Trading cryptocurrency comes with certain risks, no different than trading stocks or Pokémon cards (ok, maybe a little different than the latter).

As traders and hodlers alike, we need to minimize our risk by doing the proper research and protecting our investments. This applies to how we store our crypto, like using a hardware wallet and perhaps most importantly, choosing a safe and reliable exchange on which to conduct our transactions.

Regardless of which cryptocurrencies you’re interested in, choosing the best cryptocurrency exchange is important if you want to grow your money and sleep well at night. Keep in mind that the most popular currencies like Bitcoin and Litecoin can be traded on all exchanges, and even coins with lower market caps like Monero, Lisk and OmiseGo can often be found on the majority of exchanges. What it really comes down to is what feature you value most, and what kind of service you expect from your exchange.

Here are 5 things to consider when considering using a new bitcoin exchange:

SECURITY

It goes without saying that keeping your money safe is the most important thing you can do as an investor, aside from not losing it. A worst case scenario would be what happened at Bitfinex, where they announced a hack in 2016 and had 120,000 BTC was stolen, worth around $72 million at the time. Similarly, when Parity wallets were hacked, $150 Million of investor money was frozen, and the community is still trying to figure out how to recover 500,000 Ethereum from the ordeal.

When choosing a bitcoin exchange, you’ll want to make sure that they offer multiple levels of security (ie. Two-Factor Authentication, Email Confirmation), and many exchanges now also offer DDoS protection, to prevent their servers from being attacked. However, even with all securities in place, exchanges still do, and will likely continue to, get hacked, so do your research and avoid storing too large of a portion of your cryptocurrencies on the exchange if possible.

FEES

Although it may not seem like it when dealing with a small number of Satoshis, trading fees really can add up quick, taking a considerable chunk of your profits with them. This is especially true for beginners, who don’t often consider every trade they make, or simply don’t know they’re being dinged, even for the smallest transactions. Most bitcoin exchanges also have a minimum fee on all trades.

It’s rare to find a bitcoin exchange without trading fees, but one of the best options is GDAX, which has a 0% trading fee, unlike its partner site, Coinbase, which charges anywhere from 1.5-4%, based on location and payment type, with credit card buys being charged the most.

Binance has one of the lowest cryptocurrency trading fees available from a major exchange, taking just 0.1% on each transaction. The fee is taken as a fraction of the currency being traded, unlike Bittrex, who take a 0.25% trading fee from your overall Bitcoin balance. Prior to signing up with a new exchange you’ll want to review their fees structure, which is often found on their website. For new traders, it’s important to track the frequency and percentages or your trades, to minimize the number of fees you’re being charged. Also make sure to take advantage of any and all affiliate offers – like saving 10% off your Bitmex fees – to increase your bottom line and decrease your bankroll’s variance.

LIQUIDITY

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Bitcoin exchanges are seeing more business than ever, and the number of coins moving around these sites can be staggering. Most exchanges will show you their current volume, often in Bitcoin, and usually on their home page. The more popular the exchange, the more important it is that they’re able to back every transaction. Look for an exchange with good assets, like Bittrex and Kraken, with holdings valued over $250 Million, or Poloniex, which holds assets worth over $1 Billion.

One thing to note is that market volatility can result in exchanges disabling trades and withdrawals of certain coins during spikes in activity. This can happen during a huge sell off, or if there’s a noticeable difference in the value of certain coins across different exchanges. To prevent financial damage to the exchange, trades can be put on hold, and your currencies may be held on your exchange until the market settles.

DEPOSITS/WITHDRAWLS

A bitcoin exchange like Coinbase makes it easy to buy bitcoin with a credit card, albeit with a 4% fee attached, but most exchanges will require that you verify a bank account in order to move money back and forth. This is a process that often takes time to set up, especially with the growing interest in cryptocurrency all over the world. Therefore, the sooner you start the verification process, the better as there’s nothing worse than watching the price of Bitcoin shoot up while you sit on the sidelines waiting empty-handed.

Sometimes people forget that there’s money to be made from cryptocurrency, and when you’re ready to cash out, you don’t want any delays or complications. Certain exchanges are known for withdrawal delays, so make sure to check user feedback in advance, and as a good rule, try to lump your deposits and withdrawals together. This will save you both time and money.

Depending on your location, certain deposit options may not be available to you. Some countries are limiting deposit options due to the uncertain nature of the cryptoverse, as seen in the United States with recent moves by Bank of America and Visa to prevent deposits onto exchanges. As mass adoption moves forward, newer and better deposit options will become available, but in the meantime, do your research and find a reliable financial institution based on your needs and location.

STABILITY

There are times when all you want to do is make a trade, but the world is conspiring against you. Maybe your currency is losing value, or maybe you have a hot tip on a new coin that just got listed on your favorite bitcoin exchange. Whatever the case might be, you never want to miss out on a trade because of technical issues or lag. Certain exchanges see a huge amount of volume, especially during peak times when it feels like the entire world is online. This can greatly affect your ability to trade during huge price swings, as has been seen in the past on many of the best cryptocurrency exchanges such Kraken, Bittrex, Coinbase, Bitmex and Binance, so keep that in mind when deciding how much capital to leave on an exchange.

 

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