How to Choose a Cryptocurrency Exchange: 7 Essential Features

There are over 1600 active cryptocurrency exchanges trying to entice crypto traders and investors. In this article, we’ll discuss seven essential features you should look for when choosing the best crypto exchange. 

1. Location

There is a sea of crypto exchanges to choose from, but not every exchange is available to every investor. Many cannot cater to citizens in the US, China, or the countries on the sanctions list like North Korea, Syria, and Iran. Within the US, local regulations may vary depending on the state. When picking an exchange, you should first find out if it operates legally in your country or state. To be on the safe side, you should also check your local crypto assets regulation and taxation. Circumventing the law by using a VPN is not recommended as you might lose access to your funds and have no legal background to sue nor the knowledge of the other countries’ jurisdictions. 


2. Fees

Trading fees are standard operational fees you pay exchanges to execute your transactions. They are usually expressed as a percentage of your trade amount, or sometimes as a flat rate. A trading fee is deducted from your total transaction worth every time you sell or buy your cryptocurrencies

You should browse your chosen exchanges to check their fees. Below, you’ll find a fee comparison of bigger global exchanges valid as of May 2019. 

Other fees may include deposit and withdrawal fees when you put or take out your currencies off the exchanges, and margin trading fees. Margin trading includes leverage trading (broker loans) and usually comes with extra fees. 

Source: Medium.com

3. Liquidity and Volume

Two of the most important statistics for the exchanges are liquidity and volume. Liquidity expresses the amount and the size of the buy and sell orders in the order book. Volume is the amount and size of the actually executed transactions. Both of those stats can inform traders if it’s likely that the exchange is popular and has many sellers and buyers. If so, you have higher chances of quickly buying or selling your assets for the right price, especially in the volatile crypto market

In practice, both of those statistics are often falsely inflated. Malicious players can set large buy or sell walls (large orders impossible to fulfill) inflating liquidity. The exchanges have also been shown to manipulate their volumes by trading with each other or between their own accounts. Recently, a CER CER organization emerged, offering volume verifications. 

4. Exchange Pairs

The term ‘pairs’ in crypto refers to the cryptocurrency pairs available for trading on the exchange, for example, Bitcoin-Ethereum or Ethereum-Dogecoin. It means you can exchange Bitcoin into Ethereum and vice-versa, or Ethereum into Dogecoin and vice-versa, on the platform. Not all exchanges offer all pairs, so you should make sure your favorite platform supports the coins you want to trade and carries the right exchange pairs.

5. Fiat Deposits and Withdrawals

Fiat is the standard currency like dollars or euro. Some platforms will allow you to use your credit card, bank transfer, PayPal, or debit card to purchase cryptocurrency with your local currency or to withdraw your assets into fiat. It is not a necessary feature, but it makes investments easier if you are a beginner. Without a fiat feature, you will need a secondary exchange or platform to buy cryptocurrencies or withdraw your assets.