In a CCN.com April 2018 report, there was about $670M USD worth of Bitcoin (BTC) futures traded daily. These consisted of just about 11,000 contracts. Yes, the market is huge! The crypto-asset economy is giving the traditional shares and stocks markets a good run for their money to the joy of all cryptocurrency traders.
Indeed, the new asset class is creating new millionaires every day. While the frenzy is on, many traders are cashing in big time. Are you interested in potentially joining the cryptocurrency bandwagon? If the answer is yes, join us as we take you through a hands-on tutorial that could change your life forever.
What is a Cryptocurrency Exchange?
Lest we jump the gun, we will start this series with the explanation of what a cryptocurrency exchange is. Primarily, cryptocurrency exchanges are websites that enable people to buy, sell, and share a digital currency. Millions of people all over the world get connected to the platform using internet-enabled devices. On the digital currency exchange, you will sign up and start trading.
Before that, many cryptocurrency exchanges will require you to submit your personal data. The reason is that in countries where cryptocurrency is regulated, crypto exchanges subject their customers to certain conditions. The most likely policies are KYC (Know Your Customer) and AML (Anti-Money Laundering) as determined by relevant regulations of the country.
Types of Cryptocurrency Exchanges
- Trading Platforms
Trading platforms connect buyer to sellers. For this service that they provide, the traders pay the platform a commission. Most cryptocurrency exchanges have their tokens which traders pay for their services with.
- Direct Trading
Under direct trading, the platforms offer direct person-to-person trading. Most importantly, direct trading exchanges have no fixed market prices as they allow sellers to fix their exchange rates.
Here, the broker sets the price and users are expected to pay the fees. Just like foreign exchange dealers, brokers provide the same service using digital currencies online.
- Exchange Rate
Exchange rates vary from one exchange to another. Find out the exchange rate of your preferred platform before going ahead to register.
Factors to Look Out for before Signing up on an Exchange
As far as cryptocurrency trading is concerned, we advise that you perform your due diligence. That due diligence starts with going through this article. Here are the factors to look out for.
- Online Reviews
First of all, go online and read reviews on the cryptocurrency exchanges. You may visit social media platforms like Quora and Reddit to get traders’ opinions about a certain exchange.
With reviews, you will determine their reputation. You may also check out BitcoinTalk and get more insight. We bet you don’t want to put your coins on an exchange that will “go under after undergoing maintenance.” Also, you should think about taking the relatively safe route with popular coins such as BTC and ETH.
Before signing up on any website, do well to find out their fees. More often than not, they always have it on their websites. We trust you don’t want to pay high commission for services you could also get at a cheaper rate elsewhere.
- Verification Requirements
Earlier, we mentioned KYC and AML in some countries like the US and the UK. Yes, these processes are critical for the safety of your funds and complying with local laws.
- Location-based Restrictions
In addition, some exchanges have restrictions based on certain locations of users. Indeed, this is always the case due to local laws. So, ensure that the exchange allows people in your country to enjoy their full service.
Take the Next Step: Getting Started
For you to start trading, you will need:
- A cryptocurrency wallet
- A cryptocurrency exchange
In truth, many consider Coinbase as one of the simplest platforms to buy, sell, and store cryptocurrency. Accordingly, we will use Coinbase to demonstrate how to trade digital currency on exchanges.
- Visit coinbase.com to sign up. Your new digital wallet will enable you to store your coins securely.
- Connect your debit or credit card, or your bank account, to the new exchange account. This is to enable you to fund the exchange wallet from your fiat currency (USD) account.
- Consider buying a major coin/token like Bitcoin (BTC), Litecoin (LTC) or Ethereum (ETH). Yes, you will pay for the preferred coin using the dollar.
- Visit another exchange, say Bitfinex, and repeat the same process.
- Trade one cryptocurrency for another. You do that by transferring from one wallet to another. While at it, ensure that you record all your transactions.
Tips for Rookie Traders
- Coinbase and many centralized exchanges will ask for your personal information. This is unlike decentralized exchanges where the security of coins is the responsibility of the trader. Coming to Coinbase, the more information you give them, the freer your account becomes. Trading on exchanges require that you trust somebody, and Coinbase appears a reliable platform as any.
- Charges on bank accounts are lower than those on debit and credit cards. You may want to consider signing up with a bank account.
- Keep in mind that signing up with your bank account will require you giving out your account information. Don’t worry about it; others did it too.
- While some new exchanges may go fee-less in order to attract new customers, Coinbase is not free. The good part is that fees decrease as trades increase.
- Two-factor authentification is important for the security of your coins. It sends a code to your mobile phone whenever you log in. Take your time and have it set up.
- To start trading, go to Account in your wallet and select the coin of your choice. Keep in mind, you have to set up your account before you start trading.
- Using US dollars (USD) to purchase coins on Coinbase is exceedingly easy and seamless. Though before you do that, endeavor to transfer some USD to your exchange wallet. Afterward, buy the cryptocurrency with the USD already in your wallet. Notice that if you transfer directly from your bank account, the transfer takes much longer to process.
- Having their app will make your trading much fun. Keep in mind that it is a volatile market, so much can happen in a New York minute.
- Make sure you have your alerts on. It will send you important updates. This way, you know when to buy or sell.
This article should not be taken as, and is not intended to provide, investment advice. Users are ultimately responsible for the investment decisions he/she/it makes based on this information. It is your responsibility to review, analyze and verify any content/information before relying on them. Trading is a highly risky activity. Do consult your financial adviser before making any decision. Please conduct your thorough research before investing in any cryptocurrency and read our full disclaimer.
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