When choosing a crypto exchange, there are various issues you need to consider before joining the platform.
Do your research to find one that will meet most of your needs.
Some of the factors to look for include; reliability, security, verification, exchange type, fees, mobile app, and whether or not it is available in your country.
Without a shadow of a doubt, it will be challenging to tell which of the exchanges you came across will be successful in accomplishing what you want from it, and which ones will fail.
Hundreds of exchanges are formed every day. No doubt, this creates a healthy competition among all of them. Countries are beginning to regulate exchanges, which makes it harder for some of them to remain in business as it will drive up costs. The larger exchanges, will, therefore, have an unfair advantage over the smaller ones.
You will find there are two levels of security to allow access that most exchanges make use of nowadays:
- The first level is the use of a username and password as a necessary login procedure.
- The second level will require the user to authenticate themselves. They would get an SMS with a number, which must be entered into a section on the exchange site. Preferably, you want a next level security process that involves Google authentication. Some platform would give you a choice while others will allow you to use both options.
Losses due to cyber attacks, fraud, theft, and any illegal actions taken by the exchange personnel are covered by the latest cryptocurrency insurance policies.
Users on more than a dozen exchanges can request their holdings to be financially safeguarded.
The framework would weigh criteria such as the level of technical security, passwords, key storage reliability, and personal data provided by each exchange.
It also takes into account the quality of the personal risk management system of each platform, and how unvarying the KYC (know-your-customer) and AML (anti-money-laundering) procedures are.
Certain exchanges require hardly any verification. Usually, the crypto exchanges get away with this. Other platforms need one to key-in a name and address. Different levels will apply if you want to trade and take out higher amounts than the average person would.
The types of verification required would involve submitting copies of your passport or ID document. You will come across crypto trading platforms that would ask you to take a selfie and send this with your ID. No doubt, every exchange out there have different requirements that must be met.
What About Trading Bots – Can You Trust Them?
Algorithmic trading and the use of trading bots is nothing new on Wall Street. Many might be concerned as to how reliable and trustworthy these bots are. But, various crypto networks provide a unique environment to minimize the risk. They continuously experiment with updated methods, and the bots have the ability to manipulate the markets.
The combination of more sophisticated software tools used for trading purposes, coupled with the advancement made in machine learning as well as decentralized exchanges should instill even more confidence in the development of trading bots.
Notwithstanding the advent of algorithmic trading in various cryptocurrency markets, it is still a growing field with a much-needed amount of improvement waiting to unfold.
The future of different blockchain networks is unclear at this stage. Having said that, trading bots will be useful for institutions and traders to help minimize risks and to take care of larger orders.
Many of the trading bots honed in on arbitrage trading taking place between exchanges.
This brings us to three types of exchanges:
- Crypto Exchanges – These would only be utilized to trade cryptocurrencies and do not allow exchanging your fiat currency into cryptocurrency. One of the benefits associated with this kind of exchange is that they have lower verification requirements. The disadvantage is that you must already possess crypto coins to make use of these.
- Crypto Fiat Exchanges – They would accept fiat deposits and let the user buy crypto using the fiat currency. All you need is your bank account or credit card. These exchanges would be regulated by government agencies as they deal with fiat currencies. The disadvantage is that these do not offer access to a variety of cryptocurrencies.
- Cryptocurrency Brokerages – These are brokerages in that they offer their services for trading with products like; bonds, stocks, foreign currency exchange, commodities, etc. They also allow trading with cryptocurrencies. Users have the convenience of a one-stop shop so to speak. The brokers are trustworthy as they are regulated by the authorities. The only downside would be the higher fees and fewer types of crypto to trade with.
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