As cryptocurrency become more popular, it’s important for anyone looking to invest in them to be familiar with the best exchanges. Cryptocurrency exchanges are online platforms where you can buy, sell, and trade cryptocurrencies like Bitcoin and Ethereum. They’re also the first stop when it comes to getting started with cryptocurrency since they let you purchase your first virtual coins for other digital currency or traditional currency like US dollars or Euro.
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How Do Crypto Exchanges Work?
To use a crypto trading platform, you will need to register with it first and comply with its verification process to authenticate your identity.
The verification process might vary from one exchange to the other. While some crypto exchanges won’t ask you for anything more than your email ID, others might require you to complete stringent KYC (Know Your Customer) checks such as photo upload, id verification, address verification, etc. before onboarding you to their platform. This is basically to comply with their KYC (Know Your Customer), CFT (Combating the Financing of Terrorism) and AML (Anti-Money Laundering) measures.
Please note, even though it’s entirely up to you whether you use non-KYC or KYC exchanges, the latter can prevent you from dealing with antisocial elements and also reduce the risk of fraud.
Your account will get opened after completing the verification process. Thereafter, you can deposit funds into it, using a currency and payment method permitted by the platform. Exchanges normally allow multiple deposit/withdrawal methods including debit cards, credit cards, bank drafts, wire transfers, e-wallets, Paypal, wallet transfers, etc.
Once you’ve deposited funds into your exchange account, you can use them to trade cryptocurrencies available on the platform. The funds can be withdrawn anytime either in crypto or in fiat by placing a withdrawal request.
Crypto exchanges facilitate crypto trading via ‘Buy’ or ‘Sell’ orders that are matched by the platform’s software.
To sum it all up, a crypto exchange is essentially an online marketplace where you can buy/sell cryptocurrencies from/to other traders, based on their current market price. The exchange works as an intermediary between the buyers and sellers and charges a fee for its services.
Different Types of Crypto & Bitcoin Exchanges
There are different types of cryptocurrency and Bitcoin exchanges catering to different trader types. Below are the four main types you will find in the market:
- Centralised Exchanges (CEX)
These work quite like conventional stock exchanges, with a central authority having complete control over the product, function and service. Interestingly, the concept of a centralised exchange is quite contradictory to why cryptocurrencies were invented in the first place, which was to free the financial world from the authoritative, and singular rule. The funds are held by the exchange and the available trades can be crypto-crypto, fiat-crypto or both.
- Decentralised Exchanges (DEX)
These are crypto exchanges that facilitate peer-to-peer trading of cryptocurrencies. All functions of the crypto exchange, including crypto assets exchanges, order matching, order books and capital deposits are decentralised, in the true spirit of cryptocurrency. There is no central server and no possibility of a single point of failure.
These are websites that function more like local dealers that can buy/sell cryptocurrencies from/to you against your local currency. Whilst many of them provide automatic buy/sell orders, they don’t offer crypto trading facilities.
Fiat-Crypto exchanges are the ones where you can purchase a cryptocurrency using a fiat currency. Extremely popular amongst starting-out crypto investors, these enable easy access to cryptocurrencies to the general populace. On the contrary, Crypto-Crypto or Pure Exchanges are the kinds where you can trade only in cryptocurrencies, with no provision for fiat-crypto exchange.
Hybrid exchanges combine useful components of centralised and decentralised exchanges. They take the security of decentralised exchanges and the scalability of centralised exchanges into a single platform. They are still a growing development
Key Things to Consider When Choosing the Best Crypto Exchange
- Exchange User Interface: When it comes to finding the best cryptocurrency exchange, one factor that is often overlooked is the user interface. A good user interface is important for two reasons: first, it makes it easy for you to find the information you need; and second, it makes it easy for you to trade. The best exchanges have a user-friendly interface that is intuitive and easy to use.
- Account Opening and Verification Process: The account opening and verification process is important when choosing a cryptocurrency exchange. The process should be simple and straightforward, with clear instructions on how to verify your identity.
- Exchange Security: When it comes to choosing a cryptocurrency exchange, security is paramount. You want to make sure that your funds are safe and that the platform is secure. Look for exchanges that have implemented industry-leading security measures, such as 2-factor authentication and cold storage.
- Fees and Commissions: All exchanges charge fees for their services, and these fees can vary widely depending on the exchange. Some exchanges charge a flat fee per trade, while others charge a percentage of the total trade value. Some even charge different fees for buying and selling! When comparing exchanges, be sure to take fees into account.
- Support Options: The best cryptocurrency exchanges offer a variety of support options. These can include online chat, email, and phone support. Some also have social media channels where you can get help. Look for an exchange that offers the level of support you need.
- Payment methods: A crypto trading platform would be of no use to you if it doesn’t offer a deposit/withdrawal method of your choice. Make sure it does before signing up with any. Deposit funds can be both fiat currency or crypto. The top platforms we’ve come across accept bank deposits in local currencies for all jurisdictions they operate in. For jurisdictions where bank deposits are unfeasible, like Nigeria where banks don’t process crypto transactions, third-party options like electronic wallets should be made available. The ultimate third-party deposit method is a p2p marketplace. Not all major exchanges have p2p markets, which makes those that do more desirable as these marketplaces have a wide range of payment methods
- Supported coins: All reputed exchanges offer a large variety of cryptocurrencies to cater to all types of investors. Ensure that the exchange you have in mind allows crypto trading in the cryptocurrency that you are interested in.
