Best Cryptocurrency Exchanges in 2021
For anyone looking to get started as a crypto trader, cryptocurrency exchange platforms offer one of the best venues for buying and selling cryptocurrency.
As the number of cryptocurrencies on offer continues to grow, most crypto exchanges have grown accustomed to offering users a variety of coins, tokens, or altcoins. These digital assets can be traded for other cryptocurrencies such as Bitcoin and Ethereum.
However, with so many exchanges available, it can be daunting trying to figure out which ones best suit your needs. Fortunately, our onboarding questionnaire can quickly point you to the right crypto exchange with just a few steps.
What Is a Crypto Exchange?
Simply put, a cryptocurrency exchange is a platform that allows users to buy and sell cryptocurrencies.
There are two primary types of exchanges in crypto: centralized and decentralized.
A centralized exchange (CeX) is owned and controlled by a central entity. The company in charge of this type of exchange is responsible for matching orders, providing liquidity, and ensuring secure storage of user’s funds. These exchanges are ideal for beginners as they allow buying cryptocurrencies with fiat money such as the US dollar or Euros. They also feature intuitive user interfaces.
Decentralized exchanges (DeXs), on the other hand, have a somewhat steep learning curve. They are designed for users who want to trade one crypto asset directly for another without going through a third party, as is the case with a centralized exchange.
As the name suggests, decentralized exchanges are built on a decentralized network with no central entity governing the platform.
How Centralized Crypto Exchanges Work
Once you have your money deposited on a CeX, the process of purchasing your cryptocurrencies is easy. The CeX usually comes with a built-in crypto wallet that you can use to store your cryptocurrencies. You also get the option of withdrawing your crypto assets to an external wallet.
Every centralized exchange features a different internal architecture; however, most centralized exchanges operate with order books that match buy and sell orders.
A CeX’s order book lists all orders (buy and sell) from users looking to trade cryptocurrencies on that particular exchange with prices ranging from the best offers, best bid, high, low, etc.
Once an order is matched by a counter-party (i.e., a buyer or seller), the order will be taken by the platform operators, who match the orders and provide liquidity, thus enabling an efficient and fast trade execution at the best price.
Examples of Centralized Exchanges
The best CeXs will give you an intuitive interface that is easy to understand.
Kraken, for instance, comes with a very intuitive interface that enables you to buy and sell bitcoins with a few clicks. It also provides advanced tools for traders who want to exploit different trading capabilities such as stop losses and margin trading.
With Kraken, for example, you can exchange fiat currencies such as the Euro for Bitcoin. This function is hard to come by among most exchanges. The Kraken exchange also features a state-of-the-art security level that comes with a Security Shield to help users have an easy time setting up security features on the Kraken exchange.
Kraken also provides a high level of liquidity for its users, thus making it easy for traders to take on larger positions without any adverse implications on market price movements.
Coinmotion is another fast and reliable crypto exchange platform for buying and selling Bitcoin. Although not as huge as the Kraken crypto exchange, it equally features an intuitive design that makes it easy to use, even for those who are new to cryptos. It also supports various payment methods such as bank transfers, credit cards, SOFORT Banking, and other instant payment methods such as S-pankki (an instant online payment method available in Finland). You can use Coinmotion to carry out exchanges between different cryptocurrencies such as Ethereum, Zcash, or Monero, among others. The platform also comes with affordable trading fees set at a range of 1 to 2%.
If you are looking for a peer-to-peer exchange that will allow you to shop around for varying exchange rates, check out Paxful. It is a peer-to-peer marketplace for buying and selling Bitcoin and other cryptocurrencies with more than 300 payment methods.
This exchange was established in 2015 by a team of developers whose goal was to simplify access to Bitcoin. Paxful provides a direct exchange where buyers and sellers of cryptocurrencies can meet and transact with each other directly. The buyer deposits cash through Paxful's payment methods such as prepaid VISA, Gift Card Code, or Western Union to the seller's account. Once the seller confirms receipt of funds from Paxful's escrow service, they release Bitcoins to the buyer directly.
How Decentralized Exchanges Work
Decentralized exchanges are also easy to use; however, there is a learning curve involved. These types of exchanges allow you to buy cryptocurrencies from other users with nothing but the blockchain as the intermediary.
