A cryptocurrency exchange is a platform where you can buy, sell, and trade one crypto asset in exchange for other crypto coins or fiat currencies. As a trader or an investor, crypto exchange software is the first interface through which you will interact with the crypto world. So, it is necessary to choose the most suitable exchange based on your requirements.

However, with more than 500 exchanges out there, selecting a suitable one is going to be easier said than done. To help you, we have shortlisted 10 factors that you need to consider when choosing a crypto exchange.

1. Available Coin Pairs

Most crypto exchanges offer a limited number of cryptocurrency pairs. They usually list the top currencies with Bitcoin (BTC), Ethereum (Ether), Ripple (XRP) and Bitcoin Cash (BCH) being the top four in 2019.

If you choose an exchange with limited coin pairs, you will have obvious trading limitations. On the other hand, coin pair diversity will offer more trading options. It also provides more alternatives in case one of the cryptocurrencies faces regulatory or security-related issues.

2. Reputation

The crypto world is abound with bad actors that have swindled crypto investors of millions of dollars so far. In 2018, Taiwanese exchange Cobinhood duped its investors in a classic pump-and-dump scheme. In the beginning, they listed a hundred little-known coins, which were later removed leaving investors with illiquid assets.

Usually, investing in exchanges promising unrealistic prices and with website’s starting with HTTP, not HTTPS, is a bad idea. Find out what online crypto communities such as Reddit are saying about the crypto exchange. Try to learn about their history of falling victim to hacks. Also, verify their registration and contact details if possible.

3. Security

2018 was a record-breaking year for crypto exchange hacks as hackers stole $865 million at the rate of $2.7 million per day. You must ensure that the exchange employs the following security measures to avoid theft

• Use cold wallets to store the majority of the coins offline and away from hackers. For example, Coinbase exposes only about 2% of its coin holdings to the internet.
• Use 2-factor authentication (2FA) such as Google Authenticator or SMS to ensure safe logging in and out of trading accounts.
• Email encryption and verification for each transaction ensuring the highest level of security.

4. Volume and Liquidity

Trading volume and liquidity go hand in hand. The higher the number of traders is, the quicker your order (buy/sell) gets filled as more people back the current price trend. Thus, higher volume often leads to competitive pricing, providing you with more scope for trading.

Most crypto exchanges with multiple crypto coin pairs have a better trading volume. Smaller exchanges, on the other hand, have low trading volume, resulting in supply-demand issues. As a result, buyers have to pick up the tab for the price slippage with a higher transaction cost than the original price.

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