Crypto Exchanges allow you to buy at the best market rate cryptocurrency using conventional payment methods like by bank transfer or credit card.
Cryptocurrency exchanges work similar to traditional stock exchanges. After you have registered and identified yourself with the exchange, you need to deposit money (euros or dollars) into your exchange account. Once that's done you can start trading. The simplest and fastest way to buy, if you don't feel comfortable with advanced trading options, is to submit a so-called "market order", which simply means that you are willing to buy at the current market price. This will get your order executed instantly and your exchange account will be credited with the amount of cryptocurrency you purchased.
In most Western countries cryptocurrency exchanges need some sort of licenses to operate. In the US it is common for exchanges to register with FINCEN and apply for a money transmitter license while in Europe, exchanges frequently need a brokerage license. This is why users need to identify themselves upon registering with an exchange. Furthermore, they need to have a crypto custody license or use the services of a third-party custody service to store cryptocurrencies on behalf of users.
Cryptocurrency exchanges are safe if you do your research and choose one that has a good track record and established reasonable safety measures. Although, there have been hacks of exchanges in the past, these have largely only affected smaller exchanges. All exchanges that we have listed have a good reputation and take security seriously. To make your account more secure, it’s important to set-up second factor authentication, choose a long and random password and never store too much cryptocurrency funds on the exchange.
Cryptocurrency exchanges hold user funds in two types of wallets: hot wallets and cold wallets. Hot wallets are connected to the internet. They hold just enough funds to allow users on a daily basis to withdraw their assets on demand and on short notice. However, because they are connected to the internet, they are also more exposed to hackers who can break into the servers of that exchange. That’s why most exchanges hold the majority of user funds in cold wallets, which are not connected to the internet. Often the keys to the cold wallets are split between multiple senior staff members of the exchange who all have to approve a transaction before funds can leave the exchange.
Cryptocurrency exchanges make money by charging a small fee on each transaction. The fee amount depends on whether you are buying or selling as well as the amount of crypto that you’re trading each month. The more frequently you trade the less you’ll pay for each single trade. Most exchanges listed here take a 0.25% fee if you’re looking to buy crypto. Sometimes exchanges have additional revenue streams by providing crypto lending or staking services.
If you’re a crypto-trading beginner, look for a platform with a simple and straightforward interface. A good exchange starts simple, and hides complex features for advanced traders in the settings.
Make sure your exchange has deposit and withdrawal options that work for you, and remember to check the fees associated with different methods. Bank deposits are always the most inexpensive method, PayPal and credit cards are faster but more expensive.
The level of liquidity on an exchange affects the ease and speed with which you can complete trades. If there's a high level of liquidity – in other words, if the exchange has a high trading volume – then trades should be completed quickly and easily.
From deposit through to trading and then withdrawing funds, how much will it cost you to buy and sell crypto on each platform from start to finish? Good exchanges are transparent about their fees.
1. Compare cryptocurrency exchanges to find one that suits you
2. Register an account and go through the account verification process
3. Deposit fiat currency (e.g Euros) using the payment method of your choice.
4. You will receive an email once the money has arrived in your account.
5. Choose the trading pair of your choice (e.g “BTC/EUR”)
6. Review the details of the trade and click “buy” if you’re happy to proceed
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