The crypto boon has gone beyond the point of speculation. Internet users have gone from asking whether investing in a crypto asset is reliable to asking which coin offers the best benefits. Even so, despite the wide coverage in awareness and understanding, there are still gaps that developers are having trouble passing across to interested and invested blockchain enthusiasts. One of such gaps is the choice of centralized exchanges (CEX) or decentralized exchanges (DEX).
In truth, choosing to trade cryptocurrencies and other crypto assets with CEXes or DEXes is a decision only a user can make. Both trading platform categories have their pros and cons. However, the theme of this article is the top 6 CEX platforms making the rounds at present, so we will focus on these platforms and leave their DEX counterparts for later.
You need an exchange to get your hands on a crypto asset. However, knowing the suitable platform to use can be tricky. There are different things to consider, from regulations to the exchange's reliability.
The cryptocurrency market remains a relatively new financial space. Many users are still finding their way around it. While most traders have learned the ropes, others have unfortunately fallen victim to scams and using the wrong platforms. In this article, we'll show you the top 7 crypto exchanges to buy, sell, and trade cryptocurrencies. But before we start, we'll tell you how exchanges work and how to verify that the platform you're considering is the right one to use.
Cryptocurrency exchanges are online platforms where you can buy and sell crypto assets. While they primarily allow you to purchase crypto tokens using your US dollars or other government-backed fiat currencies, you can also carry out crypto-to-crypto trading. This means you can exchange Bitcoin for Ethereum. Cryptocurrency exchanges use trading pairs. For example, to trade 0.1 Bitcoin to USD, you'll have to go for the BTC/USD trading pair. BTC is Bitcoin's trading ticker. In some cases, you have to convert your fiat currency to a stablecoin such as USDT before you can trade.
Cryptocurrency prices are uniform across every exchange. However, there could be slight differences. You could also use an exchange as a crypto calculator app. For example, if you want to convert 100 Bitcoin to USD, you can type in the BTC amount to know its equivalent in US dollars in line with current market rates. You can convert your crypto assets back to fiat currencies and leave them in your account whenever you want.
Unlike the new days of crypto, exchanges are now being regulated. That means you have to be sure you're trading on a platform licensed to operate in your jurisdiction. This and more should guide your decision in choosing a crypto exchange.
Before we continue, you must understand the different types of cryptocurrency exchanges. They are centralized and decentralized exchanges.
We've pretty much covered what a centralized exchange is. This type of exchange has a significant level of control over your funds. It controls your wallet and can freeze your assets if there's a bug or if it flagged your account for fraud.
A decentralized exchange, however, is unregulated, just as its name suggests. It's what you can call an anonymous crypto exchange. It's mostly for people who are looking to use a crypto exchange without KYC. Traders use non-custodial wallets, which they completely control, to trade on these platforms. However, you can't purchase crypto assets using fiat currencies on decentralized exchanges. Instead, they only facilitate crypto-to-crypto swaps.
Some platforms are built on white-label crypto exchange software solutions. This means they did not develop their core applications from scratch. While most might have good management and practice, they don't always have high liquidity and trading volume during their early days. So, it would be wise to look out for them. Most white-label crypto exchanges don't offer derivatives, lending, margin, and other customizable products since these features require complex development.
Reading this article means you're looking for a crypto exchange to buy and sell crypto. There are hundreds of platforms available today. However, the right pick for you depends on different factors. For starters, you have to make sure the exchange is trusted. This means looking at its trading volume, user base, and regulatory compliance. You want to ensure you're trading on a platform where your funds are safe and one that has enough liquidity.
So, what should you look out for?
One of the top priorities when it comes to trading is security. Unfortunately, there have been incidents in the past where traders lost their funds because exchanges were hacked.
Unlike bank deposits, cryptocurrencies aren't backed by central banks. This means you're at the mercy of your exchange's security and insurance policy. While some platforms insure users' deposits, others depend on security practices.
So, try to determine if the exchange has an insurance policy and how many crypto assets they store in cold storage (offline).
Regulations could prevent you from you trading on specific exchanges. For example, the US has strict trading policies, and only a handful of exchanges are licensed to operate in the region. Even at that, some states have separate policies that could prevent trading. You don't want to make up your mind about an exchange only to find out you can't access its services. So, head to the platform's website and confirm if they operate in your jurisdiction. You should also check out each exchange's KYC and AML compliance. With no KYC crypto exchanges will restrict your access to their products. In some cases, you won't be able to trade.
Liquidity means you can buy and sell cryptocurrencies with ease. As we mentioned, there are hundreds of crypto exchanges, but some are more liquid than others.
An exchange's trading volume tells you how easy it will be to sell your coins for fiat currency and withdraw your money. The trading volume is usually measured in US dollars and shows how much money is traded on the platform.
So, check to make sure your money won't get stuck when you decide to sell. You should also confirm the number of tokens traded on the exchange. This would determine how easy it will be to withdraw your crypto asset to a non-custodial wallet (more on that below).
Cryptocurrency exchanges charge a fee for every trade. These fees are mostly a fixed percentage of each transaction, but they could change. For example, they could be as much as 20% and as low as 0.
For most platforms, a trader's level or order weight determines the fees. So, check these details to understand how an exchange's fee structure works before using it. You shouldn't necessarily look for the lowest fee crypto exchange. That's because many platforms with poor security and low liquidity use the promise of little to no fees to lure in new investors. On the other hand, most exchanges with high costs charge extra to make the trading experience seamless.
You need a crypto exchange with the best uptime stat. Server downtime can cause a lot of problems. For example, you might want to sell off an asset when it reaches a particular price only to find your crypto app not working anymore.
There are many online resources that you can use to check out each exchange's daily trading volume and cryptocurrency pairs. Coinmarketcap is one of these resources. It can also act as a token converter and crypto calculator app so you can know coin prices in real-time.
Cryptocurrency wallets interact with blockchain networks and can be used to store tokens. Therefore, understanding how they work is vital. Exchanges, on the other hand, are platforms where you buy and sell cryptocurrencies. That said, centralized exchanges come with built-in wallets. Now, there are two main types of crypto wallets: custodial and non-custodial. This is often what comes to mind whenever crypto exchange vs. wallet is mentioned.
A user has complete control of a non-custodial wallet, whereas a third party controls a custodial wallet. You have full ownership of the former because you have its private keys. Your account on a centralized exchange comes with a custodial wallet, and the exchange has complete control. This is why the platform can execute trades faster since it doesn't need confirmations for every transaction after you've placed orders.
Non-custodial wallets live outside exchanges. However, you can use them to interact with decentralized exchanges and purchase tokens. In this case, though, you'll have to confirm every transaction and pay blockchain gas fees instead of exchange fees. Crypto wallet advocates see decentralization as its main advantage. It's more decentralized exchange vs. centralized exchange than crypto wallet vs. exchange.
No one has control over your non-custodial wallet except you. However, it means you're responsible for keeping it safe. If you lose your private keys or lose access to your device, your wallet and the funds in it will be gone for good. When it comes to an exchange, you can lose your device, forget your password, and still recover your funds.
Now, let's get down to the central business. We've compiled a list of crypt exchanges we believe you can trust: