If you want to invest in cryptocurrency, you usually have to buy it on an exchange. It’s similar to exchanges, although there are a few more factors to consider.
In our analysis, we found several great options for people looking to get into cryptocurrency, depending on your goals and how comfortable you are with investing in cryptocurrency in general.
The most important factors for exchanging cryptocurrencies
There are many cryptocurrency exchanges and at first glance they all seem to be the same. However, there are differences between them and the main features to consider:
- Security. Some exchanges are more prone to hacking and scams than others. Make sure to examine the history of all crypto exchanges to see if they have a squeaky clean record or if they have had any problems in the past.
- Liquidity. It can be more difficult to find buyers on smaller exchanges. The bigger the exchange, the easier it is to buy and sell crypto.
- Trading costs. Most cryptocurrency exchanges charge trading fees, so price out your options.
- Insurance. Unlike your bank’s FDIC insurance, cryptocurrency exchanges don’t have formal insurance programs, which makes them risky. However, some offer insurance in limited cases.
- User friendliness. Some cryptocurrency exchanges are easier to use than others. This is an especially important factor to consider when you are just starting out.
The 5 Best Cryptocurrency Exchanges
Here is a quick recap of the best exchanges based on your search:
- BlockFi: Best for buy-and-hold investors
- eToro: Best for nervous investors
- Twins: Best for security
- Coin base: Best for liquidity
- octopus: Best for cross-exchange deals
Cryptocurrency exchange reviews
It’s a good idea to do in-depth research into how each cryptocurrency exchange works before deciding which one to choose. Read multiple reviews written by different people and look for government action, hacking incidents, or other warning signs. Here’s a quick rundown of each exchange so you can narrow your list down.
BlockFi is relatively new to the world of crypto exchanges and has been around since 2017. You can buy and sell crypto on this exchange just like any other platform, but BlockFi offers a huge advantage that many others don’t: you will earn interest on it Your crypto, and a lot of it.
The interest rates are currently up to 8.6% APY for certain types of crypto. BlockFi also offers other ways to use your investment. You can take out a loan with your cryptocurrency as collateral, with same-day financing and interest rates as low as 4.5% APR.
eToro doesn’t have that many cryptocurrency options – only 17 choices – but what it lacks in choice it more than makes up for in ease of use. That’s because it’s one of the few cryptocurrency exchanges that actually has a work out Account with a virtual $ 100,000 portfolio.
If you are really nervous about investing in cryptocurrency and you want to practice a little before you risk real money, eToro is a great choice. It even offers a “CopyTrader” option that lets you copy the same crypto trading strategies as top traders if you are not comfortable developing your own investment plan.
Gemini was founded by Facebook’s Winklevoss twins and is now one of the largest cryptocurrency exchanges. It has many security features: dollar deposits (as opposed to cryptocurrency) are backed by FDIC insurance, and it also offers insurance against system-wide hacks and other threats that are not your fault.
Gemini supports a mobile and web-friendly interface as well as an ActiveTrader option for advanced investors. Gemini even offers interest rates of up to 7.4% APY on certain types of crypto if you are a buy-and-hold investor, and at the time of writing, you can trade 60 different types of currencies on the platform.
Coinbase was one of the first cryptocurrency exchanges to be launched. It went online in 2012 to buy and sell Bitcoin, the world’s first cryptocurrency. Bitcoin is still the leading star of Coinbase today, but you can buy 60 other cryptocurrencies as well.
The strength of Coinbase is that it offers a lot of user-friendly information about how cryptocurrencies work. There are tons of articles out there on cryptocurrency in general and the intricacies of each option. There are even courses you can take on some of the more unique altcoins, and Coinbase even gives you a small amount of these currencies to play with.
Kraken is another long-established cryptocurrency exchange. It’s been around since 2011 – an entire decade that is ancient in terms of cryptocurrencies. It currently offers 57 different currencies to choose from, as well as lots of educational articles and videos.
Beginners will find Kraken easy to use, but it also has far more advanced features, even margin trading, if you’re comfortable living on the edge. It also has a robust “cryptowatch” feature that notifies you of price changes, as is often the case in the volatile crypto market. You can even trade on other non-Kraken cryptocurrency exchanges through Kraken if another offers a better price.
What You Should Know About Cryptocurrency Exchanges
Since cryptocurrency is completely digital and largely operated outside of state consumer protection, it is particularly important to know how to invest mindfully. If you are not careful, you could lose all of your cryptocurrency balance. That would be especially damaging if you hold a large part of your portfolio in cryptocurrency; it could all go away overnight if hacked.
Most security experts recommend having your cryptocurrency all in one cold wallet if you don’t act it directly. This is something like a USB stick that literally allows you to securely store your crypto offline so that no one can access it without the physical hardware. When you are done trading, simply unload it into the cold wallet and keep it in a safe place.
This is of course a little more difficult if you keep your crypto in an interest-bearing account. In that case, you need to physically leave it there. You need to weigh the risks and whether you are comfortable with them, and this is why it is especially important to review these services accordingly.
A better understanding of cryptocurrency exchanges
There are two main types of cryptocurrency exchanges: centralized (that is, in one place) and decentralized (that is, spread across multiple locations without a single server having the upper hand). We included centralized exchanges in our test because they are the largest, most liquid, and most beginner-friendly.
However, if you are more concerned about security in the cryptocurrency path, it is important to be aware of the decentralized exchanges as well. They have the advantage that they cannot be wiped out in a single hacking attempt. A centralized exchange like Coinbase could theoretically be leveled in an attack. It’s unlikely to happen, but it is possible.
The decentralized exchange is also anonymous, which can be good or bad depending on the motivation. They’re also typically smaller and less liquid, so you may not find it easy to fulfill your orders.