Cryptocurrency Exchanges. There are a lot of cryptocurrency exchanges out there, but just a few that we think make sense for long-term crypto investors.
Investing in cryptocurrencies is risky due to its unpredictable and speculative character, regardless of how or where you acquire it. When it comes to picking a cryptocurrency exchange, we feel that the security of your money should be a top concern, and each of our best exchanges clearly states which security measures they have in place to safeguard customers. In general, we believe that bitcoin exchanges that have been operational for a long time are a safer choice than those that are fresher.
Theresa Morrison, a CFP with the Beckett Collective, adds, “I would go with any of the old guard.” “I start with the people who have been doing it for a long time.”
It’s vital to realize that cryptocurrency is a highly speculative asset with a limited track record, regardless of where you acquire it (at least compared to the stock market). That’s why experts advise investing no more than 5% of your portfolio in cryptocurrency, and that investors should adhere to Bitcoin and Ethereum, both of which are accessible on each of the exchanges we propose.
Here are our top suggestions for the best crypto exchanges for the long-term value investor who is more concerned with saving for retirement than becoming rich quick
Best Cryptocurrency Exchanges
Coinbase and Coinbase Pro
Coinbase was chosen because it makes purchasing and trading cryptocurrency simple and secure. Coinbase now provides Coinbase Pro, which has the same cost structure as Coinbase but has a lot more charts and indicators.
Coinbase was the first cryptocurrency exchange to list on the Nasdaq in 2021, however, it has been in operation since 2012. Over 50 cryptos are available on the cryptocurrency market, as well as a free wallet service with private key access.
Coinbase has generally avoided any scandal in the cryptocurrency market, which has been plagued by counterfeit currencies and dodgy exchanges. Coinbase provides an incredibly user-friendly exchange, decreasing the barrier to entry for cryptocurrency investing, which is often perceived as complex and perplexing.
Investors and traders can also put their funds in Coinbase’s insured custodial wallets. They’re covered against data breaches and hacking, and your money is kept in FDIC-insured bank accounts, which is significant because customers have reported their accounts being hacked and their monies being drained.
The Coinbase custodial accounts are ideal for novice users getting their feet wet, but the private keys to the coins belong to Coinbase, not the investor.
Coinbase now provides the Coinbase Pro edition, which has the same pricing structure but substantially more charting and indicator choices. Coinbase Pro is a great next step for individuals who’ve gotten their feet wet with Coinbase, and it helps complete out the whole offering by providing capabilities that a more sophisticated user would appreciate.
Coinbase’s fee structure makes it more expensive than other exchanges, but we enjoy the platform’s ease of use and upfront security precautions, which are particularly appealing to newcomers. You’ll be charged a spread as well as a Coinbase fee when you make a transaction.
The spread fee is the difference between the price of the cryptocurrency and the price you pay to purchase it (or receive for a sale). The spread is about 0.5 percent of your bitcoin sales and purchases, but it might be more depending on the coins you’re trading.
The Coinbase cost, which is in addition to your spread fee, is determined by your region, payment type, and other criteria. The Coinbase charge does not apply to crypto-to-crypto transactions (such as trading Bitcoin for Ethereum). You’ll also be charged fees for things like funding your Coinbase wallet in specific ways or withdrawing your money.
Unlike FDIC-insured assets, cryptocurrency is not covered by any government regulations. Coinbase, on the other hand, is open about its security precautions, claiming that 98 percent of its clients’ bitcoin is stored in offline, cold storage. The remaining 2% is utilized to make trading easier.
While your assets aren’t covered by the Federal Deposit Insurance Corporation (FDIC), Coinbase does have an insurance policy to protect your bitcoin holdings. Even so, there’s no assurance that if you’re hacked, you’ll get your coins or money back in full. While your coins are not covered by the government, any cash you keep in your pocket is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.
Cryptocurrency Exchanges Gemini
Gemini was launched in 2015 and is suitable for both novice and experienced investors. Over 40 cryptocurrencies are available on Gemini, as well as a suite of products that can add value to more experienced investors.
Gemini is very open about its security measures and keeps the majority of your cryptocurrency in an offline cold storage system. Gemini offers tools and upgrades features that can be helpful for more advanced traders but also has a simpler interface to help beginners get their grounding.
Plus, people with more crypto knowledge could find value in Gemini’s suite of additional products: Gemini Earn, Cryptopedia (a learning hub), Gemini Wallet, and Gemini Custody, ActiveTrader, and Gemini Pay.
When you purchase or sell bitcoin on Gemini, you’ll be charged a convenience and transaction fee. Before the transaction is completed, the entire fee will be presented as your “quoted price.”
The convenience fee is normally around 0.5 percent of the Gemini market price for a given deal, but it can fluctuate, and it is charged in the cryptocurrency that you buy. The transaction charge is determined by the amount being traded. A normal 1.49 percent transaction fee is applied to crypto-to-crypto exchanges, such as Bitcoin to Ethereum. The transaction charge for purchasing and selling varies depending on the kind of cryptocurrency.
According to Gemini, the bulk of your bitcoin is stored offline in a cold storage system, but a tiny piece is maintained online in a hot wallet that is protected against theft due to a security breach, hack, fraudulent transfer, or staff theft.
