How to choose an exchange

There are lots of crypto exchanges out there. What do you look for when choosing one?

So you want to buy (and ultimately sell) crypto. Good for you: you’re ahead of most of the rest of the population. In the coming years, that could prove a great decision. The problem is, there are a lot of crypto exchanges out there. A LOT. So, what do you look for?

Well, the answer is, of course, ‘It depends’. There are many exchanges and they specialise in different things. If you’re looking to trade bitcoin for profit, you might want one kind. If you’re looking to buy and sell altcoins, your needs are different again.

But assuming you’re just starting out and simply want to buy some bitcoin, here are some of the factors you need to consider in choosing an exchange or broker. (Exchanges let you buy and sell bitcoin from other customers; brokers sell you the coins themselves.)

• Jurisdiction. Depending on where you live, different exchanges and brokers will be available to you. They have different banking arrangements, and it may be hard (or impossible) to deposit funds from certain areas, and if not perhaps expensive and time-consuming. It’s generally best to pick an exchange that has banking arrangements in the same country as your bank. Many large exchanges offer several options.
• Liquidity. Smaller exchanges don’t tend to have great liquidity, meaning that a large buy or sell can cause ‘slippage’ – the price you get is worse than you expect. If you’re looking to buy large amounts of BTC, go for a bigger exchange (they tend to be safer too).
• Fees. Different services have different fee structures. If you’re just looking to buy some BTC and hold for the medium-term, this won’t be too much of a problem. If you want o trade, then it’s a bigger factor because every buy or sell will incur a small cost. Brokers tend to have higher fees than exchanges, but they’re designed for lower turnover.
• Storage. It is extremely important that you store your coins securely. If you don’t know how to do this yourself, it’s vital you learn how to create and use a Bitcoin address. You can store coins on exchanges, but it is not recommended. However, certain services are designed with secure storage in mind, and these can be a reasonable second-best option. Check out the reputation of the exchange/broker, their security measures, how often they are audited, whether they are insured, etc.

If you’re looking to buy and sell bitcoins for fiat (dollars, euros etc), then you realistically have a limited number of options. There are many, many smaller services, but you will get the best prices with one of the big players – and they’re more secure and reliable.

• Coinbase. Good for US-based buyers but also serves other markets well. Brokerage and secure coin storage.
• Bitstamp. Euro-area exchange with USD markets. Good for most of Europe but you will need to organise your own storage.
• Uphold. Excellent brokerage service, working with many currencies. Good for storage. Worth investigating for building a long-term portfolio, wherever your location.
• You can also use smaller peer-to-peer services like LocalBitcoins, but you’ll need to be happy with setting up your own bitcoin wallet.

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