DeXs are great for people who want to exchange cryptocurrencies without having to go through a third party and trusting a central entity with the safety of their funds.
There are two categories of decentralized changes: order-book-based decentralized exchanges and automated market-making DeXs.
Order-book-based decentralized exchanges operate in the same way as centralized exchanges in that they list all of their orders on an order book with prices ranging from best asking prices to the best bids. The difference is that they deploy a decentralized framework to match and settle transactions. Automated market-making DeXs don't use order books. They use smart contracts to match and settle orders between a user's wallet and a smart contract. AMM DeXs also outsource liquidity from platform users.
How to Use the Best Crypto Exchange
- Answer our onboarding questionnaire: Pick your exchange based on our recommendations: Picking an exchange with the right criteria in mind is important as the security of your funds is at stake. It is important to consider factors like insurance coverage, security of funds, customer support, and the reputation of the exchange when picking an exchange.
- Open an account: Opening an account on the exchange you have picked is easy. Simply enter your email address and password or sign up using Facebook, Twitter, Google. All exchanges require some form of account verification. Depending on the exchange you have picked, you may be asked to verify your identity by sending a scanned copy of your ID documents or passport. This process contains simple steps
- Complete the KYC process: Know Your Customer processes are necessary as they help exchanges prevent fraud. Exchanges have to be sure that you are who you say you are before they can allow you to withdraw and deposit funds.
- Fund your account: Different exchanges will come with different funding methods. For example, some exchanges will only allow bank transfers from your bank account, whereas others will ask you to wire money via Western Union or MoneyGram. If the required funding method isn't available, most exchanges will allow the deposit of cryptocurrencies. Therefore, if you already have crypto in a separate wallet, you can simply send them to the exchange and start trading.
- Purchase the crypto you want
How to Get Started With Crypto Trading
The best thing you can do when first getting started with crypto trading is to start with a plan. With your goal set, you can decide how much you're going to trade. It is always wise to start small and build your way up. Some trading strategies to consider include:
- Day trading: This trading strategy is best for traders who want to make smaller investments but at a higher frequency throughout the day. Professional traders commonly practice it as it is best suited for those people who have enough time to trade full-time. To find out more, read our day trading guide.
- Swing trading: This strategy relies on a breaking trend in the price movement of a cryptocurrency. It is an ideal strategy for those who want to make larger investments but do not have the time for analyzing charts and graphs all day long.
- Position trading: This is a long-term trading strategy where you buy and hold an asset for days and even months as you wait for a positive market trend to occur. If you want to learn more, read out crypto investing guide.
- Use dollar-cost averaging: This strategy uses the concept of average cost. With this plan, you have the option of making small amounts of investments over time, no matter the current price. This allows you to accumulate an asset at a low average cost.
- Use stop-loss orders to protect your assets: A stop-loss order will set the minimum amount of losses you are willing to stomach in a falling market. Once the asset price hits your set limit price, the order to sell or buy will be executed automatically. This is a good risk management strategy.
Do You Have Questions?
Yes, you can start trading with as little as $100. Keep in mind that you don't have to invest in a full Bitcoin. You can own decimals of a bitcoin and still benefit from Bitcoin's price movements. The smallest fractions of Bitcoin are called Satoshis, and they are made up of 1/100 million of a Bitcoin. Check out our guide on how to buy Bitcoin for more information.
There are thousands of cryptocurrencies to pick from at this point. Therefore, deciding what digital asset to pick out of the thousands depends on your trading strategy as well as your long-term goals. If you are looking for a long-term investment, bitcoin is certainly one of the most reputable assets to hold. However, other emerging cryptocurrencies like Ethereum, Cardano, and Litecoin have a promising future. All in all, it is important to conduct your research and analyze the market to identify opportunities for making profits.
Find the Best Crypto Exchange Now
A good crypto exchange platform, whether centralized or decentralized, should have a comprehensive list of features, best-in-class security measures in place, and support for a majority of the cryptocurrency assets available. It should also offer affordable fees, thus allowing beginners to dive into crypto trading without too many hassles.
With our easy onboarding questions, you can now find your way around the best cryptocurrency exchange out there.