a Cryptocurrency Exchange?
A cryptocurrency exchange works similar to a broker. The exchange enables you to buy and sell various cryptocurrencies through the platform.
A good exchange will offer low fees and tight security like a brokerage. In addition, it will offer you the cryptocurrency you are looking to trade.
Exchanges can be used to trade one crypto for another. You can also use the regular currency to buy various cryptocurrencies.
Exchanges can be used to cash our crypto back to be held in cash in your crypto account or even transferred to your traditional bank account.
What to Look for in an Exchange
There is no one-size-fits-all exchange, and people choose different exchanges to suit their individual needs.
Some factors to consider are:
Accessibility
Crypto is becoming more and more regulated.
You need to check that the exchange you want to use is accessible to you. Many states have imposed strict regulations that must be complied with by an exchange before operating an exchange. Some countries, like China, have banned all citizens from accessing crypto at all.
Fees
Fees vary wildly between different exchanges, and buyers and sellers often pay different fees for the same transaction.
The easier it is to trade, the higher the fees charged, but bear in mind that higher fees often are accompanied by better security and added insurance offered.
Since each crypto exchange has its own fees, it is frugal to make sure you understand exactly how the fee structure works before investing your hard-earned cash.
Security
Some crypto exchanges have been hacked, and large amounts of money stolen. The more lucrative crypt becomes, the greater a target for hackers and thieves.
An excellent way to assess security is to research what kind of insurance the exchange has for its holdings.
Exchanges should keep most of their assets in cold storage, which is more challenging to hack.
Coinbase, for example, stores 98% of customer funds offline.
Two-factor authentication improves security and should be implemented at serious exchanges.
You are probably safer using more prominent well-established exchanges than new and smaller outfits.
Types of Coins Offered
Crypto exchanges do not offer all coins. However, some more extensive exchanges offer a wide variety of coins.
If you want to trade in several coins, the more extensive exchanges are probably more suitable.
Other Considerations
Other things to consider are ease-of-use, whether you like the mobile app, how good the customer support is, and how liquid the coins you intend to hold are.
You could consider looking here to see a well-organized comparison of what the top crypto exchanges offer before deciding which one is right for you.
In Conclusion
As with any investment, especially with volatile investments such as crypto, knowledge is critical. The more you learn and the more research you put into the best crypto exchange for you, the better.
Do your homework and invest wisely.
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