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What to Look for in a Crypto Exchange
When the concept of cryptocurrency was first introduced there was a good deal of debate regarding whether it was the next big financial product or simply a fad that would pass with time. Years down the line, it's clear that crypto is here to stay.
Readers who are looking to buy cryptocurrency for the first time should do some research before jumping in the deep end. Read on to find out what to look for in a cryptocurrency exchange to get started.
Look for a cryptocurrency exchange that offers proof of reserve and cold storage for funds in addition to two-factor authentication. The first of these features ensures that the exchange can actually cover customer balances while the second lowers its risk of getting hacked. Two-factor authentication, often known simply as 2FA, ensures that the exchange can confirm each customer's claimed identity by using two different forms of verification, which helps keep both customer data and funds safe.
All exchanges charge customers fees. That's how they're able to stay in business. However, not all of them charge the same fees.
Many exchanges take a small percentage of each trade instead of charging a set fee. Make sure that this percentage is reasonably low. Most exchanges that opt for this strategy keep their charges below one percent, but some charge as little as 0.2 percent.
Liquidity and Trading Volume
Transaction speed can be compromised by insufficient trading volume or liquidity. The best way to make sure that this won't happen is to look up the exchange's most recent trading volume and liquidity rates online prior to signing up. Keep in mind that the more buyers and sellers there are, the more liquidity a cryptocurrency will have.
When the idea of cryptocurrency was first introduced, Bitcoin was really the only option available. Today, though, there are dozens of formidable contenders. Readers should choose what kind of cryptocurrencies they want to trade in before choosing an exchange in order to make sure that the exchange will carry them.
Make sure to balance all of the factors described above when choosing an exchange. Those that charge fewer fees may be sacrificing security, so don't just choose the exchange that charges the least for use of its services. If anything, security should always be prioritized since all the money in the world isn't worth much of anything if it can be stolen by a hacker and disappear in a moment.