Are you wondering how to choose the right crypto exchange for you?
Well, you’re not alone. Choosing the perfect crypto exchange is like finding the right key to a treasure chest – it can unlock incredible opportunities, but it’s no one-size-fits-all solution.
Now, here’s the kicker: There’s more to it than meets the eye. It’s not just about signing up and trading; it’s about making savvy decisions that can make or break your crypto journey.
Imagine this: the lower your trading fees, the better your chances of growing your crypto wealth. That’s just the tip of the iceberg. In this guide, we’re about to help you understand how to choose the right crypto exchange, how to avoid pitfalls, and many interesting bit that you would not know if you miss out on reading this guide.
From understanding jurisdiction complexities to maximizing your VIP status and even tackling liquidity challenges, this guide is your compass through the crypto wilderness.
This guide on selecting the right crypto exchange for you will help to understand all the factors needed when selecting a crypto exchange.
12 Things to Consider When Choosing a Crypto Exchange
1. Jurisdiction Friendly Exchange:
One of the biggest factors when selecting a crypto exchange for any user should be their jurisdiction. These days, all the crypto exchanges ask you to go through a process called KYC where you share your personal details like passport or government ID. This is to ensure that the person using the crypto exchange is legit.
A crypto exchange that supports your local jurisdiction will help you in the following ways:
- Support for your local currency (ex: GBP, AUD, INR)
- Often regulated or under the supervision of your country’s financial institute
- Get customer support in the local language or telephonic support
To be honest, local crypto exchange is not a norm in the world of cryptocurrency. A crypto users (beginner or advanced) usually prefer an exchange that offers maximum liquidity, trust, low fees, and security, as all these features add up to give an outstanding investing or trading experience.
However, I would suggest you work with a crypto exchange that offers direct or indirect integration with your crypto taxation tool so that you are compliant with your local laws.
Often users from certain countries use crypto exchanges thinking it would be okay to use a foreign established exchanges without declaring the same in their tax-resident country. In our opinion, this is a big mistake, especially if you are someone who is planning to make six to seven figures income from crypto investment or trading. Choosing a crypto exchange that is friendly to your jurisdiction will help you avoid future headaches.
At this moment, a few no-KYC exchanges do exist, but lately, we have seen that many exchanges like Bybit, KuCoin, or Bitget which used to be either no-KYC or reluctant to KYC norms, have made this process compulsory.
2. Ease of Use:
Based on our current understanding of cryptocurrencies, you should pick the exchange that caters to your needs. For example, if you are an investor looking to buy and hold, you can use an exchange that offers a simple interface. A newbie-friendly exchange is what you need.
Similarly, if you are a trader or an advanced user, you should use an exchange that offers advanced tools for trading, such as Binance, Bybit, and Phemex which will help you make more money as you hone your trading skills and strategies.
Some of the above-mentioned exchanges do offer advanced tools like trailing stop loss, derivatives trading, and bot trading to name a few.
3. Compare The Trading fees:
Crypto exchanges make the maximum money when you trade or invest with them. Some exchanges offer zero-fee trading, while others take up to 0.4% of your trading amount as fees. These fees add up over time and put a huge dent in your wealth-building process.
Usually, exchanges with zero fees are good to have, but many of them are not ideal for long-term holds, and in the past, we have seen many such exchanges like Hoo(dot)com and others shut down.
In my experience, it’s best to find an exchange that offers low fees, a high-quality trading experience, and at the same time, is trusted.
A lot of exchanges like Binance and Bybit have a feature called VIP levels, which are awarded based on your trading volume, the value of assets you have on the exchange, and so on. The higher your VIP level is, the lower your trading fees will be. So it’s often better to use no more than one or two exchanges at a time to improve your VIP level and lower your trading fees.
Fees of some major global exchanges:
Fees of major US exchanges:
⭐️Note 1: The fees for simple swap (which investors need) and the fees for trading (Traders) is often different.
