Beginners GuideInformation

A Complete Guide to Cryptocurrency Exchanges for Beginners

So you have heard about cryptocurrencies,  especially after the unbelievable market growth it caused worldwide in the last few years and was in news all the time. Whatever the coin may be, the first thing everyone wants is to get knowledge about cryptocurrency and to own it. This trading is done on platform ‘cryptocurrency exchanges’.

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Now, choosing a cryptocurrency exchange to purchase can be a formidable and difficult process. Ultimately, there are more than  200 cryptocurrency exchanges today, with 24-hour trade volume in the billions.

And probably the most important tip before you start. Don’t trade with money that you can’t afford to lose! Really. Beginners do a lot of stupid things, like an investment of the whole savings. And the stupidest one is borrowing the money from family and friends and invest that into the bitcoin, litecoin, ripple etc. So please, always think the option that you could lose everything if you don’t know what are you doing.

If you are looking to trade in digital currencies then you should know about top crypto exchanges, list of cryptocurrencies and crypto exchange rates.

1.)What Is A Cryptocurrency Exchange?

A crypto-currency exchange is any mechanism that operates with other assets dependent on the trading of cryptocurrencies. Like a conventional financial exchange, the central function of the cryptocurrency exchange is to enable the purchasing and sale of these, as well as other, digital assets. It is also often known as Digital currency exchange (DCE).

A cryptocurrency exchange, or a digital currency exchange (DCE), is a company that enables clients to swap cryptocurrencies or digital currencies for other properties, such as traditional fiat money or other digital currencies.

2.) Different Types of Exchanges

Fiat – Crypto Exchanges

These exchanges allow you to buy a cryptocurrency directly using your fiat currency (a government-issued currency like US dollar or Pound). These are most popular with new users who are yet to explore the crypto market because it offers easy access to the cryptocurrency of their choice without much difficulty.

The issue with these exchanges is that they have little support and they offer less number of choice of coins. It is used as just an entry point by beginners.

Crypto – Crypto Exchanges

These exchanges allow you to trade a cryptocurrency for another cryptocurrency. It means first you need to buy a cryptocurrency on a fiat–crypto exchange and then transfer it to the wallet of the crypto – crypto exchange and then trade for the coin which you want to buy in the first place.

This is done by experienced traders who are actively trading between coins to profit quickly or want to buy smaller less known coins.

Peer-to-Peer Exchanges

In these exchanges, a buyer is matched with a seller and they exchange currency at their own agreements. Like one of the exchange Localbitcoins, where they match a buyer with a number of sellers, where the buyer has the option to choose the best price of the selection.

Also, they normally offer an escrow service( a financial arrangement where the third party holds and regulates the payment of the funds for two parties involved in a given transaction ) so that there is reduced risk for both buyer and seller.

Brokers

In these exchanges you can buy cryptocurrencies from brokers directly. The brokers set their own prices which could be higher or lower than market price. Here you need to be careful before trading with the

3.) Finding The Best Crypto Exchange

Now you know the different type of exchanges and you have made decision to get into the crypto world,

So it is very much important to find the best exchange to make the most out of this business. Before you start trading , there are some criteria you must check on these platforms to identify the most suitable for you. Let’s go through the most important ones.

Reputation :

Read about exchange reviews online(coinpedia). Check whether they have been ever hacked or have issues transferring the users money. Check if they have suitable trading tools and if other experienced traders trust them. You can also go through independent users comments on sites such as Reddit and BitcoinTalk.

Exchange Rates:

There are different exchange rates for different exchange platforms. This is the conversion rates for fiat currencies. Find those that have reasonable rates to save some money. You can find these fees on the sites’ platforms or from other users’ reviews.

Restrictions:

Some exchanges work only in specific regions or countries. Check if the platform is available to use in your country. You need to choose one that is supported in your country to avoid issues with depositing and withdrawing funds, especially if you plan to use wire transfer.

Limitations:

Check for any limitations on trading. There are some  platforms which limit the amount you can trade until you complete the verification process. Then there are few exchanges that allows trade whether or not you have verified your account. Check also the ease and user interface. The highly liquid exchanges are some of the best crypto exchange platforms as many digital coins are available.You can check this info on the exchanges official websites.

Verification:

Most exchanges will  ask you to provide identity(Govt issued ID) to exchange crypto on their site. This require you to upload your identity card and location details. For some you to need take photos of yourself holding your identity card. This verification is very important to prevent fraud. It is a way the exchange platforms to protect themselves from fraudulent traders whose aim is to deceit others. Also, the verification protects traders as you only get to interact with verified individuals. It reduces the chances of getting conned.