- Exchanges domiciled in the US usually have a limited collection of coins compared to their global peers. While an exchange that offers 65 cryptos may be considered limited by global standards, it is an appropriate number for a US-based exchange, although Coinbase which is US-based, offers 193 cryptos.
- All the exchanges on our list also offer fiat-to-crypto pairs like BTC/USD and crypto-to-crypto pairs, also called crypto crosses, like ETH/AAVE. For global crypto exchanges, fiat-to-crypto pairs should exist for major currencies (USD, GBP, EUR, AUD, CAD).
- For crypto crosses, major cryptos should cross with USDT, USDC, or stablecoins that are native to certain platforms, like BUSD for Binance, e.g. BTC/USDT, ETH/USDC, AVAX/BUSD.
- Privacy: If you’re someone who desires a high degree of anonymity, you should go with an exchange that doesn’t ask for a lot of personal details Centralised exchanges are not the best option for anonymity as they require users to pass KYC before operating a fully functional account. Nevertheless, security on these platforms should be airtight. Your platform of choice should also conform to cybersecurity best practices and have certifications like the ISO 27001:2013 to prove it.
Reputation
Before signing up for an exchange, always read peer-written reviews. Sites like G2 and Trustpilot are great for finding independent third-party reviews. Some exchanges work well in certain regions but perform lacklustre in others.
A good example is Binance. Reviews on G2 are positive with an overall rating of 3.8 of 5.0 while Trustpilot reviews are mainly negative with an overall rating of 2.0 of 5.0. Comparing both reviews, we found that Binance doesn’t work well in the Middle East.
Another place to monitor reputation is the news. Some exchanges are constantly embroiled in regulatory issues. These exchanges are high risk as they could be smacked with restrictions that affect your ability to withdraw your funds.
Finally, skim through the platform operating history. Do they have a history of suddenly suspending withdrawals due to legal issues? Have any C-level executives gotten into trouble with the law? If so, then you want to tread carefully.
Regulation
Regulated platforms are more legitimate in the eyes of the law than their unregulated peers. You are less likely to lose your funds with regulated platforms. Each country has its regulatory agencies. Here are some of the popular ones in various countries:
In the US, there is no concrete legal framework for regulating cryptocurrencies, so exchanges do not fall directly under the purview of the SEC, however, they are regulated by the Bank Secrecy Act (BSA), must register with the Financial Crimes Enforcement Network (FinCEN), and must comply with Anti-Money Laundering (AML) laws.
Cryptocurrency exchanges like eToro, on the other hand, fall under the SEC and must be registered with the SEC and fall under their purview. eToro is fully registered with the SEC.
In the UK, exchanges are regulated by the Financial Conduct Authority and are beholden to AML and Combating the Financing of Terrorism (CFT) laws. Crypto exchanges are not allowed to offer crypto derivatives to citizens.
In Canada, exchanges operate under the domain of provincial regulators. Crypto investment firms like Nexo must register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
Australia is friendly towards crypto exchanges and only requires them to register with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and meet clear-cut AML/CTF obligations.
In the Eurozone, cryptocurrency is currently legal, however, authorities have been pushing a Markets in Crypto Assets (MiCA) regulation that is said to bring the same transparency and credibility that the traditional finance sector enjoys. In the meantime, exchanges must adhere to AML and CFT laws.
In Japan, cryptocurrencies are considered legal property and are regulated by the Payments Service Act (PSA). Exchanges must register with the Financial Services Agency (FSA) and adhere to AML and CFT guidelines.
Wallets
Most exchanges on our list offer secure web wallets associated with their accounts. These wallets come with certain limitations. For example, you can only withdraw and deposit from them. You cannot use them to qualify for external airdrops or purchase activities. You do not hold their private keys and are not in control of the wallet, hence, you are entrusting your funds to the exchange.
If you must leave your coins on an exchange, ensure that it is regulated in your region. Exchanges like eToro are safe because they are regulated by several agencies in numerous jurisdictions.
If you are unsure about the regulatory status of your chosen exchange and they seem to obscure that information, you may not want to leave your funds on their platform.
Unique Features
Buying and selling cryptos is a base feature that all exchanges possess. To stand out, they include other unique features and services. For example, Nexo extends crypto-backed loans that do not require a maintenance fee, and eToro has a Copy Trader feature that allows newbies to copy the trades of more experienced users.
For traders, FTX has some of the lowest fees at 0.02% for makers and 0.07% for takers. FTX also subsidised crypto withdrawals, making them free for certain blockchains.
For investors looking to grow their funds, Binance offers flexible saving pools that generate returns anywhere in the range of 2% – 30% per year. This return is higher for locked funds.