⭐️Note 2: The 0.0% fee above is usually for maker fees.
4. Number of Tradable Coins:
When you are starting out your journey as an investor or crypto trader, you may be looking at the top 20 cryptocurrencies like BTC, ETH, SOL, and so on. However, as you march ahead, you will realise that there are often more possibilities of making money with altcoins.
This is why you need a crypto exchange that not only supports all good altcoin projects but also who are proactive in adding new hot projects.
Often tier-2 exchanges like MEXC, and Phemex are more proactive than top-tier exchanges to add new projects.
5. 3rd Party Integration:
One of the sweet aspects of the cryptocurrency market is it runs 24/7, and to make the most out of these amazing features of the cryptocurrency market, you will need crypto trading bots, trading terminals, and similar trading tools. Now, if you are simply a beginner, you don’t need to worry about this particular factor, but as you move ahead, you would want to pick the one that works with all popular trading tools. Most of the best crypto exchanges do work with popular trading tools like Bitsgap, Cornix, or 3Commas, to name a few.
If you plan to trade spot or derivative markets, you would want to pick an exchange with higher liquidity. Working with a crypto exchange that has low liquidity might cause you substantial losses, as the slippage would be high. Especially if you are into derivative trading, exchanges with low liquidity could cause your stop loss to be taken out quickly, and thus, you will be out of your trade-in time and often at a loss.
Here are the top spot and derivative exchanges based on the volume.
|Top 3 Derivatives Exchange based on trading volume|
Note: If you are trading small caps, you may not find them being listed on many exchanges, and take the help of something like Coinmarketcap or CoinGecko to check the liquidity of these tokens on various exchanges.
We are also building a tool on CoinSutra, which will help you check everything here.
7. Top Notch Security Like Fort Knox:
It is well-known that cryptocurrency is still highly unregulated, and this often causes a lot of new exchanges to sprout, and they do marketing of their exchanges on Instagram, Facebook, and Twitter X to get new users. These unsuspecting users do not really care for security because of marketing lures such as welcome bonuses, and free bitcoins, which often cost them their entire savings.
While no exchange is 100% safe or secure from hacking, however, you should prefer exchanges that have a proven track record, have backup funds, have audited code, and have maximum user satisfaction.
8. Instant and Friendly Customer Support:
When dealing with finance and crypto, the need for customer support is often urgent at an emergency. Some of the most common reasons why you would need customer support on an exchange are:
- Account locked due to a hacking attempt.
- Account hacked.
- Sent crypto to the wrong blockchain.
- Sent crypto to the wrong address.
- KYC-related issues.
Having live chat support will help you resolve these issues in real time; else, the stress and panic of losing funds could cost you many days or hours if you are dealing with an exchange that does not offer excellent support.
Food for thought is: that not all best crypto exchanges have the same quality of support. Only a few of them work like Amazon, where they go above and beyond to resolve the user’s query in real-time.
Some of the most common ways you can get customer support from an exchange are:
- Live chat
I have had a great experience with Binance and KuCoin when it comes to outstanding and instant customer support. Even though I advocate Bybit a lot, but I often found their support to be a little slower in comparison with Binance or KuCoin. At the same time, Phemex seems to be doing reasonably good when it comes to customer support.
9. Leverage and Advanced Features:
If you are a derivative trader, you might want to pay special attention to how much leverage a particular exchange offers. At the same time, combine it with the tips I have shared above, such as liquidity and fees, to find an exchange that fits your requirements.
Also, you should pick an exchange that offers products that you are interested in, such as perpetual futures trading, options markets, and so on.
Here are the top derivative exchanges with allowed leverage and available products.
10. Deposit and Withdrawal Methods:
There are exchanges that let you add funds using your bank account, and then there are exchanges that allow you to add only cryptocurrencies like BTC or USDT. When it comes to fiat deposit, you have multiple options such as bank transfer, SEPA, Add using Visa or Mastercard, PayPal, and so on. Different deposit methods have different costs, and you should be aware and mindful of it.
