Financial Spectrum’s Brenton Tong authored this article for Canstar. You can view the original article here.
Once you have your head around how to buy cryptocurrency, the second question you may ask yourself is where to buy it. Choosing the right exchange to buy cryptocurrency might not seem too difficult. However, depending on your needs, there is a lot of legwork required to find one that fits you just right. Financial Adviser Brenton Tong shares his view.
How to choose a cryptocurrency exchange and app
Most people would have some experience in using a broker or intermediary to buy something in the past. This could be a car dealer for a car, a stockbroker for shares, or even just the coffee shop down the road for buying locally roasted beans. You may ask, what made you choose them? Was it service, was it range, was it price? A Toyota is a Toyota – so what makes buying one in one dealership different to another?
You could be hunting for the cheapest price, or you need someone that will go the extra mile with their service. It might be close by and easy, or they do great trade-ins. For whatever reason, we all choose different exchanges for the same goods. Choosing a cryptocurrency exchange is exactly the same.
There are several key elements that you might want to consider when choosing the right exchange, however, some of these attributes may be more important than others depending on what you plan on doing in the world of cryptocurrencies.
What factors should you consider when choosing a cryptocurrency exhange and app
There are various different needs you may require from a crypto exchange. I’ve looked at factors such as price of trading, the need to use the foreign exchange, the selection of currencies, technical features available, availability of wallets and security, and the reputation and size of the platform.
Price
There is a cost to trade between different coins, as well as currency exchange fees. Some platforms are well known for being low in costs, such as Binance or Kraken, while the lesser-known Independent Reserve Exchange can be cheaper again depending on your trade volume. It’s important to check all the fees that may be applicable. Some exchanges might have a low fee for simple purchases, but you might find yourself paying 10x the basic fee for other trades.
Foreign exchange
So you’re eager to get into the market. You transfer the money into your exchange account, convert it into US dollars and buy those coins! Did you check the USD to AUD exchange rate? It’s easy to lose 1% or much more in exchange rate differences, especially if you’re taking cash in and out of your exchange account. Some Australian Cryptocurrency exchanges offer Australian Dollar accounts such as Digital Surge and CoinSpot, avoiding the need to worry about foreign exchange rates altogether.
Selection of currencies
When buying a car, a dealer will show you a number of different models. Similarly, exchanges will have a list of available currencies that you can buy. While CoinJar offers the unique benefit of having a Cryptocurrency Debit Card, you can only buy 24 different currencies through their exchange. That might be all you need, however if you’re looking for the broadest spread of coins, try CoinSpot, Swyftx, Binance or Digital Surge, all offering over 200 different currencies.
Technical features of cryptocurrency apps
You might just want to buy some cryptocurrency and leave it there. Or you might want to get a little more active and try to benefit from the wild volatility that we’ve grown to love about the markets. If you’re into watching the wild swings closely, you’re going to want a lot of technical features in your currency exchange. While not offering the broadest range of currencies, eToro has a mixture of crypto, stock and commodities that you can trade along with leverage and CFDs. Other exchanges such as Binance and Swyftx have advanced trading features that allow you to automate trades, track down arbitrage opportunities and keep track of movements and momentum.
Wallets and security
If you haven’t heard of cryptocurrency exchanges being hacked, then you’ve only just started to read up on the basics. Over the years, many of the world’s exchanges have been compromised in one way or another, with some of the hacks being big enough to close an exchange. Many exchanges require you to have your own wallet, be it an offline one on your device or an online wallet. Other exchanges, such as Independent Reserve Exchange, have their own online wallet and are the only exchange to offer insurance on their premier accounts.
Reputation and size
Bigger is better, right? Well, often yes – it is. The biggest exchanges in the world, such as Binance and Huobi Global have a combined daily volume of trades 20 times bigger than Kraken, the fourth biggest player on the market. Just as you wouldn’t buy a car from a dodgy car dealer, do your research on the reputation of any exchange that you are considering. Look for recent changes in user reviews in case customer service has dropped, or recent technical changes that may have affected the exchange.
The different types of cryptocurrency exchanges and apps
There is a difference between choosing a cryptocurrency platform for a beginner compared to a more experienced trader. Not all exchange platforms are the same, just as not all buys, sellers and traders have the same needs and use of their cryptocurrency.
If you’re a beginner – There is a large range of brokerage platforms well suited to beginners which allow you to make a simple and fast purchase directly on the platform. Many offer clear instructions and resources to help you at each stage of purchase.
If you’re more experienced – If you’re looking to trade, a broker may not be the right option for you. There are open market providers which offer competitive prices and additional features such as margin trading.
If you’re advanced – There are platforms that allow you to trade cryptocurrency derivatives. If you are looking to trade crypto frequently at high speed, these platforms with a full range of features may be for you.
The rate at which exchanges are popping up and disappearing is quite remarkable. According to coinmarketcap.com, there are currently 314 different exchanges in operation and it’s likely that there are a number more that are either too small or too new to be noticed. However there is a strong band of exchanges that have been around for a while, are well backed and have great reputations.
So, which exchange or app is right for you?
Before choosing an exchange you first need to work out what you’re going to be doing in the cryptocurrency market and choose your exchange accordingly. Finally, keep in mind that as your needs change, it’s very straightforward to open an account with a different exchange that suits you better and move your coins over. If you’re starting out, it’s recommended you pick a simple exchange and switch over as your needs and skills change.
Consistently ranked one of Sydney’s top financial planners (Adviser Ratings), Brenton helps his clients life a great life by making the most of their money. Read his full bio here.
