When it comes to cryptocurrency trading, you can’t be too careful. There are many fake cryptocurrency exchanges out there and the lack of proper regulation in the industry makes it easy for these fake exchanges to get away with your hard-earned money. As a prospective investor, it is up to you to protect your investment by researching thoroughly before making any investment in a cryptocurrency exchange. While researching, there are several questions you should keep in mind and find answers to before you make up your mind.
7 Questions Worth Asking Before You Start Cryptocurrency Trading On An Exchange
1. How Secure, And Anonymous Is the Exchange?
Most people who dive into the cryptocurrency industry do so because they are interested in maintaining their anonymity. Trading fiat currencies might put them in the spotlight of the SEC and scammers alike. Make sure that the exchange you create an account provides you with a degree of anonymity. Decentralized cryptocurrency exchanges provide more anonymity because they allow you to sign up and trade cryptocurrencies without risking your data. You will create a private recovery seed that cannot be accessed by others.
Also, find out what security measures have been put in place to protect the exchange from hackers. While no exchange is completely protected from hackers, some have stronger protocols than others. Exchanges that allow users to activate Two-factor authentication are the best. This login method makes it more difficult for anyone else to access your account. Go for exchanges that have cold (offline) wallets where most of their assets are held and protected in case of a security problem. Exchanges that have multiple wallet private keys spread across executives are often secure. A single executive can’t just run with all the funds.
2. Will The Restrictions In The Exchanges’ Country Of Origin Influence My Trading Experience?
Not every country has fully embraced the blockchain and cryptocurrency revolution. This is why you need to be careful when you’re creating an account. Find out as much as you can about possible restrictions in your location and the location of the exchange. If your country is not yet cryptocurrency-friendly, you’re going to have issues when you want to use the exchange. You might successfully create an account and start trading but have difficulties when it’s time to make a withdrawal.
For example, some exchanges accept deposits and withdrawals through PayPal but some countries are only allowed to make deposits on PayPal. If you create an account on such an exchange, you’ll be able to deposit and trade but unable to withdraw your funds. Make sure you focus on exchanges that don’t have restrictions that will affect you negatively eventually.
3. Is The Exchange User-Friendly?
When it comes to trading cryptocurrencies successfully, the user interface and design of the exchange cannot be overemphasized. The last thing you want to do is sign up on a slow exchange that keeps crashing when there is traffic. You’ll miss out on a lot of opportunities if the user interface and design are not user-friendly. The issue of user design is indeed subjective but make sure you pay more attention to functionality than aesthetics.
4. What Is The Customer Service Like?
When you have a problem with your account how can you reach the customer service agents for assistance? Do you call, email or visit them? Keep in mind that a decentralized exchange may not welcome visitors in their physical location but this doesn’t mean that the location should not be made public. There is always an address, and contact information that allows you to reach them. Find out what people are saying about their customer service response time as well. The faster the response from an agent, the easier it will be for you to handle issues with your account.
5. What Tokens Does The Exchange Support?
Most cryptocurrency exchanges support Bitcoin. This isn’t a surprise since Bitcoin is the first and largest cryptocurrency per price and market capitalization. While there is nothing wrong with trading Bitcoin, it’s a good idea to keep your options open by signing up on an exchange that allows you to trade other cryptocurrencies like Ethereum (ETH), Ripple (XRP) and others. This way, you’ll keep you will be able to diversify your portfolio. Consider exchanges that also have stablecoin trading options.
6. Does The Exchange Have High Volume And Liquidity?
How fast can you get your money if you decide to liquidate? How long does it take to execute large trades? Do you have to wait for weeks, days or hours? Exchanges that offer high liquidity are the best. One way to know if an exchange has liquidity is to check out the trading volume. Most times, high exchange volume means high liquidity. Keep in mind that not every exchange publishes the right volume. Some of them falsify data or manipulate their volume to win customers over. The high-quality volume will allow exchanges to execute your orders instantly irrespective of the size. This comes in handy whether you’re trying to buy or sell cryptocurrencies.
7. Is The Platform Automated?
Trading manually is cool but something cooler is performing automatic trades on the go. Being able to execute trades when you’re at your day job, or vacation is an amazing way to generate passive income. This is why you need to look out for a cryptocurrency trading platform that is automated. One of the best-automated cryptocurrency platforms out there is Bitcoin Evolution. It is a fully automated trading software with an accuracy level of 99.4%. It detects trade signals for you making it easy for you to invest irrespective of your level of cryptocurrency trading experience. It’s available in over 150 countries so make sure you find out if your country is on the list.
These are the top seven questions you should find answers to before you start trading cryptocurrencies on an exchange. There are some other things you should consider like the form of trading, the type of platform, the fees, etc. However, make sure you check out all the things on this list first before considering other factors that will make the trading experience awesome.
Carolyn Coley is a blockchain reporter. She joined Smartereum after graduating from UC Berkeley in 2018.
