A cryptocurrency exchange is a digital marketplace for buying and selling cryptocurrencies. On an exchange platform, you can trade cryptocurrencies for one another, convert fiat into crypto, and vice versa.
This post will cover everything you need to know about cryptocurrency exchange – How to buy cryptocurrency? Which is the best cryptocurrency exchange? How to buy bitcoin and much more.
Let’s get started.
What is a Cryptocurrency Exchange?
Put simply, a cryptocurrency exchange is an online platform that facilitates crypto trading. It is where you can buy and sell cryptocurrencies, convert fiat into crypto, and one crypto coin into another.
Cryptocurrency exchanges act as intermediaries between a cryptocurrency seller (maker) and a buyer (taker). Similar to traditional stock exchanges, the exchange platform doesn’t set the price of the digital asset. Instead, supply and demand dictate the prices.
If you aim to profit from crypto trading, you must be well aware of the profitability of various crypto trading pairs. In a trading pair, one cryptocurrency is traded for another cryptocurrency or a fiat counterpart and vice versa. The popular crypto trading pairs are BTC/USD, ETH/USD, LTC/USD, BTC/ETH, BTC/LTC.
Types of Cryptocurrency Exchange
As discussed earlier, cryptocurrency exchanges match buyers and sellers.
Based on how they work, exchanges are divided into three types –
- Trading Platforms – Online sites that connect buyers and sellers
- Direct Trading – These platforms involve peer-to-peer trading. Each seller sets their ask price, and the buyers navigate the best deal for them.
- Brokers – Cryptocurrency Brokerage platforms are ‘Over The Counter (OTC)’ market; here, brokers set the price of the digital asset.
Cryptocurrency exchanges are also classified as –
- Centralized Exchange (CEX) – Exchanges that are governed by a central authority
- Decentralized Exchange(DEX) – Exchanges that operate without a central governing figure- instead, the trades are executed using smart contracts.
What do I look for in a Cryptocurrency Exchange?
Not all cryptocurrency exchanges are created equal. They vary in safety, security, fees, the amount of control over your funds, etc.
Here’s what you should look for in a cryptocurrency exchange –
- Liquidity – Remember, the price of the digital asset is set by the demand and supply ratio. Thus, the more liquidity the exchange has, the faster and cheaper you can execute your trade.
- Credibility and security – Exchanges have gained negative publicity due to losing millions of dollars in thefts. As a result, you must check the exchange’s credibility and security before trusting your funds with them.
- Availability – Due to crypto regulations, not all exchanges will be available across the globe. So, while choosing an exchange platform, confirm its availability in your region.
- Available cryptocurrencies – Not all exchange platforms have an extensive catalogue of crypto tokens. Thus, check the availability of the crypto asset you wish to trade.
- Transaction fees – Different exchanges charge varying transaction fees. Choose an exchange that fits your budget.
- Payment and withdrawal options – Banking options range from wire transfers, direct bank transfers, PayPal, gift cards, etc. You should choose a platform that offers several cashiering and deposit options.
Best Cryptocurrency Exchanges
For your convenience, we have compiled a list of the top three cryptocurrency exchange platforms. If you are looking for a DEX, Uniswap is the market leader.
According to CoinGecko, Binance has the highest 24hr trading volume. If crypto-to-crypto trading is your thing, Binance must be your go-to choice.
Binance is the amongst most popular platforms as it provides high liquidity and charges only 0.1% transaction fees, which can be further reduced if you pay in Binance (BNB) token.
- Lower transaction fees
- Available worldwide
- High trading volume
Coinbase ranks second when it comes to 24hr trading volume. However, with over 13.3 million users worldwide, Coinbase is a trusted and reliable exchange. If you wish to convert your fiat reserves into crypto, Coinbase is for you.
- Accepts fiat currencies
- Lists only the most popular cryptocurrencies
Kraken is well-known for its security features and low transaction fees. It is undoubtedly one of the most respected exchanges out there. Kraken is the leader when it comes to euro trading volume.
- Fiat currency trading available
- Low trading fees (0% – 0.26%)
How to Buy Bitcoin?
Buying Bitcoins or any other cryptocurrency involves similar steps.
Here’s a breakdown of steps for buying bitcoins –
- Register yourself on an exchange platform by completing the KYC requirements.
- Deposit funds in your exchange account.
- Place buy order for bitcoins.
- Once you receive your BTC units, transfer them to a wallet.
Thanks to blockchain innovation, cryptocurrencies are becoming more and more popular. Considering their increasing value, it is wise to buy cryptocurrencies. For this, you must choose an exchange platform and buy the crypto coin of your choice. Remember, the crypto universe is hugely volatile; do your research before purchasing or investing in crypto assets.