How to choose a cryptocurrency exchange: Top 5 sites for trading bitcoins
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14 August
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Cryptocurrency is becoming more and more popular. New types of digital money appear almost every day, and there are dozens of platforms where you can exchange one cryptocurrency for another, or even for real money.

Some of these platforms are peer-to-peer markets, where users make deals directly with each other, and the terms are individually discussed in each case. The system can be somewhat convenient for one-time operations, but absolutely not suitable for trading, partly because the choice of cryptocurrencies available is usually really poor: most often, it’s just Bitcoin (Bitcoin) and ether (ETH/USD). Therefore, as the market grows, more and more transactions are conducted through dedicated cryptocurrency exchanges.

The main risks for an investor who uses cryptocurrency exchanges are their possible bankruptcy, hacker attacks, and fraud (sometimes on the part of the exchange itself). At the moment, the exchanges do not provide any legal protection, so it’s unlikely you will ever see your money again in each of these cases. That’s why security is probably the most important criterion for choosing an exchange platform.

If you wish to make deals anonymously, you should understand that cryptocurrency exchanges are still subject to the legislation of the countries they are located in. This means that sometimes you will have to disclose your personal data when withdrawing your funds, and in some cases even when buying or selling cryptocurrency. Besides, most governments seek to strengthen the market regulation, creating special rules for trading in cryptocurrencies.

When choosing a stock exchange, one should take into account its trading limits, commissions, security and anonymity issues. Below you will find an overview of the world's top five cryptocurrency exchanges in terms of trading volume.

Bittrex

  • Location: Las Vegas, NV, USA
  • Currencies: 190 cryptocurrencies
  • Possibility of exchange for fiat currencies: No

Bittrex — is one of the largest cryptocurrency exchanges, both in terms of trading volume, and of number of currencies available for trading with the variety of 906 currency pairs. The commission for all transactions is 0.25% regardless of their volume.

To withdraw up to 3 bitcoins per day you must verify your account with your personal contact information; you can increase this volume to 100 bitcoins per day by providing a copy of the identity card. Funds deposit and withdrawal is made through cryptocurrency wallets only.

User accounts are protected by two-factor authentication. In addition, the bulk of all digital assets of the exchange are stored offline; the wallets are connected to the Internet only when transactions are made. This provides additional protection from cyberattacks.

This exchange is best suitable for you if you are primarily interested in trading altcoins. It will also suit you if you want to keep anonymity: the limit of 3 BTC per day for users with partial verification is good enough if compared to other large exchanges.

Kraken

  • Location: San Francisco, USA
  • Currencies: 16 cryptocurrencies, US dollar, Canadian dollar, Euro, Japanese yen
  • Possibility of exchange for fiat currencies: Yes

59 currency pairs are currently traded on Kraken. The commission depends on the specific currency pair and on the transaction volume, and usually does not exceed 0.26%. You can deposit and withdraw funds using a cryptocurrency wallet, or by bank transfer. You will be asked to verify your account before starting any operations. If you plan to use cryptocurrency wallets, specifying your contact data will suffice, but you need to provide a copy of your ID in case of bank transfers. The daily limit of withdrawal is $25 000 in fiat money or an equivalent of $50 000 in cryptocurrency.

Most of the funds are stored offline, all personal data is encrypted, and it’s possible to use two-factor authentication to log in to the account.

This exchange is well suited for those who want to keep option of withdrawal of their funds in fiat money at all times. Additionally, the daily limits on withdrawal in cryptocurrency at Kraken are also among the highest on the market, so it’s convenient for larger players.

Poloniex

  • Location: Wilmington, Delaware, USA
  • Currencies: 365 cryptocurrency pairs
  • Possibility of exchange for fiat currencies: No

Poloniex is the largest US cryptocurrency exchange and the world's largest exchange for trading Bitcoin (Bitcoin). Commission depends on the volume of transaction in bitcoins, and does not exceed 0.25% for the buyer. Funds deposit is made through cryptocurrency wallets only. You don’t need to verify your account to start trading, but the daily limit of withdrawal will be just $2000. For a verified account, the limit will increase to $25 000 per day, unfortunately the exchange users have complained about delays in payments recently.

