A crypto exchange is a digital platform where you can buy kryptowaluty bitcoin, sell and exchange cryptocurrencies. They are similar to stock trading websites or apps, allowing you to buy and sell cryptocurrencies at the prevailing price or set a limit order.
Centralized exchanges are more common, and they typically hold users’ cryptocurrency in custodial wallets until trades take place. Some also require users to comply with Know Your Customer (KYC) rules.
What is a crypto exchange?
Cryptocurrency exchanges allow users to trade cryptocurrencies like bitcoin, ether, litecoin and more. These platforms convert fiat currency into cryptocurrency and vice versa, and also provide a range of other services such as margin trading and futures contracts.
In addition to converting fiat currencies, some crypto exchanges offer long-term trading, in which users hold a coin or token for an extended period of time with the hopes of turning a profit. These services are available to both institutional and individual investors.
Several types of crypto exchanges exist, including centralized and decentralized ones. Centralized exchanges operate similar to stock brokerages or stock markets, offering a variety of cryptocurrencies, custodial wallet services and easy-to-use websites.
Signing up for an account
If you’re looking to start trading cryptocurrency, you’ll need to sign up for an account on a crypto exchange. These accounts allow you to buy and sell crypto, as well as exchange one type of crypto for another.
Generally, crypto exchanges are similar to online brokerage accounts. You’ll need to provide an email address and password to sign up for an account.
Once you’ve set up an account, you can deposit money to purchase cryptocurrency. This can be done through a bank account transfer or with a credit card.
To help protect against fraud, most cryptocurrency exchanges require you to verify your identity. This involves submitting a variety of personal information and uploading a digital copy of your government-issued ID.
Some exchanges also offer a two-factor authentication (2FA) feature that requires you to enter a code from your phone or an app before accessing your account. This makes it more difficult for hackers to gain unauthorized access to your funds.
Trading on a crypto exchange
If you’re looking to trade crypto, you’ll need to open an account with a cryptocurrency exchange. These platforms let you buy and sell cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Tether (USDT) and Dogecoin (DOGE).
There are a number of ways to trade on a crypto exchange, including market orders and limit orders. Market orders automatically match buyers with sellers, based on the current price of the cryptocurrency.
Limit orders are a more advanced trading method, allowing you to set your own price target and the exchange will execute the trade when it reaches that level. Most exchanges also offer tools to track and manage your investments.
Depending on your needs, you can choose between centralized and decentralized exchanges. Centralized exchanges are a popular option for newbies due to their streamlined onboarding and user interface, customer support and insurance should the platform’s systems fail.
Choosing a crypto exchange
As with any trading or investing venture, you need to choose a crypto exchange that suits your needs. This includes factors such as cost, security, trading volumes, instructional materials and more.
Liquidity: A crypto exchange that has a high level of liquidity (the capacity to quickly convert cash into coins and vice versa) is the most important aspect. It will help you complete your transactions as quickly as possible, enabling you to take advantage of a fast-changing price.
Security: Hackers are becoming increasingly commonplace in the cryptocurrency landscape, and it’s essential to choose an exchange with robust security measures in place. Good crypto platforms offer a variety of security features, such as two-factor authentication, biometric login and bounty programs.
Some exchanges also offer digital-asset insurance, which can be a useful way to protect your assets in case of hacking or theft. For example, Bybit https://www.bybit.com/en-US/ offers $255 million in corporate crime insurance, while Gemini has a $200 million policy for custody losses.