5 Crucial Aspects you Need to Know Before Picking Digital Currency Trading Platform and Exchange

5 Crucial Aspects you Need to Know Before Picking Digital Currency Trading Platform and Exchange

Cryptocurrencies are considered a decentralized as well as the privatized form of currency that is not regulated or launched by the government agencies of financial watchdogs, but however, with the significant growth in interest and market capacity regulatory bodies’ attention is diverted to this sector, with the aim of securing customers assets. The first crypto coin, Bitcoin was tossed in 2009, to overcome the financial crisis. Thus, with time the concept of cryptocurrencies gained global attention in no time regardless of fears of government bans or scams. However, according to the CryptoMarketCap, there are around 18,998 cryptocurrency markets in which investors can trade with fiat or digital coins. Thus, trading digital currencies with debit card is now assisting investors to achieve financial gains.

No doubt, the worth of digital currencies will further increase as the fiat to digital currency exchange services providers are enabling users to buy digital currency with a credit card with conventional money. However, digital currencies are backed by cryptographic algorithms that secure Peer-to-Peer (P2P) transactions carried out in the online ecosystem. The complete transaction information is stored on the distributed ledger which is powered by blockchain technology, the key driving force behind this innovation. 

Digital Currency Trading Platform and Exchange – Understanding Their Types 

Since cryptocurrencies and virtual assets are still unregulated in many countries, there is no rigid set of standards for money trading with digital currency. However, a wishlist for a legit exchange includes frictionless servers and enhanced security systems, technically anyone can create its own digital exchange. Although, there is no guarantee that a legit investor will use your digital currency trading platform and exchange.

However, the internet is flooding with the cryptocurrency exchanges and platforms, yet it’s quite hard to know the exact number of them, as to do so, all the exchanges need to be regulated and registered by the central authority. According to the crypto analysts’ estimation, there are nearly 500 digital asset exchanges to buy with fiat over the digital ecosystem, from which around 259 can be traced on CoinMarketCap. While the rest exchanges are startups or still in the developing phase. As setting up digital crypto money exchanges and platforms require no set of strict parameters, heaps of exchanges are being set up and are closed after some time. 

Global Cryptocurrency Statistics

Centralized Exchanges

The first type of cryptocurrency exchange is centralized. The popular platforms fall under this category. These are usually private businesses that allow the global crypto community to buy, sell, hold or trade digital assets. These types of exchanges follow a strict protocol for investor onboarding. It starts with the registration and verification to fulfill Know Your Customer (KYC) laws.

In addition to this, centralized crypto exchanges hold active trading, large liquidity, and high volumes of transactions. However, these platforms are not aligned with the philosophy of Bitcoin, as they run their own servers, making them vulnerable to cyberattacks. For instance, if the exchange servers are hacked, all the transactions, investors’ assets, customers’ viable information, and millions of worth of coins can get into criminals’ hands. These exchanges are more popular as it’s the easiest option for new users as some level of insurance is also provided in case the system or server fails.

Decentralized Exchanges 

These exchanges work the same as Bitcoin. Instead, it’s a large server, except computers which are spread across the globe, and an individual controls each computer, hence becoming part of the server. If one of the computers is compromised or turned off, the whole decentralized server is not affected, nor will its functioning.

This is a lot more secure than centralized exchanges as attacking or hacking decentralized servers is more difficult for penetrators. Hence most of the hacking attempts against these exchanges get unsuccessful. In addition to this, due to the decentralized nature, these cryptocurrency exchanges are not subject to the regulatory bodies’ laws and standards, as no single entity is operating this system. The individuals come and go, so there are no permanent entities that governments or financial watchdogs can realistically pursue. Hence, these exchanges do not require to undergo customer identification procedures and are totally free to use regardless of one access legally or not.

Hybrid Exchanges

Hybrid cryptocurrency exchanges are created by combining the key characteristics of decentralized and centralized exchanges to provide a whole new trading experience. The crucial objective of blending both versions is to provide customers the easiness of centralized exchange while on another hand giving investors the complete sense of freedom along with utmost security of decentralized exchanges.

However, hybrid cryptocurrency exchanges still need to experience mass adoption as the centralized exchanges are seeing. It’s expected that these exchanges will hold great significance in the near future to enhance the trading experience while fulfilling investors’ requirements.

Buying Digital Currency with Fiat – 5 Things to Watch Before Picking Crypto Exchange

To pick a digital assets global exchange that fulfills your requirements, aligns with your trading goals, and permit buying digital currency with fiat, you need to watch for these factors;

1. In which Jurisdiction Does the Exchange operate?

Before choosing a digital exchange, the first and foremost thing you need to watch is the “jurisdiction” in which it is working. Some exchanges are limited to area, this will become a problem for you in later stages. The origin of business not only reflects the target market but also cryptocurrency laws that slightly differ from jurisdiction.  

2. How Much Liquidity Does it Have?

The digital currency exchange and platform having large volumes of transactions and greater money-changing in hand are fruitful for the customers. Therefore, to onboard the exchange having high liquidity rates you need to look for exchanges with a large number of active users, or investors that hold their assets on the exchanges and also frequently trade. However, liquidity holds a significant role in trading, thus, less liquidity rate can increase the risk of volatility, and you can face financial loss.

3. Which Types of Crypto Coins can you Trade?

In most cases, the cryptocurrency exchanges allow trading, particularly popular digital coins like ether or bitcoins. While many don’t permit trading with less popular coins. Thus, you need to thoroughly get to know which coins are available for trade or coins that are available on the exchange, before you get on board.

4. What are the Fees?

The cryptocurrency exchanges and trading applications come up with variations in terms of services, and fees, but every exchange does charge some percent of the trade or investment against each service you avail. Thus, you need to understand the terms and conditions before picking the exchange, it should make sense for the trade you’re going to make. The fee ranges from 0.5% to 5% or higher based on the services you need to avail.

5. How Secure is it?

No doubt, not a single digital cryptocurrency exchange can provide utmost security to some people who are vulnerable to cybercriminals. Hence,  you need to look out for the exchange that is operating for the longest time, while not being in the financial crime headlines. However, you can also find detailed information regarding the security systems on the exchange’s website. Few exchanges also ensure the refund or insurance if their systems are compromised or fail to stop the crypto heist.

Final Thoughts 

Despite, the concepts of digital currency exchange and platform sound simple, yet is the most complicated thing in the cryptoverse, as it requires more scrutiny from investors as well as regulatory bodies like the bond or stock exchanges do. The crucial aspects to keep in mind regarding this sector are cryptocurrency exchanges, coins, blockchains, and digital wallets which are mostly not rigidly regulated. However, the emergence of fiat to crypto exchanges are enabling users to ​​buy digital currency with credit card as well, which come in handy for most investors. Thus, picking the right exchange can help you to gain instant and high profits.