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How To

How to identify a reliable crypto exchange

Maya Mandzikasvili | Apr. 23, 2019
How to identify a reliable crypto exchange

April 22, 2019, | AtoZ Markets - A cryptocurrency exchange is a universal place for exchanging bitcoins and other cryptocurrencies, as well as making money on trading cryptos. There are more than 190 exchanges in operation and it is worth to make a thorough research to choose a reliable one.

Crypto exchanges in a brief

The cryptocurrency is a modern mean of payment that exists on a distributed peer-to-peer network. Gaining popularity, cryptos are increasingly perceived as a valuable asset that can be exchanged, stored, sold and bought for fiat currency. Most of all trading operations with Bitcoin, ethereum and other cryptos are conducted on cryptocurrency exchanges.

The first step to a new world of cryptocurrency often occurs through the exchange, the market in which buyers and sellers interact. Cryptocurrency exchanges work as a universal platform for digital assets trading.

To get started, investors register via an online exchange using their bank account, credit card or digital currency. However, instead of relying on a third party, such as a broker, to complete a transaction, cryptocurrencies trade on decentralized platforms without intermediaries. It is crucial to remember that cryptos are incredibly volatile.

Key features of the reliable crypto exchange

The daily trading volume on Poloniex, Kraken, Bitfinex and other top exchanges amounts to hundreds of millions of dollars. Co-Founder and CEO of 7marketz Group Yagub Rahimov in one of his recent interviews explained how to identify a reliable crypto exchange.

In order to minimize risks and create your own rating of exchanges, pay special attention to the following parameters:

  • The user-friendly interface of the exchange
  • If an exchange claims to have 100 000 clients, they are supposed to have 25 000-30 000 active users;

According to the experts, a higher volume tends to lead to higher price accuracy. The exchange is processing many transactions at once rather than a few an hour — over the course of which these volatile investments can lose or gain thousands of dollars.

  • Before investing in crypto exchange go to any random pair, if you see that the order is not there, but suddenly things appear on order book, it means the company performs wash trading. So avoid wash trading.
  • Not more than 0.25% fee of the exchange

The crypto community notes that most exchanges make weigh fees against protection. The more secure exchanges tend to charge a higher transaction rate.

  • The reliable crypto exchange needs to be active on social media, especially on Tweeter. No followers, means no community, no community no volume. You need to ensure a reliable reputation of the exchange. This is well helped by the study of ratings, expert reviews, reading profile forums. Reading the news helps to draw up a picture: the attention of the authorities, the opinions of specialists, public speeches of crypto exchange owners. Pay attention to the ratings of crypto exchange, including on foreign resources. 

Mr Ian Lim Teck Soon, Group Chief Underwriter of The Archipelago Group; a leading InsureTech Driven Ecosystem Insurance Company in Asia commented;

“Yagub’s ‘five’ points in his video are realistic and practical for selecting one’s desired crypto exchange. A reliable crypto exchange must have the following attributes, one, it allows you to trade your desired crypto pairs and provides conversion to fiat readily, two, similar to bank accounts, wallets are provided to store tokens on hot and cold basis, three, information that allows analytics and alerts for informed trades to purchase, sell or keep. We also see the importance of protecting through insurance the loss of digital assets by theft or fraud. As the digital assets can represent a substantial amount of value it is really worth selecting a crypto exchange which insures your crypto coins or tokens in the wallets.

As an international insurance company, we have partnered with CGCX.io providing innovative solutions of making it the world’s first fully insured hybrid crypto exchange."

Security is one of the key points of a reliable exchange

Beside reputation and technical features, it is very important to check whether the crypto exchange platform is secure enough. Every new coming user has to pay attention to such features of the crypto exchange:

  • account security;

If the exchange requires a simple registration with the indication of e-mail and a simple confirmation, it means that the company does not care much about the safety of customers. There must be at least two-factor authentication with a binding to a mobile phone number (confirmation code via SMS). Also, a reliable exchange will practice using a multi-signature - that is, additional procedures for confirming a payment. The more serious crypto exchange’s security precautions (in theory), the harder it will be for scammers to break into it.

It is also worth to focus on the following points while choosing reliable crypto exchange:

  • the adequacy of technical support and the ability to resolve conflicts;
  • withdrawal conditions;

It is important to consider the availability of withdrawal limits. It might look annoying because it is impossible to withdraw all the money earned in one time. But this can not be done by the attackers as well, in case if they seize somebody’s account.

Make sure the exchange will work with you. It means that the platform accepts payments in one of the international currencies, like US dollars or euros.

  • location;

If you don’t know where your exchange is located, “when you get hacked it’s going to be very difficult for you to even find the right jurisdiction in which you should sue the people who stole your money,” said Emin Gün Sirer, an associate professor of computer science at Cornell University who writes about bitcoin.

No crypto exchange is 100% safe

Firstly, it is worth to remember, that cryptocurrencies are not always legitimate, and crypto trading platforms do not yet have a clear legislative regulation. Secondly, crypto exchanges are periodically attacked by hackers. Finally, due to high market volatility, a cryptocurrency is not considered a reliable asset. To choose a reliable crypto exchange, you first need to collect as much information as possible about it.

It is also better to trade with small amounts. Firstly, there is less risk of losing everything on rate fluctuations, and secondly, it is possible to check whether the site has problems with withdrawing money or not.

In addition, you should choose those crypto exchanges, which employees adequately respond to criticism and successfully deal with the elimination of the problem.

And you should always remember: when you are trading cryptocurrency, you do it at your own peril and risk, so never invest more than you can afford to lose.

Please share your thoughts in the comment box below.

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.