A cryptocurrency exchange is where cash is exchanged for cryptocurrency. Yet at the same time, a cryptocurrency exchange serve multiple purposes, and depending on the person, an exchange might be needed for very different reasons. The right exchange for me might not be the right exchange for you.
When you begin to shortlist exchanges in your search for the perfect suitor, it’s of the utmost importance to consider your unique set of needs and preferences. You can think of it like searching for a life partner. OK, maybe that’s a little bit too far, but nonetheless, choosing the right exchange will make your cryptocurrency life a lot easier. And choosing the right person to live the rest of your life with will leave you better off for the long haul. See, I could’ve told you that was going somewhere!
Like young men and women around the world, exchanges have many similarities, but it is their subtle nuances that set them apart, make them special and give you interesting choices. Choosing the right exchange is about paying attention to these differences and selecting the best match with your goals and background.
Using a cryptocurrency exchange with USD, GBP, or EUR
You’d be best off using a fiat to cryptocurrency exchange? Looking to invest in a relatively unknown altcoin? Search out the coin’s availability and use a cryptocurrency to cryptocurrency exchange where it’s listed. Don’t have any cryptocurrency? Use your trusty fiat to cryptocurrency exchange and buy some first. And so on and so forth.
As you can see, there are many different scenarios to be faced when investing in cryptocurrency, and these are only scratching the surface. In an attempt to cover as many bases as possible, I’ll outline a few of the most distinct differences and unique features among exchanges below. Following the comparisons will be some exchange examples. I don’t endorse any of these exchanges, but I’m providing them to give you an idea of what’s out there.
As always, do your own research and choose what makes sense. When you’re reading the exchange trait descriptions, make note of what is most attractive to you. It’s probably a bit different from what I’m looking for, but that’s what sets us off on unique cryptocurrency investing journeys.
Cryptocurrency exchange – Centralised vs. decentralised
In general, you should choose a centralised exchange if you value cost and convenience. Because centralised exchanges are able to aggregate many orders at once, they are able to operate more efficiently and offer better exchange rates to their users. On the other hand, a decentralised exchange aligns more closely with the vision of Bitcoin and other cryptocurrencies, eliminates middlemen and gives users more control and a greater sense of security over their holdings.
Centralised: Binance, Coinbase, Gemini, Kraken, Kucoin, Bitfinex
Decentralised: IDEX, Waves Dex, OpenLedger Dex, CryptoBridge Dex, OasisDex, Radar Relay
Low fee vs. high fee
The benefit of a low fee exchange should be pretty obvious. As it sounds, low fee exchanges offer reduced exchange rates and let you keep more of your money. All good, right? On the other end, no exchange will blatantly say that it’s “high fee,” but there are certainly some exchanges that feel entitled to take a big, whopping cut of your pie.
With these high fees usually comes increased convenience however, so there is a bit of a tradeoff. If you value ease of transactions, high fees might be justifiable. At the same time, however, you might be able to find a comparable, if not better, exchange experience with much lower fees, so take a look around at alternatives before committing to an exchange with an exorbitant fee structure.
Low fee: COBINHOOD, GDAX, Binance, CEX.io, Bitpanda, Bitfinex
High fee (Added Convenience): Coinbase
F2C (Fiat to Cryptocurrency) vs. C2C (Cryptocurrency to Cryptocurrency)
F2C exchanges allow you to exchange between fiat currencies (USD, GBP, EUR, JPY, etc.) to cryptocurrency (usually Bitcoin and Ethereum). On the other hand, a C2C exchange allows for conversion between different cryptocurrencies, and these options are usually represented by trading pairs with BTC, ETH, or another popular cryptocurrency.
This can be a little bit confusing, however, because an exchange can technically be both a F2C exchange and a C2C exchange. For example, Kraken offers an ETH/USD trading pair along with an EOS/ETH trading pair. This is just one example though, and it is becoming more common to see a combination of F2C and C2C offerings as cryptocurrency popularity increases.
F2C: Kraken, Coinbase, Gemini, Bitstamp, Coinmama
C2C: Kraken, Binance, Kucoin, Gate.io, Bibox
Check out our other cryptocurrency guides here.