Cryptocurrency Exchanges eToro
In 2018, eToro launched as a cryptocurrency exchange in the United States. Only 43 states are allowed to trade cryptocurrency on the site, with Delaware, Hawaii, Minnesota, Nevada, New Hampshire, New York, and Tennessee being banned. This is the only platform we suggest that isn’t available in all 50 states, but we believe it contains features that will appeal to those who live in those states. eToro has a straightforward UI and over 20 different cryptocurrencies to pick from.
Although eToro has fewer currencies (just over 20) than other exchanges, experts advocate sticking with the two most popular coins, Bitcoin and Ethereum, which are both accessible on the platform.
eToro has a unique tool called eToro Virtual Portfolio, which allows you to try investing in crypto up to $100,000 and follow its development. Users may use this tool to gain a feel of how volatile cryptocurrency is.
The costs you pay on eToro are purely determined by the spread (the difference between what the crypto is selling for and what you pay for it). Depending on the cryptocurrency you chose and current market values, the spread might change.
To secure your funds, eToro uses a combination of hot and cold storage, and any US money in your account are housed in FDIC-insured custodian accounts.
Understanding the Types of Cryptocurrency Exchanges
It’s critical to understand the many sorts of exchanges before deciding on the ideal one for your needs.
The centralized exchange is the original and most popular form of exchange. Coinbase, Binance, Kraken, and Gemini are examples of popular exchanges in this category. These are private firms that provide bitcoin trading platforms. The Know Your Customer (or Know Your Client) guideline requires registration and identity for certain transactions.
All of the following exchanges feature active trading, significant volumes, and liquidity. Centralized exchanges, on the other hand, are incompatible with the Bitcoin ideology. They run on their own private servers, creating an attack vector. 3 If the company’s servers are hacked, the entire system might be taken down for a period of time. Worse, sensitive information about its users may be made public.
The bigger, more well-known centralized exchanges provide by far the smoothest on-ramp for new users, and they even offer some form of insurance in the event that their systems fail. While this is true, when you buy bitcoin on these exchanges, it is housed in their custodial wallets rather than your own wallet, which you control.
The insurance given is only valid if the exchange is at fault. If your computer and Coinbase account, for example, were to be hacked, you would lose all of your money and be unable to file a claim for insurance. This is why it is critical to withdraw big quantities of money and store them safely.
Decentralized exchanges function in the same way as Bitcoin. There is no central point of control in a decentralized exchange. Instead, think of it as a server, except that each computer on the server is distributed around the globe, and each computer that makes up one portion of the server is controlled by a single person. If one of these computers fails, the network will continue to function since there are enough additional computers to keep the network working.
This is in stark contrast to a single corporation operating a single server in a single location. Attacking anything that is dispersed and decentralized in this way is far more difficult, making such attempts implausible and likely futile.
Because of this decentralization, these sorts of exchanges are not subject to the restrictions of any regulatory authority, as the system is not controlled by a single person or organization. Individuals who engage come and go, therefore a government or regulatory agency can’t reasonably pursue any one person or group. This implies that people who trade on the site are not required to reveal their identities and are free to utilize the network in any way they see fit, whether legal or illegal.
What Is a Cryptocurrency Exchange? How Does It Work?
An online marketplace where users may buy, sell, and trade bitcoin is known as a cryptocurrency exchange. Users can deposit fiat currency (such as US dollars) and use those funds to acquire cryptocurrencies on a cryptocurrency exchange, which functions similarly to an online brokerage. Users may also swap their cryptocurrency for other cryptocurrencies, and some exchanges enable users to earn interest on their bitcoin holdings.
What Should You Look at When Choosing a Cryptocurrency Exchange?
There are various factors to consider when choosing a cryptocurrency exchange, including security, costs, and the types of cryptocurrencies available. It’s also crucial to know where your bitcoin is held and if you can take control of it by moving it to your own digital wallet.
There are controlled and decentralized cryptocurrency exchanges. Government financial rules (such as the Securities and Exchange Commission) are rigorously followed by centralized exchanges, and many will guarantee your cash deposits and require confirmation of identification to utilize the site. Decentralized exchanges are uncontrolled internet exchanges that are run by users and are hosted on distributed nodes with no centralized regulating authority. While this may appear frightening, decentralized exchanges provide transparent transactions and fees, as well as direct peer-to-peer bitcoin trading.
How Do You Buy Cryptocurrency?
Most centralized exchanges enable you to buy cryptocurrencies with funds from your bank account, credit card, or debit card. The money can then be exchanged for the cryptocurrency of your choice. While some exchanges simply offer a simple “Buy Now” transaction that only allows you to place a market order, others enable you to place more complicated order types such as limit and stop orders.
When you buy bitcoin, the exchange usually takes custody of it, and most exchanges hold it in offline “cold storage” for safekeeping. Most exchanges enable you to transfer cryptocurrency to your “hot” or “cold” wallet, along with the private keys for that cryptocurrency, if you want to take custody of it yourself.
How Do You Open a Cryptocurrency Exchange Account?
Most cryptocurrency exchanges need you to create an online account and show evidence of identity in order to open an account (to follow KYC standards). This might entail answering personal questions, using a third-party application to verify your identification, or giving a photo of your driver’s license.
You may then deposit dollars and begin purchasing cryptocurrencies after your account has been authorized.