So you want to get involved in cryptocurrency? You want to own a piece of the pie… or rather a piece of Bitcoin, or Ethereum, XRP, Litecoin, EOS, Cardano (ADA), Monero, Binance Coin, IOTA, Tron, etc. The easiest way to do that today is to make an account on an exchange and buy it from there. I briefly discuss the process of setting up an account on an exchange on a previous post. But how do you know which exchange to use?
What are the best cryptocurrency exchanges out there? You’ve probably read about many scams or failed cryptocurrency exchanges where the owners/operators lost cryptocurrency or someone lost access to their cold storage wallet. Or worse, their cryptocurrency was on a hot wallet and was hacked. Or perhaps their website was phished and countless account-holders had their information stolen and cryptocurrency stolen right from under their noses.
There are literally too many of these examples for me to list them all. There have been more failed exchanges or significant breaches than there have been stable, trustworthy exchanges. Also, now that we’ve been in the longest bear market in cryptocurrency history (February 2019) we are seeing that many cryptocurrency exchanges are shutting down due to not being able to sustain a profit.
Sounds terrible. Might even turn you right off the idea of buying cryptocurrency from an exchange, or at all. In fact, most people might not have even gotten to this paragraph. But if you have, please, allow me to explain how to properly determine what the best cryptocurrency exchanges are.
Now I am not simply going to make a list, toss up an affiliate link and ask you to join any old exchange. No. That is not why you visited Markshire Crypto. You visited Markshire Crypto to get honest, accurate information that you can trust. I will explain the different characteristics/features of a cryptocurrency exchange so that you can identify the best cryptocurrency exchange when you see it.
I much rather that you have a solid understanding of what makes a robust, trustworthy, respectable cryptocurrency exchange before you read any list of “best cryptocurrency exchanges” or “top crypto exchanges” etc. After all, knowledge is power.
I will briefly list the qualities of the best cryptocurrency exchanges and then go into more detail on them below:
- History of the Exchange
- Volume of the Exchange
- Security Measures of the Exchange
- The Best Cryptocurrency Exchanges have Multiple Coins
- Multiple Deposit Options
- Customer Support
- Compliant with local laws
- NASDAQ Technology, SMARTS
- Other services
History of the Exchange
How will you know if an exchange is any good if they just came online this week? They can claim anything they want about themselves, but they are untested. The best cryptocurrency exchanges have been around for at least a year.
Why does time matter? Well, it’s not just time, its history, which is by definition ‘the study of past events’ (Apple Dictionary). What is the story of the exchange? Has it had any hacks? If so, why did the hack happen? Did they rectify the situation?
How has it developed over its history? A stagnant exchange in this growing industry is doomed to die. They must innovate and develop.
Has it developed a good reputation? A simple google search for “Crypto exchange name” and “Review” will give you a pretty accurate answer. People are pretty honest on the internet.
Volume of the Exchange
Volume traded on an exchange means the amount of money (measured in USD) being traded through it in each 24 hour period. So an exchange with a volume of $25,000,000 means that people have bought/sold $25,000,000 USD worth of cryptocurrency in the last 24 hours.
The higher the volume on an exchange the better.
This is because higher volume means that there is more money on the exchange. This translates to more availability of cryptocurrency and fiat for you to buy or sell. The value of this is that there is more likely to be cryptocurrency available to buy and more likely be a buyer there for you to sell your cryptocurrency to. I’ve run into the problem of using a low volume exchange where my buy order was sitting there for 6 to 8 hours because there weren’t enough people on it selling their cryptocurrency for me to buy (and this was during our recent 2018 bear market so it’s not like there were tons of buyers competing with me).
The top 30 exchanges on Coin Market Cap all have volumes over $100,000,000 USD over a 24 hour period (as of early Febrary 2019). I’d say that’s a good cutoff.
Security Measures of the Exchange
Where you hear of all of the cryptocurrency exchange hacks since Mt Gox it can be quite unnerving and scary. There has been $1.5 billion worth of cryptocurrency hacked from cryptocurrency exchanges, with $865 million of that hacked in 2018, averaging $2.7 million per day. That is intimidating.
You may be putting thousands of your hard earned dollars into sound cryptocurrency money. You don’t deserve to have that hard earned money stolen from you. I never advise leaving any significant amount of fiat or cryptocurrency on an exchange, instead, immediately transfer it to your personal hardware wallet.
Even if you do transfer your cryptocurrency to your wallet you want to know that the exchange you use has sound security. Especially if you leave some cryptocurrency on the exchange for trading. An exchange with high-quality security measures tells you two things: (1) it’s secure and you can feel much safer using them; (2) they do their due diligence and it shows that they take your money and investments seriously.
