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What You Should Know Before Putting Your Money on a Crypto Exchange?

Cryptocurrency as a medium of exchange or as an investment has certainly caught everyone’s attention in the past few years. You can’t turn to any financial news outlet without seeing news reports about who is and who is not accepting cryptocurrency as a form of payment. And some of the currencies have caught people’s attention as their values have soared to astronomical heights.

Cryptocurrency may be the future. It is also leading many to think about investing in it. In order to do so, you have to understand about the exchanges where these can be found. 

Crypto exchanges are the first step into the crypto world for many newbies who wish to trade or buy digital currencies. Also, if you want to utilize any token issued through an ICO (Initial Coin Offering), you should eventually exchange your other cryptocurrencies for them. So, it’s essential to choose a proper exchange service and know what you are doing there.

Here you will find some things to think about in the cryptocurrency exchange world.

The ABCs of Crypto Exchanges

What are crypto exchanges, and how do they work?

An exchange is a place where you can trade your fiat currencies (like dollars, euros) for cryptocurrencies of other types.

These trading platforms work much like a traditional investing platform that you might see at a brokerage firm. Most trading operations are made at the exchanges through a website interface. Just like a stock investment, you give an order to sell or buy some cryptocurrency. If there are enough people that want to do the same thing on the other side, then the transaction is completed and you own the currency.

Related Content: The Ultimate Beginner’s Guide to Investing Money the Right Way

Every exchange should have enough liquidity to fulfill the orders. It’s also important to know that crypto exchanges are not an exact science. So sometimes, you may see your order getting executed partially or with a delay.

What do I need to start trading at an exchange?

There is no strict rule here, so it depends on what kind of service you want to use. At most crypto exchange sites, you must register and create your account. After that, they may offer some kind of verification procedure. This is required by law in many countries. And you will have to fund the account with the money you’d like to trade for cryptocurrency.

However, you should be aware that not every exchange offers cryptocurrency-to-fiat transactions. So if you would like to trade Bitcoin for dollars, then find an appropriate service that can complete that transaction.

Things to watch out for when using a crypto exchange

Like already mentioned, not all crypto exchanges are created equal. You will need to watch out for some specific features when using exchanges.

First look at their fee structure. You are looking for an exchange that has low fees. Every exchange should have low commissions for trading operations. However, if you’re not careful enough, then your order may be executed with an extremely high fee. 

Also think about liquidity. Liquidity refers to the amount of easily moveable assets to a market or company. The higher the liquidity on an exchange, the more likely you get your order fulfilled. So, it’s logical to look for exchanges with many users and high trading volumes.

Lastly, look at the user interface. Some people may prefer an exchange that functions through an easy web interface. All they need are the necessary features. Other people prefer using mobile apps or maybe even intraday trading software. The choice ultimately depends on what you are looking for. Figure out what makes sense for you as you interact with the interface.

Tips for keeping your money safe on a crypto exchange

Finally, you will want to understand all things about security. Though the security measures at exchanges are constantly improving, you should be very careful with your account’s safety.

For example, it is best to set 2-factor authentication (2FA) for your account. This additional login step can help prevent unauthorized users from getting into your account. 

Also, check your email regularly to keep track of what happens to your money. If you own cryptocurrencies at several exchanges and would like to withdraw money from them, be aware of possible limits for withdrawing funds. If you’re not careful enough, then your account could get hacked with all consequences it brings.

Related Content: The Beginner Bitcoin Mistakes You Don’t Want to Make

Crypto Conclusion

In general, crypto exchanges are great tools for those people who want to utilize any cryptocurrency or token issued through an ICO.

However, they offer a variety of features and fees structures. So you should be very careful when choosing one. In addition to that, never forget about using 2FA and keeping your email address up-to-date to avoid losing track of your money.

Leave a Comment of Answer a Question Below: What do you think about the future of cryptocurrency as a medium of exchange in the marketplace? Do you think it will become a viable investment? What cryptocurrencies do you think will ultimately emerge as the top 3 or 4 in the industry? 

Photo by Kanchanara on Unsplash

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