The Importance of Exchanges
Let me give you some background on why I chose this subject for this post. My colleagues and I were discussing how authorities might try and control cryptocurrency trading. Our conclusion was that the only way to really hurt crypto was to target the exchanges. Exchanges play an important role in cryptocurrency in more way than one.
The first thing you need to get started with cryptocurrency is money (FIAT) and an exchange where you can buy coins. Whenever I want to buy cryptocurrency I use Litebit.eu or Anycoindirect.eu, primarily because they support iDEAL.
iDEAL is a Dutch payment service that allows online payments with your bank account
These exchanges are important because you can exchange FIAT (old fashioned digital money) into cryptocurrency (fast, often decentralized digital currency on next-gen blockchains).
If ever these types of exchanges or services were targeted it would be hard to buy cryptocurrency. The only way to get some would be through mining or sites like Steemit where you can earn coins.
When you have your coins (most likely Bitcoin or Ethereum) it is time to go to another type of exchange and buy some other coins that are dirt cheap and are most likely to become the next Bitcoin.
The way to do this is to register an account on a different kind of exchange, one that focuses on trading.
I have a number of accounts for trading Exchanges and they all have their own pros and cons. Visiting this kind of exchange can be quite overwhelming, when you first go to the exchange part of the site, you will be bombarded with graphs and sell/buy order info, different kinds of markets (ETH, BTC, USDT). On these exchanges you can trade your coins for other type of coins, you can sell or buy coins from other crypto traders.
I have no preference for a certain exchange but here is a list of some of the exchanges I use or have used:
Poloniex - The first Exchange I started on. The interface is very user friendly and I never had any problems but I moved away from Poloniex after there were some problems with Steem/SBD.
Bittrex - I probably use this Exchange the most at the moment. The user interface is somewhat less user friendly compared with Poloniex but it gets the job done and the exchange is pretty reliable (as far as Crypto Exchanges can be reliable).
HitBTC - On the one hand they support a great deal of coins but the site is far from reliable. Avoid this one if you can, especially the withdrawal/deposit issues are a big turn off.
Cryptopia - Ok -ish site but very sloooow.
There are a lot more Exchanges but I don’t have much experience with those. Kraken gets good reviews from what I’ve heard. I recently added Kucoin and Binance to my list of exchanges but haven’t done any trading there yet.
These kind of exchanges are important because this is where all the trading of coins takes place. Because of the international nature of these exchanges they are next to impossible to control. If one should go down, another one will take its place.
One thing that all these exchanges have in common is that they often have a problem coping with the growing user base which leads to networks issues and slow support response.
Like the previous Exchanges you can use these type of exchanges to trade coins. The difference is that here you don’t trade coins with other users (as far as I know) but directly with the exchange itself.
Examples of these kind of exchanges are Blocktrades, Shapeshift and Changelly. On the site you choose the currencies you want to exchange and sent crypto. The exchange will then forward the new coins to your wallet.
These exchanges have a more reliable vibe. I have been using Blocktrades (for obvious reasons) for some time now and found that is a reliable and easy way of transforming one coin into another (especially for Steem and SBD).
The downside is that the transaction fee can be quite high.
Look at it this way, you are paying extra for the ease-of-use. If you are a beginner to cryptocurrency, this kind of Exchange is the most newbie friendly way of exchanging crypto.
Another downside is that this kind of exchange only trades a limited amount and type of coin. So don’t expect to be able to trade new or uncommon coins.
These kind of exchanges are more vulnerable for outside influences because I reckon that they must have a large stock of crypto stowed away. This might pique the interest of IRS- like organizations.
So you’ve bought some Bitcoins, went to an exchange to trade and bought a promising coin. After the coin quadrupled in value you sold the coin for Bitcoin. Now it is time to get a payout and spend some of your earnings.
Here is where the last type of exchange comes in play.
Sites like Litebit and Anycoin direct let you sell mainstream crypto for money. The process is simple, just enter the amount of BTC/ETH you want to sell and you will see how much you will get (euros in this case). You will get an address where you can send your coins. Enter your Paypal or IBAN bank account and a couple of days later you will receive the payment on your Paypal or bank account.
A lot of my friends like this way of turning crypto into FIAT but to be honest I don’t prefer this method.