Coingecko shows that there are 531 cryptocurrency exchanges worldwide with a total market cap of about $945.62 Billion and 24 hours trade volume of about $54.59 Billion. 79% of daily average trade volume is generated by the top 10 cryptocurrency exchanges on Coingecko.
When it comes to choosing the best cryptocurrency exchange, there are a lot of things to consider like fees, security, ease of use, and location are just some of the factors that come into play (as shared above). And with so many exchanges out there, it can be hard to know which one is the best for you. Here are few top exchanges that you can consider choosing from:
Binance
Binance is a popular cryptocurrency exchange that offers a wide variety of altcoins. It is also one of the most affordable exchanges, with low fees and a variety of payment methods available. mobile app and probably the fastest growing exchange. If you need to pick only one, this is the best
Sign up with Binance today
Kraken
Kraken was another early platform, founded in 2011. It allows you to buy/sell/trade Bitcoin as well as Litecoin, Dogecoin, Ripple, Stellar/Lumens, Monero, Ethereum, and many others. It supports many currency “pairs” (for example, USD with Ripple, Monero with Yen, etc.) and supports more fiat currencies than Coinbase. It takes credit card and bank transfers of fiat currency and charges significantly lower transaction and deposit fees than Coinabse. Overall, it has a great reputation in the crypto community.
Kraken’s worldwide reach is better than Coinbase, and it offers a number of trading features, including margin trading. While its platform is much more robust, it is also confusing and counterintuitive. There is no mobile support, the website can be slow to process trades, and their customer support has a mixed reputation. In short, Kraken is a good option for experienced traders, especially those operating outside of the U.S., but is not as good for beginners.
Poloniex
Poliniex is a US based company and has one of the highest volumes of trade of any exchange. It supports margin trading and allows trades of over 90 pairs. It doesn’t accept fiat currencies, however. To use this exchange, you would need to purchase Bitcoin or other cryptocurrencies elsewhere and then transfer them to a wallet on the platform. Its user interface is simple, but relatively straightforward. Its fees are very low (less than .25%), and it has an excellent security reputation and history.
However, their customer service is notoriously bad; there are anecdotal examples of support tickets waiting for 90 days or more. Withdrawing funds can be difficult with Poloniex as well; some have waited months to do this. Their terms of service also prohibit class action lawsuits against the platform and gives them the unilateral ability to terminate your account for any reason.
Privacy is also a concern; they use a tiered approach in which each “level” of trading requires you divulge more personal information. The more you want to trade, the more information you have to reveal. If low fees are your priority, this might be an option, but Kraken provides a similar service with a better community reputation.
Bittrex
Bittrex is another crypto-only platform (no fiat currencies). It charges slightly higher fees than Kraken, especially on larger trades. Bittrex has repeatedly been the target of phishers who try to get login information but has repaired its reputation and aggressively invested in security measures.
Like Coinbase, it holds the majority of its funds offline, increasing its security, and has an excellent customer service reputation, in part because the company is trying to fix its public image. It has no mobile app, and is less beginner friendly than Coinbase, but also offers significantly more currencies (over 190, compared to Coinbase’s
Gemini
Gemini is a cryptocurrency exchange founded by the Winklevoss twins, who are also known for their involvement in Facebook. Gemini is a regulated exchange and has been praised for its security measures.
Many beginner users buy Bitcoin using Coinbase, and then migrate their holdings over to Bittrex to use the more advanced features after they are more experienced. Its community reputation is similar to Kraken; it’s slightly more expensive on big trades, but also offers a smoother user interface.
BitMEX
speaking of older exchanges, another “OG” cryptocurrency exchange to add to the list is BitMEX which has been around for almost a decade. In fact, recently they just launched their spot exchange and are offering an exclusive limited-time welcome offer to new traders. This may very well be the best deal in town.
eToro
One trading platform that has managed to garner attention from both newcomers and experts alike is eToro. eToro allows users to trade in various assets which includes commodities, stocks, indices, crypto assets, and currencies on their powerful yet user-friendly platform.
Launched in 2007, eToro has rapidly become an award-winning social trading feature to connect with over 25 million users worldwide. Apart from trading, eToro has various advanced charts and analysis tools to enhance your trading experience and better decision making.
Final Thoughts
The best crypto exchanges make it extremely easy to buy/sell cryptocurrencies and are contributing greatly to the world’s changing perception of cryptocurrency, money and finance as a whole. Furthermore, these crypto trading platforms continue to be the most preferred means for buying and selling coins for the majority of people.
Binance is the best crypto platform overall as its vibrant community of users and social features create an environment where users can learn from more experienced peers. Binance also makes it easy for new traders to get a leg up on investing.
It also supports several deposit methods like bank transfers, credit/debit cards, electronic wallets like Neteller, and the eToro Money account. Deposit limits are favourable at a minimum of $10 while withdrawal fees remain flat at $5 regardless of the amount withdrawn.
Trading fees remain affordable at a 0.75% – 1% markup to raw spreads which applies to both spot trading and crypto CFDs.
Every crypto app in our guide is the best at a specific function which represents areas that customers look out for in crypto apps
This guide helped to look at the key points you should keep in mind while choosing them and the top exchanges in 2022.