Cryptocurrency exchanges are centralized and thus stockpile large sums of cryptocurrency, making them vulnerable to attacks.
The best cryptocurrency exchanges will employ a number of the following security features:
- Your exchange of choice should at minimum require a password with 2FA.
- It should support an authenticator app or U2F verification.
- Do not use SMS 2FA.
- Also CAPTCHA verification (Completely Automated Public Turing Test to tell Computers and Humans Apart)
- Email confirmation for withdrawals
- Email notifications of sign-ins (so you are aware if someone signs in that isn’t you)
- Account time-out if window left inactive
- Database fully encrypted
- SSL encryption when browsing the exchange website
- Servers monitored (video surveillance) and/or guarded
- Offline storage of coins
- Better if:
- Higher percentages (>90%) stored offline
- Distributed in geographically different locations
- Offline, air-gapped
- Multisig access
- Better if:
We all know what insurance is. A premium is paid to insure a specific asset against loss or damage. For example, house insurance – you pay your premium every month and if there is a disaster (flood, fire, theft, etc) your costs are covered. Paying one hundred dollars a month for years can protect you from having to pay tens or hundreds of thousands in repairs or loss.
The exact same principle applies to cryptocurrency exchanges. They pay insurance to protect their cryptocurrency assets. In the event of a loss or hack, the insurance may pay out the value of the lost assets. Whether or not the insurance company pays out depends on if the cryptocurrency exchange was following their minimum security measure agreed for their insurance rate.
An insurance company loves numbers/statistics and risk stratification. The better security features an exchange has the more they reduce their mathematical risk of being hacked or losing coins, thus they receive coverage for less cost to themselves. However, if they do not practice their due diligence for their security, the insurance policy may not pay out.
Insurance is a good thing for the user of the exchange because it is a back-up, a fail-safe if the exchange is compromised.
The Best Cryptocurrency Exchanges have Multiple Coins
Imagine going to a grocery store and they only had 3 fruits, 2 types of meat, 1 vegetable and only 1 brand of yoghurt. Terrible selection. You probably wouldn’t want to go back to that grocery store.
So imagine if an exchange only has two or three cryptocurrencies? Same idea… The main coins that most exchanges have are Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and XRP. Most exchanges are branching out and adding other coins such as EOS, XLM, NEO, DOGE, and TRX.
The more coins and trading pairs give you more options and make your life easier if you want to buy/sell some cryptocurrencies or trade-in/out of different coins without going to fiat or BTC in between.
More cryptocurrencies and more trading pairs to attract buyers, sellers, HODLers and traders!!
The Best Cryptocurrency Exchanges Have Multiple Deposit Options
Today cryptocurrency exchanges are the onramps to the cryptocurrency world. The greater the funding options the more inclusive and flexible the exchange is for you. If you have more options, it is easier for you to invest in the cryptocurrency world.
Some typical options are:
- Interact E-transfer
- Wire Transfer
- Bank Draft
- Interact Online
- Money Order
- Credit Card
- Debit Card (Binance)
- Flexepin voucher
Sometimes you need to actually set up an account before you can view all of their funding options, but they should mostly have funding options listed on their site for people to read prior to signing up as this is an important factor in deciding whether or not to use a cryptocurrency exchange.
The Best Cryptocurrency Exchanges have Invested in Quality Customer Support
Imagine sending $3000 USD to an exchange and buying some cryptocurrency. You buy a few different coins, attempt trading with low value amounts just to test it out for yourself because you’re curious and want to learn more about the cryptocurrency space. Of course, you are likely going to have some questions about the exchange.
You try emailing their support desk. Three days go by without a response. You look, but can’t find a number to call. There is no live online chat for help. You feel alone and abandoned. You start to wonder if the cryptocurrency exchange you are using is a scam… After all, if you spend $1000 on an iPhone you get better customer support than spending $3000 on a cryptocurrency exchange. That is just wrong (on the part of the cryptocurrency exchange).
Any cryptocurrency exchange worth anything will have high-quality customer support. In the climate of mistrust, scams, hacks and shut down cryptocurrency exchanges, not having a customer support centre is detrimental to the exchange. An exchange that intends to survive the rest of this bear market and thrive in the next bull run will have to have amazing customer support, otherwise, no one will use your exchange.
Features of high-quality Customer Support:
- Email support, usually with a ticket number and response times less than 24-48 hours.
- A 24/7 phone number to call, usually a 1-800 type number.
- A live chat box in the corner of the screen on their website.
An exchange can compensate for an error or a minor difficulty with user interface if they have a high-quality customer support centre that can assist users through problems. It makes users feel heard, understood and… supported.
