Buying cryptocurrencies: introduction
Are you thinking about buying cryptocurrencies? So, first, you need to know that Bitcoin is not your only investment option. There are several other cryptocurrencies to choose and each one has its particular advantages.
The second aspect to keep in mind is that buying cryptocurrencies is easier than you think. You just have to register with a cryptocurrency exchange company and then make your transactions! However, each exchange has its particularities and knowing how to decide on the best is fundamental to preserve your investment.
In this article, we are going to give you some tips to choose an exchange when your plan is buying cryptocurrencies. Let’s check it out?
Types of exchanges to buy cryptocurrencies
Before properly picking an exchange, you must decide in which type you intend to carry out your cryptocurrency transactions. There are two types of exchanges. They are:
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Centralized exchanges (CEX): It works similarly to the stock market where there is an intermediary responsible for matching a cryptocurrency purchase order with a sales order. It is not an anonymous process and the exchange controls the operation – hence called centralized. However, the registration is easier in a CEX.
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Decentralized exchanges (DEX): there are no intermediaries in between and you negotiate the cryptocurrencies directly with those intending to buy from you or sell to you.
The key difference between the two options is the privacy issue. When selecting a centralized exchange, it is important to check the liquidity and the volume of transactions the company carries out. This will show you the platform’s ability in quickly meeting your demands.
Pay attention to the functionalities
As we said before, not all the exchanges work in the same way: some may trade only one type of cryptocurrency, others commercialize several types, some allow specific forms of transactions while others not.
After deciding between a DEX and a CEX, therefore, you must pay attention to the functionalities each platform offers – it has to meet your needs in the assets and type of transaction you are willing to make.
Some crypto exchanges also offer advanced trading features. It can be good, but only if you know how to use them. For those that are still beginning, a simpler platform is the best option.
Check the transaction fees
Each cryptocurrency exchange has its specific fee structure. The key here is not necessarily choosing the one that offers the lowest rates but to perceive how each fee structure fits your investor profile.
If you plan to become a day trader, or even want to buy cryptocurrencies frequently, you will not want to pay high fees for transactions that you make. On the other hand, if you are a more conservative investor and your idea is to make sporadic purchases, fees are not so relevant in your selection.
One important tip is to look at all the fees. An exchange may charge a fee for buying, another for selling, and even a third for transactions in different cryptocurrencies. Make sure you are aware of each one of them.
Cryptocurrency exchange’s security
The security of your data and money is always important when buying cryptocurrencies. A good cryptocurrency exchange will offer multi-factor authentication to your account, that is, an authentication that requires at least two pieces of evidence of your identity.
In addition to that, it is important to examine the exchange’s reputation and to find out if it has already been the target of any type of cyber attack (if it has happened, is also important to check how the exchange dealt with the situation).
However, protected as a cryptocurrency exchange may seem, all are subjected to attacks. For this reason, it is a good idea to keep your funds in a wallet rather than in an exchange. Wallets are developed specifically to store cryptocurrencies and, thus, they have much more robust security mechanisms.
You can also find out whether the exchange has an insurance fund or not. Some platforms keep funds to compensate clients in specific circumstances.
User experience
User experience (UX) matters a lot when buying cryptocurrencies, especially for those begging. A platform that has an intuitive design will help you to learn more about the cryptocurrency market and will prevent difficulties when making your transactions.
Research on internet forums to find out what other users have to say about the cryptocurrency exchange of interest. The experience of those that have already used the service is the best way to find out if an exchange will meet your needs or not.
Do you want to learn more? Check also how mining cryptocurrencies works and find out everything about it!
