Sifting through the many options to find the best cryptocurrency exchange can be a challenge. Cryptocurrencies had a stellar run in 2017 but have given back some of their gains through the first half of 2018. Bitcoin, the widely-traded crypto, peaked at over $19,000 against the dollar in Dec. 2017.
Experts are still optimistic and expect the digital currency to regain momentum in the second half of the year. Predictions by WishKnish CEO Alisa Gus, a panel member at comparison website Finder, suggests that bitcoin may end the year at $25,000. Meanwhile, the average end-of-the-year price forecast for bitcoin, taking into account all the panel members, is $14,638.
Quick Look – The Best Cryptocurrency Exchanges
If you want to capitalize on cryptocurrencies, you might want to acquaint yourself with an institution called cryptocurrency exchange, which facilitates trading in the currency.
- Earn a $15 BTC credit just for signing up! – Voyager
- Featured Exchange: XTB
- Best overall: Coinbase
- Best for the number of coins: Bittrex, Changelly
- Best for the number of countries supported: Kraken, Bittrex, Coinmama
- Best for commissions and fees: Coinbase, Binance
- Best for services offered: Coinbase
- Best for technology: Coinbase, Bitfinex
What is a cryptocurrency exchange?
A platform which allows buying and selling of cryptocurrency in exchange for another cryptocurrency or a fiat currency, i.e. currencies such as the dollar, pound, euro, etc. which governments declare as legal tender, is called a cryptocurrency exchange.
Crypto current unit prices
Types of cryptocurrency exchanges
One way of classifying the exchange is based on the tradable currency. On this basis, an exchange can be a fiat exchange or a crypto-to-crypto exchange.
- Fiat exchange: This allows the exchange of government-backed currencies with the cryptocurrencies.
- Crypto-to-crypto exchange: In these exchanges, cryptocurrencies can be exchanged for each other. The widely traded crypto pair is Bitcoin vs. Ethereum.
Cryptocurrency exchanges are also classified as:
- Traditional cryptocurrency exchanges: These operate like traditional exchanges, where buyers and sellers trade in cryptos based on the prevailing market price. Here, the role of the exchange is like that of a middleman facilitating the transaction.
- Cryptocurrency brokers: Just like currency changes, these brokers facilitate buying and selling by customers at prices determined by them, which usually is the current market price, plus a small premium.
- Direct trading platforms: These platforms facilitate peer-to-peer trading between buyers and sellers, without an exchange that acts as an intermediary.
Global Digital Asset Exchange, or GDAX, an arm of Coinbase, launched as a professional trading platform in 2015, is an example of a direct trading platform. GDAX is now switching over to the name Coinbase Pro, with Coinbase promoting the platform as one offering “professional trading tools and services, delivered through a completely re-engineered UI.”
Snapshot of Coinbase Pro
How do you get started?
For a glimpse into how trading happens, look at how digital currencies are bought on Coinbase. Once you verify your identity on Coinbase, it allows you to buy Bitcoin using either the cash in your bank account or a credit card. Coinbase charges a transaction fee for this.
If you wish to trade using the Bitcoin you bought, it has to be moved to the GDAX trading platform. Bitcoin can be deposited and it will instantly show up in your balance.
Factors to consider
Legitimacy and security of a platform should be one of the primary considerations while choosing an exchange. Recently, South Korean exchange Bithumb was hacked, and the exchange lost the equivalent of $31.6 billion.
Although the exchange swung into action by stalling all withdrawals and deposits and moved the existing cryptocurrencies with the exchange to a cold wallet where it can’t be accessed, the hack triggered a near-term downward move in most cryptos.
A potential investor may do well to scout around for exchanges, which allows trading in all tokens.
Fees and commissions
If you’re a high-volume trader, transaction charges may eat into your profits.
Mode of payment
The permissible payment mode varies with exchanges and includes varied options such as cash, credit cards, wire transfer, payment through PayPal, etc.
Choose an exchange in the country of residence, as legislation and policies governing an exchange vary among countries.
Ease of use
Simpler is better, especially when you’re using a complex financial instrument.
Coinbase wins the battle hands down. Gaining access to the GDAX platform (now Coinbase Pro) is a unique advantage. Coinbase’s user-friendly app is supposed to be a better bet for a novice investor.
The procedure for linking to bank accounts is fairly simple. Coins can be sent and received easily using QR code. Coinbase is also a relatively safe exchange and coin holdings of U.S. residents are insured by the FDIC up to a maximum of $250,000. Transaction fees are also relatively nominal.
Best for breadth of coins
Among fiat exchanges, Bittrex allows trading in over 100 tokens, while Bitfinex supports 39 tokens. Kraken is the next best, which supports 17 tokens, followed by Kucoin, which supports 12 tokens.
Meanwhile, crypto-to-crypto exchanges such as Poloniex and Changelly support 66 and over 100 tokens, respectively. Binance, a Chinese exchange, allows trading in over 350 currencies.
Coinbase, which is reputed for its bitcoin trading, incidentally supports only four currencies, namely Bitcoin, Litecoin, Ethereum and Bitcoin cash.
Best for number of countries supported
Kraken, Bittrex, and Coinmama are the fiat exchanges that support about 200 countries but are not available to all states in the U.S.
In fact, Coinbase is available to residents of only 38 states in the U.S. Crypto-to-crypto exchanges allow participation by residents from several countries across the globe.
Best for commissions and fees
Coinbase charges a base rate of 4% for all transactions but waives a portion of the conversion fee depending on the payment method used. Meanwhile, its trading platform, the GDAX, charges a 0.10% to 0.30% taker fee, depending on the trading volume over the trailing 30-day period, as well as a 0% maker fee. A maker fee is one which applies to a market maker, one who places limit orders on the order books.
Since market makers help avoid wild swings, they are rewarded with a lower fee. However, taker fees become applicable when an order is placed that is immediately filled in entirety. Binance charges a 0.1% trading fee, and if the binance coin is used, the fee is cut by half.
Kraken’s maker fees varies from 0-0.16% based on volume, while the taker fee ranges between 0.10 and 0.26%. CEX.io also has a similar fee structure. Bitfinex charges a small deposit fee for deposits less than $1,000 and for deposits above the limit; no deposit fee is charged.
Maker fee ranges from 0-0.10% and taker fee between 0.10% and 0.20%. Coinbase and its linked trading platform, the GDAX, score over the rest and Binance is the next best.
Best for services offered
Some of the ancillary services offered by crypto exchanges are digital wallets, offline storage, insurance protection for coins stored, money transfer, etc.
A crypto wallet is a software program that stores private and public keys and are required for users to send and receive digital currency as well as monitor their balance.
Offline storage, otherwise known as removable storage, is a storage medium that needs to be physically inserted into a system when data needs to be accessed or edited. Coinbase ranks first among the exchanges in terms of services offered.
The security features are stringent, as only about 2% of its coin holdings are exposed to the internet at a time. It also insures against theft for up to $250,000.
Best for technology
Coinbase leads the rest in terms of the user interface and technology, while Bitfinex closely follows. Coinbase, with its new Coinbase Pro platform, is completely user-friendly.
Meanwhile, Bitfinex has advanced charting and a host of indicators. The exchange allows traditional orders like limit, market, stop and algorithmic traders like Iceberg, OCO, and Post Only.
Coinbase marries the concepts of simplicity with advanced optionality through Coinbase Pro, thereby appealing beginner and seasoned traders. This, along with the safety/security offered by the exchange, makes it tough to overlook.
That said, you should carefully look at the features and options offered by individual exchanges and choose the one that suits your investment philosophy.