What Factors Should You Think of When Evaluating a Cryptocurrency Exchange?

Investing in cryptocurrencies is becoming increasingly popular. Still, with so many cryptocurrency exchanges available, it can take time to decide which one to choose. To make sure you’re making the right choice, read this article to learn about the metrics you should evaluate before selecting a cryptocurrency exchange. 

Factors to Evaluate Before Selecting a Cryptocurrency Exchange

When selecting a cryptocurrency exchange, there are several factors you need to evaluate to find the best one for you. Here are some of the essential aspects to consider:

#1 Fees 

An important factor to consider is fees. Different exchanges charge fees for their services, so you must compare them before selecting an exchange. You also need to consider whether the fees are worth it concerning the features and services offered by the exchange.

#2 Reputation

The reputation of the exchange is also critical. You want to ensure that you select a reliable exchange with a good reputation in the industry. There are many review websites where you can read about other people’s experiences with different exchanges.

#3 Payment Methods 

When you’re ready to start trading, you need to deposit funds into your account. Different exchanges accept different payment methods, so you must ensure that the exchange you’re considering supports your preferred payment method.

#4 Location & Restrictions

The exchange location can also be important, depending on your needs. To trade internationally, you must ensure that the exchange supports that. Some exchanges only operate in certain countries or regions, so this is something you need to check before selecting an exchange. It is also important to consider the restrictions that the exchange imposes. Some exchanges only allow certain transactions, while others have no restrictions.

#5 Exchange Volume

When looking at cryptocurrency exchanges, it is essential to consider the exchange volume. This measures how much trading is taking place on the exchange and can give you an idea of its liquidity. The higher the exchange volume, the easier it will be to buy and sell your chosen cryptocurrency.

#6 Crypto Wallet Support

When selecting a cryptocurrency exchange, one of the key factors to consider is the type of wallet support offered. There are various types of wallets, and not all exchanges support all types. So, it’s important to ensure that the exchange you’re considering supports the kind of wallet you’re using or plan to use.

#7 Hybrid Nature

One of the key factors you need to consider when selecting an exchange is the hybrid nature of the platform. This means that the platform can support traditional fiat currencies and digital assets.

The benefits of a hybrid platform are numerous. 

• It allows you to convert your fiat currency into digital assets efficiently. This is especially useful if you want cryptocurrency to make online purchases or payments. 
• The platform provides more stability and security than purely digital.

#8 Core Features

To ensure that your trading experience is as smooth and profitable as possible, you need to choose a cryptocurrency exchange that offers a variety of core features. These features include high throughput rates, minimum latency, enhanced order types, multiple security layers, and a perfect trade engine.

High Throughput Rates

High throughput rates are essential for traders who want to use their time to the fullest. With high throughput rates, you can make sure that your trades are executed quickly without any delays.

Minimum Latency

Minimum latency is another important factor to consider. When it comes to trading cryptocurrencies, every second counts. If an exchange has high latency, it can mean the difference between making a profit or taking a loss.

Enhanced Order Types

Enhanced order types allow you to tailor your trading strategies to your specific needs. If you’re looking for more flexibility and control over your trades, then enhanced order types are something you should look for in an exchange.

Multiple Security Layers

Multiple security layers help protect your funds from theft or hacks. When choosing an exchange, check out its security measures to ensure that your funds will be safe.

Last but not least, a perfect trade engine is a must-have for any serious trader. A perfect trade engine ensures that all trades are executed perfectly and without errors.

#9 Liquidity Management

A good exchange will have high liquidity, meaning it can handle large trades without affecting the price too much.

The exchange you choose should also have a good reputation for processing trades quickly and efficiently. You want to avoid being caught in a situation where you need to sell your assets, but the exchange cannot process your trade quickly enough, causing you to miss out on a good opportunity.

Finally, ensure you understand the fees associated with trading on the exchange. Some exchanges charge higher fees for certain types of trades, so it’s important to be aware of these before you start trading.

#10 Transparency

When looking for a cryptocurrency exchange, it is important to consider transparency. The exchange should be transparent about its policies and procedures and the fees it charges. It should also provide clear and concise information about the cryptocurrencies it lists.

The exchange should also be willing to share information about its security measures, including how it stores and protects user data. It should have a good reputation and be known for providing excellent customer service.

#11 Customer Support 

You should evaluate the customer support of the exchange. Good customer service is essential in case you have any issues or questions related to your account or trading experience. Most exchanges offer direct support via email and/or live chat, so be sure to check these out before selecting an exchange.

All in all, choosing a cryptocurrency exchange can be a daunting task. However, by considering these factors, you should be able to find the best exchange for you.

Examples

Here is a list of the latest statistics on exchanges, with sources:

• As of September 2018, there were over 200 active crypto exchanges worldwide (Source: CoinMarketCap )

• The top 3 exchanges by volume were Binance, OKEx, and Huobi Global (Source: CoinDesk)

• In terms of security, the top 3 exchanges were Coinbase, Bitfinex, and Kraken (Source: Blockchain.info)

• In March 2018, Japanese financial authorities recognized 11 cryptocurrency exchanges as official businesses (Source: CoinDesk). 

• In the US, Coinbase, and Gemini are two examples of regulated exchanges (Source: Investopedia). 

• The exchange rate is the price of one currency in terms of another currency. For example, the US dollar (USD) is worth 0.88 British pounds (GBP) (Source: Yahoo). The rate will fluctuate based on market conditions. 

• Transaction fees are usually a percentage of the trade amount and vary from exchange to exchange (Source: BlockGeeks). For example, Kraken charges 0.26% for trades made using their maker-taker model, while GDAX charges 0 .30% for trades made using their taker-maker model.   

So, when choosing a cryptocurrency exchange, consider factors such as volume, security, and other aspects mentioned through examples here as well.

EndNote

An important point to remember when choosing a cryptocurrency exchange is to understand the different types of exchanges and the associated risks. It’s also important to research each exchange’s security measures and potential fees or withdrawal limits. 

Considering all these factors, you can decide which cryptocurrency exchange works best for your needs. If you are about to build one for your business, choose the most trustable and best cryptocurrency exchange development company!