My suggestion for you here is to pick an exchange that supports adding funds via the banking route. An exchange that offers deposit funds via bank often is more reliable than an exchange that does not have a partnership with existing banks or credit/debit card providers for adding funds. More over,
11. Centralized (CEX) or Decentralized (DEX) Exchange:
There are two very popular types of exchanges these days, and they are centralized and decentralized exchanges. Based on your jurisdiction and requirement, often decentralized exchanges are good. Thanks to layer 2 blockchains like Arbitrum, Optimism, and likes, the trading fees on these exchanges are becoming lower.
However, this is not recommended for an absolute beginner, as a user is responsible for handling their funds. Whereas on a centralized exchange, the operator of the exchange ensures all the security features like KYC, 2FA, strong password, and so on to ensure the security of your funds.
Again, if you are interested in trading permissionless and without sharing your KYC, you should check out my earlier guide on top decentralized exchanges.
12. Proof of Reserves – Transparency:
A while back, there used to be a crypto-exchange called “FTX,” which was the #2 exchange of its time, and one day FTX went bust as the founder of the exchange was using the user’s funds to trade via one of their companies. After this fiasco, exchanges have started publishing proof-of-reserve, which adds significant trust.
The reserves stay on the blockchain, so if there is any significant crypto movement happening, we all know there is something going on in real-time, and it could help avoid future catastrophes like what happened with FTX or Hoo(dot)com.
Also check: Crypto exchange hacks (A history)
Proof of reserves is one of those features that a good crypto exchange must have. At the same time, work with an exchange when we know who are the people behind it, where the headquarters are, and all those trust and transparency-related features that we expect from a reliable crypto exchange.
Final Takeaway: Choosing A Cypto Exchange
The world of crypto exchanges is complicated, and here at CoinSutra, we do our best to bring and share the latest news and features of the top crypto exchanges. However, due to the fast-moving nature of the crypto world, challenges can arise unexpectedly, which we have seen in the past with Mt. Gox, FTX, Hoo, and many known and unknown exchanges.
Choosing the right exchange should be your crucial priority, and instead of creating an account on a random unknown exchange, it could result in the total loss of your funds. I hope the above checklist will help you pick the best one for your needs.
How many crypto exchanges should one Signup for?
As a beginner, you should be okay working with one or a maximum 2 exchanges, as you learn how to use them, how to do tax accounting of your trade, and so on. Once you have moved from beginner to intermediate or advanced level, you should have more exchanges from tier-2 level such as MEXC, and Phemex so that you can quickly take a long or short position on new projects.
You don’t want to end up using too many exchanges, as it might create an accounting and management headache for you. But if you live in a country like Dubai where there are no personal taxes and reporting, you can sign up for a few good exchanges and be ready to use them when a hot project is listed on it.
What is the biggest mistake one makes while choosing an exchange?
The biggest mistake is not doing enough research about the exchange, founders, and proof of reserves. Without these, you might end up signing up for an exchange that may cease to exist one day and might cost you lose your entire investment and savings.
Any other crypto exchange tip that one should be aware of?
Do not use a crypto exchange as a wallet. Keep only those funds that you are trading, else move it to a cold wallet like Ledger Nano X, Metamask, or anything that is secure and you have complete control over. This way even if an exchange goes belly up, your funds are safe with you, and the only risk is the amount that is on that particular exchange.
Here are some of the resources that will help you in your selection:
About Harsh Agrawal :
An award-winning blogger with a track record of 14+ years. He has a background in both finance and technology and holds professional qualifications in Information technology.
An international speaker and author who believes in blockchain and the crypto world.
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Harsh has experience of 12+ years in Fintech and 7+ years in Blockchain and Bitcoin. He has also moderated the panel of Blockchain experts and attended international blockchain events like BTCMiami, and Token2049.