If you’re new to the world of crypto currencies, you’ll probably use an exchange: a marketplace where buyers and sellers interact. Theoretically, it should work like a stock exchange, but in reality, it can be quite different.
At the time of writing, there are at least 190 exchanges to choose from, with more appearing all the time. Without rules and regulations, there’s no obligation for the exchange to replace your digital money if it should get hacked. In fact, Mt. Gox, one of the first exchanges to go mainstream, went bankrupt.
Don’t gamble on buying your Bitcoin from a fly-by-night exchange that could disappear: these are our tips for choosing the right exchange.
1. Look for the address
No address, no deal. If you don’t know where your exchange is based, it’d be difficult for you to find out the legalities of your situation should you get hacked.
2. What’s its reputation like?
Simply googling the name of the exchange can lead you into forums where people share their experiences. You’ll be able to gauge potential problems and speak to other users of the exchange. But don’t just search the name: add ‘hack’ onto the end to find the real stories.
3. Be pedantic about security
Is opening an account difficult? Good. If it’s easy, it’s untrustworthy and if things go south, you might not be able to get your money back. Experts say that at least 95% of the exchange’s assets should be kept offline.
4. Consider the fees
More secure exchanges charge higher transaction rates. Coinbase, one of the reputable exchanges, charges a base rate of 4% for all transactions. If you’re seeing a 0.2% transaction fee, be on high alert.
5. Be lightning-quick
The key to effective crypto-trading is efficiency. Don’t keep too much money on the exchange for too long and never trade more than you can afford to lose.