How can I select an ideal cryptocurrency exchange?
You now feel confident and ready to own your first coin. Maybe it is bitcoin which is the most popular digital currency, or Ethereum which is also gaining momentum. Most likely, the big question ringing in your mind is “where can I buy my digital coin?” “What exchange is preferable to me?” This blog will help you go through the process of selecting an exchange without experiencing headaches. Read to the end and learn more about Cryptocurrency exchanges and the criteria of finding one that suits your needs.
A cryptocurrency exchange is an online market where cryptocurrencies are exchanged for dollars or alt coins. As you are getting started in the Cryptocurrency journey, the first step should be to know how to buy the digital coins. Cryptocurrencies are bought and sold through online services called exchanges. Most important in this initial stage is to know and select the right exchange. One you can trust since you will be investing your money there. Many exchanges are coming up worldwide, and some are vulnerable to attacks from fraudsters.
Before selecting an exchange, note the factors below. Note that these are my suggestions to help you make the right decision. They are prone to change depending on circumstances and the market. You just need to do your homework prudently before taking the step! As the digital currencies continue to grow popular, new exchanges have been introduced to the market and careful scrutiny is necessary.
Selecting an Exchange
i) Transferring Fiat (paper money) currencies
First and foremost, you need to know where the exchange is located. You should be familiar with the rules and regulations of your country and the country the exchange is based. What is legal in one county may be illegal in another. You need to be careful when buying from international exchanges. Check the fine print in their terms of service. What currencies do or don’t they accept? Some exchanges accept several multiple currencies while others don’t.
ii) Ways of Payment
You also need to consider ways of payment. In most cases, you can transfer your fiat currencies to an exchange using a credit card, pay pal, wire transfer, mobile payment among other ways. While transferring your money, choose the most convenient, private and secure method. For instance, you may not want to use credit cards if you want to remain anonymous.
The fees involved when transferring your money should be taken into consideration too. The fees vary from one exchange to another and from time to time. Ensure the charges are within what is charged in the market. Different ways of payment also charge different fees. For example, when you buy with a credit card, you are often charged a fee of 3-10%. However, credit cards are convenient but lack privacy. In most cases, deposits with bank transfers are free at most exchanges. However, it is important to note that banks usually charge exorbitant fees to transfer money abroad.
You can find the information about fees charged on every exchange’s website. Take an example of bitcoin which is most popular. You need to compare a local bitcoin exchange’s prices to a bitcoin price index. If an exchange constantly has significant high prices than others, it is a red light hence you need to avoid that particular exchange.
iv)Security and Privacy
Before you buy from an exchange, make sure its website is secure. This is very crucial and should not be overlooked. First, ensure the website domain has a HTTPS address. This shows that the site and your connection to it is secured by an SSL (secure sockets layer) encrypted protocol. There should be a padlock symbol next to the URL or in the bottom of the browser window.
Another crucial consideration is the two-factor authentication (2FA) secure login. When you enable two-factor authentication on an exchange that has this service, you will be prompted to enter a short code at login that will be sent to a mobile device which you will pair with the service. Enabling two-factor authentication will provide a second layer of verification that is required to access your account.
At the initial stage, most exchanges have to verify your identity when opening an account but subsequently buying or selling will be instant. Do proper research on the verification processes and the speed of service involved with each exchange from their respective websites.
Exchanges which follow Know Your Customer (KYC) or Anti-Money Laundering laws in their specific countries may require you to send them some personal identification information. While registering on some exchanges I have been forced to provide selfies of me holding my passport next to my face, crazy, yet this is a normal verification process.
The law also requires credit cards and bank transfers to collect some personal information. If you want to remain anonymous, then you may consider buying from a local contact through LocalBitcoins, where you can exchange cash directly for bitcoins.
For increased security, do not keep your coins at the exchange offered wallet for long as it exposes them to attacks by fraudsters who may hack the exchange. Exchange hacking is real. In what will be considered as the biggest cryptocurrency theft on record, a Cryptocurrency exchange in Japan called Coincheck was hacked and $530 million was stolen from its users in January this year and matter still under the Japan government investigation. The one on record as the highest theft at present is the $450 million in bitcoin stolen from the Japanese exchange Mt. Gox in 2014.
v) Coins available
Very few exchanges offer a wide variety of cryptocurrencies. Most offer Bitcoins and Ethereum. It is better if you choose an exchange with a diverse number of coins.
The ease of buying or selling your cryptocurrencies will depend on the number of the sellers and buyers available. A high number of buyers/sellers will increase liquidity which will also assist you to achieve faster transactions and discover prices more.
vii) Quality of Customer service
How long does it take you to get a response from support? If the verification process, deposit/withdraws, orders placed or reflection of trading activities takes long, you will be very anxious and may compromise on your time schedules, well-being and money.
viii) Ease of use
The user interface of your preferred exchange should be simple, with no confusion. The processes involved in navigating through the system should not be complicated.
Ensure you look for customer feedback and experiences regarding the service. You should be able to use and trust the exchange you select. The user experience is very important as it can give information that you will not be able to notice at a glance.
With the above information, you are now better placed to make a decision on the right exchange to use. You can choose to use more than one exchange depending on your expectations. Most important, choose an exchange now and get down to business! In Kenya the most popular exchanges are LocalBitcoins and Remitano.