Another way of turning crypto into FIAT (and my favorite) is to use an exchange that also supports debit cards. My favorite sites are Payeer and Spectrocoin. On these sites you have different wallets (Dollar, Euro, BTC, ETH) and you are able to sell your cryptocurrency for your favorite FIAT currency. After you have received your digital FIAT currency you will be able to load your debit card and do some online purchases or hit the nearest ATM machine.
These kind of exchanges are getting some unwanted attention at the moment. Spectrocoin for example has lost its debit card because of mischief by the card issuer WaveCrest (Spectrocoin is busy with a new card as we speak) and Payeer has announced that it is blocking all cards issued to non-Europeans.
Exchanges that turn your cryptocurrency into money are most vulnerable because they rely on Banks or Services controlled by Banks. If Banks ever decide to crack down on cryptocurrency chances are it will be very hard to ever exchange crypto for FIAT.
If the “MAN” ever decides he wants to take down cryptocurrency then exchanges will certainly be targeted. If you can stop people from buying crypto with FIAT it will dissuade a lot of people. Even more important are the exchanges where you can trade crypto and the exchanges where you can cash in.
The cryptocurrency blockchains will still be operational but the motivation to invest in the altcoins will decrease dramatically.
This will all change of course when cryptocurrency will get a wider acceptance as a means of payment.
It's almost certain that the exchanges will come under regulation - and soon. Not only will the government want to take its cut in the form of taxes, but as institutional investors become more involved in the markets they will want more security and relability from the exchanges. They only way they can be assured of this is if regulations are put in place that dictate how the exchanges must behave to operate in certain jurisdictions.
That's a great analysis, I hadn't thought about the investors who want...no need stability and security. It will be interesting to see how the exchanges will cope with that.
Thank you so much for your nice post! Paypal is kind of annoying in terms of time delays but efficient for so many other things. The nice thing about exchanges is the liquidity. I think for BTC crypto derivatives if you want something standard maybe exchange will do but for bespoke ones you'll have to OTC!
Those smaller exchanges can be troublesome though! HitBTC is killin' me at the moment 3x in a row I had a withdrawal stuck for days....At time of writing I have a Dimcoin withdrawal that has been pending for 3 days now :)
Man that is not easy to deal with...
Great in-depth post and likes you examples of the different exchanges - thanks for sharing your info and insight.
Just followed you and appreciate if you follow me too
Deal! Usually I don't accept follow 4 follow requests but for you I'll make an exception (and I am trying to reach the 1000 followers milestone). I see that you have quite a lot of followers how did you pull that off?
That's a very useful guide to evaluating exchanges. One thing I'm glad about, believe it or not, is that I actually understood every words here even though I haven't bought any cryptos yet :) Now I have two question since we're on the subject of exchanges:
Kraken, Binance and Kucoin.
Thanks for the wealth of information in this post.
Hey Nuridin, I am glad to hear that my post was easily understandable.
About your questions:
Kraken has a very good reputation (although I haven't used the exchange myself). Kucoin and Binance are very popular because a) they are new and b) both have their own coin BNB and KCS that give you lower transaction fees and let you share in the profit of the exchange just by holding them.
These are debit cards issued by the exchanges. I have a VISA card from Spectrocoin (alas now blocked because of the Wavecrest debacle) and a Mastercard from Payeer. I used both for online purchases, buying stuff in stores and ATM machines. As a fact my daughter loved the Spectrocoin card, she would use the card to buy stuff at the local supermarket.
Thank you for your answers.... Now, the full post is crystal clear to me. I wanted to sing up for the two ones you recommended (Litebit.eu and Anycoindirect.eu) but I remember you said somewhere in your post that they don't accept non-European users or something to that effect. But they do seem like a nice and easy way to cash out if I want to sell cryptos.
i enjoyed reading this! and thank you for posting this. its important to be educated on such topics and i loved your insight. I'm still new to crypto and investing in general so any insight is great for me!
Take your time researching. Remember, Steemit is a great place to learn about cryptocurrency!
As long as there is exchanges, crypto price will continue to go up and down and the demand will eventually rise.
That's true..but what will happen when authorities force exchanges to play by their rules?
👍👍
It take much time to read it but it deserve very useful thanks
I'd like to hope smart governments will phase-in regulations rather than shut down exchanges. Exchanges create a lot of jobs and provide new opportunities to investors. Not to mention the economy that is growing around cryptocurrencies. What you do think?
I love this analysis and the information is very useful.