Two-factor authentication is available, and most of the funds are stored offline. Nevertheless, it was repeatedly reported that the exchange has security problems.

The exchange is best suitable for those who want to trade altcoins. Besides, the exchange is well suited for large players who do not want to suffer liquidity problems when buying or selling large amount of cryptocurrency.

Bithumb

  • Location: Seoul, Republic of Korea
  • Currencies: 6 cryptocurrencies, South Korean won
  • Possibility of exchange for fiat currencies: Yes

Bithumb is a cryptocurrency exchange based in South Korea and is the largest exchange in terms of trading volume. Bithumb offers traders the opportunity to make deals in six currencies only: Bitcoin, Ether, Ethereum Classic (ETC/USD), Litecoin (LTC/USD), Ripple and Dash.

All currency pairs are tied to the South Korean won, so in order to exchange Bitcoin for Ether, you will first have to sell bitcoins for Korean won, and then use them to purchase Ether. The commission for all transactions is 0.15%. To start trading, you need to provide a copy of your ID. Commission for withdrawal depends on the currency: for fiat money it’s 1000 won, for Bitcoin, it’s 0.0005 BTC. The daily withdrawal limit is 100 BTC or 50 million Korean won. You can use a cryptocurrency wallet or a bank card for deposit, and it’s possible to withdraw funds to a bank account.

The exchange has recently suffered a major cyber attack, which affected personal data of 32 000 users. It should be noted that the main language of the exchange is Korean, and its interface is still not fully translated into English.

Bithumb offers very low commissions and high level of liquidity. The exchange is well suited for trading in both small and large volumes. Additionally, the Korean authorities recently legalized international transfers in BTC, which makes trading in this country even more interesting.

Bitfinex

  • Location: Hong Kong
  • Currencies: 15 cryptocurrencies, US dollar
  • Possibility of exchange for fiat currencies: Yes

At Bitfinex, you can trade 35 currency pairs, all of which include the US dollar and the most liquid cryptocurrencies. Commission depends on the volume of transaction in bitcoins, and does not exceed 0.2% for the buyer. Besides, the exchange has a commission for withdrawing funds, which depends on the currency: 0.0004 BTC or 0.1% of the amount when withdrawn in US dollars (at least $20).

You don’t need to verify your account to start trading if you plan to use cryptocurrency wallets only. However, to use the bank transfer, verification is required. Bitfinex has its own convenient and customizable trading terms.

Two-factor authentication is available, and most of the funds are stored offline. In 2016, the exchange suffered a major cyber attack. $65 million was stolen from user accounts, but the administration managed to compensate for the losses.

Bitfinex is suitable for those who want to trade a wide range of cryptocurrencies, while maintaining anonymity. All transfers in cryptocurrency are not limited, and the commission is comparatively small.

Five criteria for choosing a cryptocurrency exchange

  • Do not neglect safety. Often when an exchange can offer you beneficial terms, it is precisely because they save on data protection. However, low fees do not justify losing all your money in case the exchange is hacked.
  • Pay attention to the reputation of the exchange. If the exchange is large enough, fraud is less likely to happen. If you are planning to trade on a small exchange, carefully research its users' feedback.
  • Follow the news. If you receive timely information about a major hacker attack or come across comments on Reddit about problems with transactions, it will help to react and withdraw funds from the exchange before it’s too late.
  • Pay attention to jurisdiction. Some countries, such as China, are going to start regulating cryptocurrency exchanges, and new rules may not suit you.
  • Decide what and how often you will trade. Exchange fees and withdrawal conditions may vary depending on the transactions volume and currency pairs, so it is worthwhile to determine in advance what you are going to trade and then to look for the exchange that suites you the most.
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