How To Choose The Proper Crypto Exchange? A Few Bits of Advice From Boosty Labs Team

Today, there are many exchanges in the crypto space that provide the opportunity to trade cryptocurrencies. There are so many of them that it can be difficult for beginners to decide which one to choose. In this article, experts from Boosty Labs, a company that focuses on cryptocurrency development and cryptocurrency exchange software development, will analyze the most important aspects when choosing a crypto exchange.

Legal Component Or Reputation Of The Exchange

In order to be confident in the transparency of the exchange, it would be good if it had a license to operate. This can be a DLT license from Gibraltar, MSB status in FinCEN USA and FINTRAC Canada, a license from the Hong Kong financial regulator, and others. In short, the license depends on the place of registration of the exchange.

There are many exchanges that operate without any license. They have clients who are comfortable with trading. Here, so to speak, there are two sides to the coin. On the one hand, if you trade on a crypto exchange that operates without proper licenses, then you are not immune to sudden losses. By sudden losses, we mean that your funds may simply disappear from the account, and you will be ignored when trying to clarify the circumstances of the incident. On the other hand, the Binance exchange does not have a single license to operate, however, it provides the ability to trade cryptocurrency to anyone who wants to. Although the official information of the exchange indicates that it does not provide services for residents of certain countries, everyone knows very well what VPN is. At the same time, the Binance exchange is the largest among crypto trading platforms..

In addition, the availability of a license for a crypto exchange requires a verification procedure for each of its users. Therefore, for those who want to keep their identity anonymous, licensed exchanges are not entirely suitable.

It turns out that you should choose either a licensed exchange or one that has a history and a name. Otherwise, you risk losing your funds.

Decentralized exchanges are worth mentioning separately. This type of exchange does not have managers, that is, they operate due to the blockchain and smart contracts, and users make important decisions by voting. Decentralized exchanges do not have licenses to provide services. In addition, it is not possible to fund an account in fiat currencies. However, no one here will ask you to verify your identity. In relation to decentralized exchanges –  look only at the reputation, there are no other options.

Exchange Team

You should definitely pay attention to the media presence of the development team or exchange representatives. Does the exchange have representatives in individual countries and how active are social networks? Take Justin Sun as an example. He doesn’t have his own crypto exchange (but his company owns a part of the Poloniex exchange). In the crypto industry, he is known for his “announcement announcements”. Justin loves to announce via his social media that something big is coming soon. Although it looks ridiculous, he is actively engaged in it. Looking further, the Poloniex exchange has never had a problem with its users. The exchange conducts transparent work, not trying to somehow deceive its customers.

The extent to which the exchange is open in communication with its users also depends on how safe their trading is.

Trade Management

There is such a definition as “user memory”. Roughly speaking, if you are used to the fact that in one online marketplace the basket is located at the top right, then in any other you will look for it in the same place. Crypto exchanges were created based on the example of traditional exchanges. However, it happens that a new crypto exchange decides to radically change the interface.

Trying to innovate is not always a bad thing. The main thing here is that this new thing is convenient. This is exactly what crypto exchanges neglect when they want to be different from others. Due to innovations, users make mistakes during trading, which leads to monetary losses.

This problem is often faced by those who are just about to start trading on decentralized exchanges. Of course, there are similarities between decentralized and centralized exchanges, but initially getting used to the new interface is extremely problematic. In addition, on a decentralized exchange, you need to connect your crypto wallet, since a personal account on these sites is not provided.

At this stage, beginners are faced with difficulties, so there are many instructions on the net on how to do everything right.

Liquidity

It is extremely important that the exchange had enough liquidity for each traded asset, trading on the site depends on it. The more the exchange can provide liquidity, the smoother the trading process will be. Liquidity determines how quickly a trader can buy or sell an asset. If there is not enough liquidity on the site, then users will not always be able to sell the asset, even if the price is average.

It looks like this: you place an order to sell an asset at the average market price, and it is being sold 20% cheaper than you planned. Plus, it takes longer. This happens because there is no buyer or seller for your request.

New platforms often suffer from a lack of liquidity. As a rule, crypto exchanges attract market makers to provide liquidity for trading, as well as special liquidity providers, which can be, for example, investment funds.

Security Measures

There are such protective measures as two-factor authentication, a seed phrase, a whitelist of wallets for withdrawing funds, and so on. Of course, you will not check in any way whether the exchange really stores your funds in cold wallets, so it is not recommended to store all the cryptocurrency on the site – it is not safe.

If you analyze the crypto exchanges according to the above criteria, then you can easily filter out all the inappropriate ones and choose the one you need.

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