Fees:

Check the fees in the exchange. Ensure you carry out a required search on these as some exchanges have hidden fees. You must identify their deposit, trading and withdrawal fees. Keep an eye as there are some platforms that have unbelievable low fees such sites could be operated by conman just to lure you and get your money. On all the exchange official websites Information about fees is freely available.

Payment Methods:

Different exchanges support different payment methods. Some exchanges support debit and credit card transactions, bank wire transfer, PayPal, and others. Check the various options available in the exchange and their fees so you can choose from them. The more the payment options, it will be easy for you to choose.

Customer Support:

It is very important to have quick and helpful customer support. An exchange that has especially a chat that is available for 24/7 is the best since you can ask anything regarding your transactions at any time. Using emails can be helpful only if they are responded to on time.

How do Crypto Exchanges work?

Crypto swaps set currency prices, both coins, and tokens. The pricing of a cryptocurrency typically depends on seller’s and buyers’ behavior, although there are other variables that can influence the price.

Different crypto exchanges will have different choices and functions. Others are made for traders and others are designed for the prompt trading of crypto-fiat. Crypto exchanges, which are designed for daily traders, allow you to purchase crypto and sell it with fewer commissions than on crypto-fiat exchanges. Trading platforms also demand fees for cash withdrawal from the portfolio.

Crypto exchanges basically operate similarly to standard stock exchanges. The difference is that traders buy and sell assets, shares or futures, at a stock exchange to benefit from their changing prices, whereas traders use cryptocurrency pairs to benefit from the extremely volatile currency rates on cryptocurrency exchanges.

4.) Basic Functions of Exchange

Basically, a crypto exchange consists of following functions: Register/Login, Exchange market, Deposit and withdrawal, News and announcement section and support.

First you need to register yourself with valid email id.

Depositing Funds

If you want to sell Bitcoins online, you first need to deposit your funds in the particular exchange you wish to sell.

1) Go to the deposit page-> click on deposit beside the coin you wish to deposit.

2.) Next, click ‘Generate address’ and copy the address.

3.) Go to your personal wallet ->  then input this address as withdrawal address on your wallet. Remember every coin has different address,  if you deposit a coin to other coin’s address, you will lose all your funds.

After the transaction, go to the exchange site and check the amount you deposited.

Withdrawing funds

If you are selling Bitcoins online, you need to face the problem of withdrawing funds. The most common way is international wire transfer and top exchanges support this method. Recently, some exchanges have started to accept credit and debit card withdrawals.

Also, money can be transferred via SEPA(Single European Payments Area). It is a system designed to make international transfers easy between members of the European Union.

However, both of these systems have some glitches. Usually, depending on the country transfers take a very long time and also the amount of money being transferred, it can go up to four days to be processed. Moreover, both these systems attract additional charges.

1) Go to the withdrawal page-> click on withdrawal beside the coin you wish to withdraw.

2.) Next, enter address of the wallet where you wish to withdraw and quantity.

3.)  After the transaction to your wallet ->  check whether the coins are withdrawn or not.

Check bank charges before withdrawing. So, if you’re opening a bank account specifically for withdrawing money made on Bitcoin sales, you need to do your research and chose the bank that best suits your needs.

Differences Between Centralized and Decentralized Exchanges

Centralized exchanges can be used for fiat-to-crypto currency or vice-versa trades. They can be used to do trades between two separate cryptocurrencies as well. Although this may seem to cover all possible forms of transactions, there is also a need for another form of cryptocurrency exchange.

Decentralized exchanges are an alternative; they cut out the middle man, creating what is sometimes perceived as an atmosphere of “trustlessness.” Those kinds of exchanges act as peer-to-peer exchanges. An escrow service never retains properties and the trades are made solely on the basis of smart contracts and atomic swaps.

The main difference between centralized and decentralized exchanges is whether or not there is a middle man. Decentralized exchanges are less common than centralized exchanges and less popular.

What are the cryptocurrency pairs?

When trading a cryptocurrency on an exchange you will be using a trading pair. In most cases, people will be using BTC to trade against, but there are actually many trading pairs that you could use. Cryptocurrency trading pairs work by comparing the cost of one cryptocurrency for another.

Offering cryptocurrency or cryptocurrency pairing at this point is more popular for a centralized exchange. This will allow customers to transact for ether tokens, for example, bitcoin. Fewer exchanges sell fiat currency / crypto-currency pairs, which would make, say, USD exchanges for bitcoin. 

Conclusion

A centralized exchange is still the most common way of doing so for investors looking to access the crypto-currency space. When choosing an exchange, it’s crucial to bear in mind the number of variables that will affect user experience, including which pairs are exchanged, how high the amount of trading is, and the exchanges whose security measures have been implemented to protect their clients.


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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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