Always check an exchange for their customer support line. You could even test it out BEFORE joining by giving them a call or email. See how long it takes them to reply and test out how knowledgeable they are over the phone.
The Best Cryptocurrency Exchanges are Compliant with Local Laws
The cryptocurrency paradigm shift in finance is a globally occurring phenomenon. True cryptocurrency is open, decentralised, borderless, transparent, pseudo-anonymous, peer-to-peer value transfer network. However, cryptocurrency exchanges are centralized entities that legally operate in a jurisdiction with local laws that they are bound to obey.
The stability and durability of an exchange in part are dependent on how compliant they are with local laws. Should they not be following regulations set out by their local governments then they are liable to fines, suspensions and/or shutdowns. Why complicate your life by keeping fiat or cryptocurrency on an exchange that exposes you to this risk.
You always want to ensure that the exchange you are using is compliant with local laws and regulations. Usually, a well-developed exchange will advertise this or at the very least have the information available on their website.
The biggest two compliance factors are AML and KYC, as well as any money service provider certifications or regulations required.
The Best Cryptocurrency Exchanges Integrate the NASDAQ Technology, SMARTS
We all know the NASDAQ exchange, the second largest stock exchange, second only to the NYSE. One of the things that made the NASDAQ so popular was its superior marketplace technology. Decades ago it revolutionalized the way that stock markets were monitored/surveyed and brought transparency and equality across various different exchanges as it integrated the information.
This technology is called “SMARTS Market Surveillance System”, which is a cross-market, cross-asset surveillance tool that correlates real-time and historical data to trading patterns to detect fraud, manipulation and to support a consistent price across various exchanges, reducing price discrepancies across continents.
The SMARTS technology will help to bring transparency to the trading markets of cryptocurrency and link the legacy financial system of Wall Street to the 21st-century cryptocurrency exchanges.
We always hear of ‘market manipulation’ – well employing the SMARTS technology will help to detect, deter, investigate and correct market manipulators or whales causing waves. Obviously, you would want to use an exchange that employs this technology so that you are less susceptible to being manipulated.
The NASDAQ released a statement at the end of January 2019 that there were seven cryptocurrency exchanges utilizing the NASDAQ SMARTS tech. They would only disclose two of the seven: Gemini (New York) and VCtrade (Japan, SBI Holdings). That leaves five more cryptocurrency exchanges that are safer to use. Except we don’t know which ones they are yet. I want to guess Binance, but I cannot be certain.
Although the DX exchange in Europe did mention that it was using NASDAQ technology on its exchange… whether or not this is included in the 7 is unknown. So there are four to five other exchanges out there using the NASDAQ tech.
The Best Cryptocurrency Exchanges have “Other Services”
An exchange wants more users. That is how they become successful, by having users who buy/sell and/or trade. They can attract and keep users by supplying other services.
Crypto Asset Management: Some exchanges offer cryptocurrency asset management, where, for a fee, they will manage your money in a set of cryptocurrency investments with some instructions from yourself (i.e. if you want to restrict to certain coins and/or percentage holdings or if you want to hand over full reign to the manager).
Frequently Asked Questions (FAQ): I’ve noticed many cryptocurrency exchanges have developed FAQ sections. In such a new industry most people will have a lot of questions. Their customer support service would be overrun in the next bull run. The FAQ section empowers investors to find the answers to their queries.
“Other Topics” Section: I’ve noticed some exchanges have a category for “other topics” or “other services” that may be considered a more detailed or advanced FAQ section. They go over various topics from explaining what the different coins are/represent, to explaining hot vs. cold wallets, seed words, cryptocurrency security, 2FA, ‘how to’ set up guides for their exchange, etc.
A well developed “other” section of these exchanges demonstrates that the exchange is dedicated to helping the end-user of their service. It demonstrates a dedication to their clients and that they are willing to go that extra mile to provide you with the information that you need. Having an “other” section is not mandatory, but it certainly is a bonus.
Markshire Crypto’s Conclusion
The above factors are all assets for a cryptocurrency exchange. The more of these factors that a cryptocurrency exchange has, the better it is.
I recommend that you take your time to look up some exchanges. Once you’ve decided on your top 3, start with one and make an account. Test one out with small sums of fiat and cryptocurrency. Try buying some cryptocurrency and then withdraw it to your crypto wallet. Then try sending some cryptocurrency from your crypto wallet back to the exchange, sell it into fiat and try withdrawing the fiat. Make sure it works before investing large sums.
I am developing a list of the top 10 cryptocurrency exchanges, coming soon.
I hope that you enjoyed and found this post helpful!