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Why does choosing the right exchange matter?
Anyone entering the world of digital currencies soon faces the task of choosing an exchange. There are countless crypto exchanges, each with its strengths and weaknesses. Some offer a wide choice of trading pairs, others a convenient interface, a third group expanded functionality with many tools for technical and chart analysis, a fourth are the quickest to list new tokens right after an ICO, and a fifth provide advanced security settings, and so on.
Most crypto-enthusiasts do not limit themselves to a single venue. One exchange might be used for everyday trading in highly liquid assets, a second for high-risk altcoins, a third for buying new tokens “for the long term”, and a fourth for buying or selling tokens not listed on the other three, and so forth. There are many such combinations.
Bear in mind that by choosing an exchange, a trader entrusts funds to a third party. Decentralised exchanges, which give full control over the private key and thus user funds, are still at an early stage. This brief guide therefore focuses on criteria for selecting “traditional”, or centralised, crypto platforms.
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What criteria should guide your choice?
There are many exchanges and the choice is personal. Even so, the main criteria to consider are:
— reputation (before sending funds to an unfamiliar venue, read reviews on forums such as bitcointalk or Reddit);
— fees (each buy and/or sell incurs a commission paid to the exchange; rates vary by platform but typically range from 0.1–0.25%);
— number of trading pairs (some prefer to trade highly liquid cryptocurrencies from the top 10, others go for more volatile, less liquid altcoins);
— liquidity (this largely depends on the daily trading volume; on a liquid venue buyers and sellers appear in the order book every second and the candlestick chart is smooth, without frequent “spikes”);
— payment options (some exchanges support many payment methods, including bank transfers; others allow deposits and withdrawals only in cryptocurrency);
— user verification requirements (some exchanges, such as Poloniex or Bittrex, impose fairly strict requirements; others (for example, Binance) allow unverified clients to trade, but with a daily turnover limit).
Other factors include:
— the exchange’s country of domicile (for example, Japanese and South Korean venues may block users from other jurisdictions);
— ease of use of the interface;
— availability of technical and charting tools;
— availability of clear statistics on past activity;
— margin trading (and, as a result, the possibility of passive income by lending to other users of the exchange), and so on.
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Is Poloniex really popular?
This crypto exchange is indeed fairly popular and suits both beginners and seasoned traders. It was founded in 2014 and, thanks to a convenient interface, a broad range of altcoins and prompt listings of new tokens, Poloniex once held leading positions by daily trading volume.
At present its listing includes about 100 different cryptoassets and four market types ( \BTC \ETH \XMR \USDT). The platform supports three main modes:
— Exchange — spot trading (no leverage);
— Margin Trading — trading with leverage (up to 2.5x);
— Lending — a mode for lending to margin traders on the exchange.
Each mode offers convenient profit and/or loss analysis by trading pair. These tools are found in the My trade history & analysis section.
The charts include a minimal toolset: simple and exponential moving averages (SMA and EMA), Bollinger Bands and Fibonacci levels. Poloniex also supports pending orders (Buy Stop, Buy Limit, Sell Stop, Sell Limit).
Poloniex has a mobile version as well as Android and iOS apps. Late last year the exchange made account verification mandatory.
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Where else are many altcoins traded?
Bittrex is a true “abode of altcoins” (it lists more than 280). Thanks to surging demand for coins other than bitcoin, Bittrex once regularly ranked in the top ten by daily volume and at times led the market.
Bittrex’s interface is somewhat less convenient than Poloniex’s. On the other hand, its charts offer many technical and graphical tools.
Verification is mandatory. Trading fees are 0.25%.
Overall, the Bittrex interface is fairly well thought out and offers various security settings. In May 2018 the exchange added support for the US dollar, but the option is available only to clients in certain American states.
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What if I want to trade the most liquid assets?
Then head to Bitfinex, which mostly lists the most liquid cryptocurrencies from the first tier of CoinMarketCap. Clear advantages include professional TradingView charts, extensive statistics for analysing user activity, and numerous settings for security, notifications and the interface.
Bitfinex supports fiat currencies and offers a “Funding” mode (analogous to Lending on Poloniex), allowing passive income by lending to users trading with leverage. The exchange supports various order types, including stop-limit, trailing stop, Fill or Kill (“execute or cancel”), and more.
Bitfinex’s reputation is strong, particularly after it repaid all user losses following the 2016 hack.
On the downside, the interface can be complex and may feel cluttered to newcomers. Even so, the exchange warrants attention, especially for crypto-enthusiasts with substantial capital who prefer highly liquid instruments and a rigorous approach to technical analysis.
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What about Binance? Many talk about this exchange
This venue is relatively new yet consistently ranks among the leaders by daily trading volume. Binance lists many altcoins (more than 300), and the roster keeps growing.
The interface is quite user-friendly and uncluttered, while offering numerous security settings.
The exchange also has its own token — Binance Coin (BNB), which allows users to save on trading fees. In April 2018 the platform added an option to convert small balance dust (‘Convert to BNB’) into its own tokens.
Binance is popular with both beginners and professionals.