Choosing an exchange and what to look for

Exchanges come in various shapes and sizes, from those that offer multiple levels of security to exchanges that don’t even ask you to create an account. So when you’re about to choose an exchange, it’s best to look at its features and go from there.

• The fees

Fees vary widely from exchange to exchange and can pile up if you’re not careful. To find out how much you’ll actually be paying, consider running the numbers on a hypothetical trade before the real thing, with the same payment method, volume, coins and withdrawal.

If an exchange does not publicly post its fees, steer away.

• Payment methods

Exchanges accept all sorts of payment methods, from credit and debit cards to bank transfers, but not all exchanges accept all the various payment options. Also note that some exchanges might accept one payment method for withdrawal, but not for deposits.

Make sure your exchange has deposit and withdrawal options that work for you, and make sure to check the fees associated with different methods.

• Purchase limits

Exchanges may have limits on how much or how little you can deposit, buy and withdraw at a time. These limits will often vary depending on the transaction method as well as your verification level. For example, someone who’s provided notarised proof of identity, address and source of their funds might get unlimited transactions, while someone who’s only shown their driver’s licence might be restricted to $1,000 a week.

See whether the limits work for your plans.

• Security

A large exchange might be holding hundreds of millions of dollars worth of cryptocurrency. It’s typical for around 99% of it to be held in offline at any given time, but a successful hacker can still become a multi-millionaire by getting that remaining 1%.

Large exchanges tend to be under almost constant attack, and those without effective digital security don’t last long. You can assume that prominent exchanges have decent electronic security, but you should still read reviews and make sure an exchange is legitimate.

It’s also worth remembering that an exchange which has been hacked in the past isn’t necessarily any less secure today. Instead consider how it responded to the hack, and whether all affected users were fairly compensated for any losses.

• Available coins

Naturally you’ll also want to make sure your preferred coins are available. There’s not much point in signing up for an exchange that doesn’t have what you want.

Note:

There’s no one best exchange. It all depends on what your plans are.

But once you know what you want, you can work out what you need and can start comparing exchanges that work for you.