Cryptocurrency had a veil of mystery around it in the past. But today, “Bitcoin” is the main buzzword, and everyone wants to invest in it. The process is pretty straightforward – choose a crypto exchange platform and start buying Bitcoin.
Then, create online Bitamp open-source Bitcoin wallet and move your funds there. But no matter how essential a reliable wallet is, a trustworthy crypto exchange is where you buy Bitcoin.
So, how can you be sure which platform is right for you? Consider the following factors when making a decision.
How Do Crypto Exchange Platforms Work?
The simplest way to view a cryptocurrency exchange is as a brokerage firm. The platform serves as an intermediary between a buyer and a seller.
Upon registration, users deposit fiat currency and buy digital tokens. The crypto platform makes money by charging a transaction fee.
Users also have the option of turning their digital currency back into fiat currency and cashing out. All well-established crypto exchanges offer multiple cash out methods to their users.
There are two types of crypto exchange platforms – centralised and decentralised. Even though decentralised exchanges might seem like a more logical choice, they’re not as widespread or accepted as centralised brokerages.
They lack any regulation and typically only offer crypto-to-crypto trading. Most large international exchanges are centralised and governed by a central authority and function similarly to the stock exchange.
If you are a crypto novice, opting for a centralised crypto exchange platform is the go-to choice. But not just any platform will do. You still have to look for specific characteristics.
When it comes to anything crypto, security is always the primary concern. To ensure you’re dealing with a legitimate business, always verify whether the exchange has a headquarters address and who are in the management team.
More importantly, the best crypto exchanges are cautious about not losing their users. That’s why, in the rare case of fraud or hacking, they offer insurance policies for any lost funds. This is a sure sign that your funds will be safe if you choose to keep them at the exchange.
As mentioned, the best platforms offer custodial digital wallets where you can safely store your funds. But keep in mind that you won’t get to hold the private key that allows complete control.
Savvy investors opt for moving their money to non-custodial wallets. If you create online Bitamp open-source Bitcoin wallet, for example, no one will have access to your tokens other than you.
Imagine if you wanted to cash out with your Bitcoin and the exchange didn’t have enough money to facilitate it. That could be pretty frustrating, especially if you’re in a hurry.
Choosing a prominent and well-known crypto exchange platform usually avoids this problem. But doesn’t mean a smaller exchange isn’t legitimate, only that it might be difficult to cash out when the price of Bitcoin is on the rise.
Naturally, users will want to know about the price of transaction fees. Going with the lowest possible isn’t always the right decision. Users should keep in mind that higher transaction fees cover the cost of insurance and protection that many cheaper exchanges don’t offer.
Some platforms insist on fixed fee rates, and others take a percentage of your trade. Furthermore, some tokens will have higher transaction fees than others. Before spending any money, make sure you’re familiar with all the rules of a specific platform.
This may be a bonus consideration, but one that could make all the difference. In the UK, crypto assets are taxed either as an income tax or capital gains tax. Either way, you will need to pay taxes for crypto holdings.
Your crypto exchange platform should contain basic information on how users should approach this subject. Keeping thorough records is crucial, especially if your interest in Bitcoin goes beyond seeing it as a hobby.
Getting It Right the First Time
Choosing a Bitcoin exchange platform can be a little overwhelming at first. These platforms advertise and highlight the advantages they offer. You might find yourself sifting through a lot of information.
That’s why your primary focus should be the security level the platform offers, as well as liquidity and affordable fees. The storage, tax information, or any educational material is widely available elsewhere.