A bank or investing firm can’t just sell you crypto. You’ll need to open a crypto trading account on a cryptocurrency exchange platform to exchange your U.S. dollars (or any other currency) for cryptocurrencies like Bitcoin and Ethereum.
The details experts recommend evaluating before choosing a crypto exchange, and why choosing the right crypto exchange is so important.
Cryptocurrency exchanges are what they sound like.
A On a crypto exchange, you can buy and sell cryptocurrencies. By using exchanges, you can exchange one crypto for another – for example, convert Bitcoin to Litecoin – or purchase crypto using regular currency, such as the U.S. Dollar. The prices of cryptocurrencies on exchanges are based on the current market. On an exchange, it is also possible to convert cryptocurrencies back into US Dollars or other currencies, following which you can withdraw to your bank account or leave them in your account as cash (if you decide to trade back into crypto later).
How to Choose an Exchange
Providing accessibility
Due to state or national regulations, you may not be able to buy or sell cryptocurrency on certain exchanges due to your location. The citizens of some countries, such as China, are forbidden from using crypto exchanges.
On its website or in its terms of service, exchanges often state their geographic limitations and other accessibility factors, like which currencies they accept.
Keeping data secure
You may be able to protect your cryptos from hacking or fraud by purchasing an insurance policy through your exchange.
Irrespective of whether you plan to keep your crypto holdings within an exchange or only have them there for a short time prior to moving them into your own online Bitcoin wallet, the security of the exchange should be your first concern.
Additionally, you can look into general online security measures, such as two-factor authentication, that you are already familiar with on other platforms. You will need to verify your identity each time you log in, not just using your username and password, but also by entering a code you receive by text message.
Service fees
The fee structure is another consideration, but don’t be turned off by a high fee structure. Spencer Montgomery, founder of Uinta Crypto Consulting, a program for investors to learn about cryptocurrency, says, “The easier it is for you to buy it, the more fees you will have to pay.” However, higher fees may be worth it for the insurance and protection that larger, more popular exchanges can provide.
Financial liquidity
In order for your crypto to be liquid, the exchange you select must provide enough trade volume for you to be able to sell it whenever you need it. Size matters here as well. Trade volumes tend to be higher on exchanges that are more popular.
Coins being offered
The thousands of cryptocurrencies that exist are not all offered by every exchange.
Any exchange you’re considering will have a popular coin that you’re interested in, such as Bitcoin or Ethereum. A bit more research may be needed on newer altcoins, coins with little market capitalization, or meme coins.
Stored information
Cryptocurrency enthusiasts may disagree on the topic of storage. Many people adhere to the belief that their keys are not their coins, or that they should hold the public and private keys associated with their crypto holdings themselves rather than having them held by their exchange.
In summary
You can also consider other factors based on your preferences, Boneparth says, such as how well you like the platform’s mobile app and how easy the exchange is overall to use. Experts say that learning about crypto before investing money is one of the most helpful things you can do, but we hear that time and time again when it comes to crypto.
