Cryptocurrency is a wildly popular new investment vehicle. Currently, there are over 20,000 cryptocurrency projects worldwide, and more than 295 million global crypto users buy and sell crypto every day.
If you’re interested in joining the cryptocurrency market, you need to open an account with a crypto exchange. With at least 500 to choose from, you will need to do some homework to find one that fits your needs.
What Type of Exchange Category Will Be Best for You?
Crypto exchanges fall into two categories: centralized and decentralized exchanges. Each has features that can be advantageous for you.
Centralized exchanges are managed by a single organization. They allow users to trade fiat currency directly to cryptocurrency and make jumping into crypto trading easy for new users.
However, centralized exchanges require users to expose their identity, which goes against the very heart of cryptocurrency. Additionally, centralized exchanges are more vulnerable to hacking.
Decentralized exchanges, like OKX, operate in the original spirit of cryptocurrency and allow users to remain unidentified. Many organizations facilitate crypto trades; individuals trade as well, and you may participate in peer-to-peer trading as well as larger platform transactions.
Decentralized exchanges can be far less user-friendly, and often do not offer fiat currency exchanges. You may have to pre-purchase a cryptocurrency to trade on a decentralized exchange. Peer-to-peer trading sometimes suffers from liquidity issues as well, making quick trades more difficult.
What Trading Features Will You Use?
Basic trading features that most crypto exchanges offer include how many cryptocurrencies the exchange offers for trade and the number of currencies accepted for purchases. Advanced features that may be offered include advanced order types, volume discounts for frequent traders, and margin accounts.
Other features you may want to look for include customer support services, storage options, and educational resources to keep you on top of new trends.
What Is the Fee Structure?
Most exchanges, both centralized and decentralized, have two types of fees that you must pay to trade crypto: trading fees and withdrawal fees. Advanced trading may have additional fees.
Trading fees can be structured as a flat percentage of the volume of crypto in your transaction, or they can be differentiated for each side of the deal. Since makers increase the liquidity of exchange while takers decrease it, some exchanges reward the maker side of the trade with a lower fee.
Sometimes exchanges do not call it a trading fee, and instead charge a fee on the spread – the difference between your buy and sell rates. This structure may seem attractive but often ends up being much more expensive, especially on lucrative trades.
Many exchanges charge a fee when you withdraw your coins from their system. These fees can add up, especially if you prefer to keep your coins in an off-site wallet instead of stored on the exchange.
Advanced trading often has additional fees. Margin trading and quick buys are two types of transactions that often carry additional fees.
Choosing the right crypto exchange can make jumping into the cryptocurrency market easier and more lucrative for you.