What crypto currency exchanges should you use?
This is the first beginner trader question. That's a good one, in the sense that it brings up a LOT more questions. "What makes a good/bad exchange?" is probably a better question actually. I will here tackle a few important points that I think will help you decide what is a good exchange, for your style (i.e. conservative or risk taker).
Heads Up: Registration on exchanges
Registration on crypto exchanges goes in 2 steps:
- Sign up with email, password and other security setup (always activate 2FA)
- KYC/AML verification: full name, passport picture, proof of address, and so on
The 2nd step (KYC/AML verification) takes between 2 days and ... 3 weeks! So better sign up and do the KYC/AML verification as soon as you can.
Regulation
In a nutshell: only use regulated crypto exchanges if you want to be on the safest side of thing
Most countries do NOT regulate crypto currency exchange (almost no laws restricting them on what they can do).
It is very surprising in the sense that any bank or exchange to trade stock/bonds (and other traditional financial instruments) is always very regulated: it must follow many strict rules imposed by law.
Users of the regulated exchanges are much more protected:
- the CEO and all the employees are known
- funds have to be insured
- and so on
In the USA, the state of New York is regulating crypto currency exchanges, it includes CoinBase.com (hence GDAX, since belonging to the same company).
Japan also decided to regulate exchanges and gave licenses to 11 crypto currency exchanges, such as Quoine (who owns Quoinex and Qryptos).
So if you are conservative, and want to be on the safe side of thing, you probably want to only trade on regulated exchanges at first.
Note: I have posted a more exhaustive article covering the "regulations in the crypto currencies eco-system" topic on https://steemit.com/crypto/@adrienbe/countries-regulations-related-to-exchanges-crypto-currencies-and-icos
Company history
Age: an old exchange is a usually a good sign, but "old" only means around 5 years old since the crypto space is so new.
Hacking: double check (via quick googling) the hacking history of the exchange you consider using. If hesitating on signing up, it'll probably help you decide.
Reputation & reviews
Crypto exchange do get reviews. For instance, digiconomist.net reviews exchanges with a clear list of rating criteria.
Reputation can be hard to track via googling since you often get a lot of "noise", forums with 20-pages long threads with angry users complaining. But if you have time to clear that up, you might be able to find very valuable information.
Fiat deposit: Processing time
Funding a crypto exchange account with fiat currency via bank transfer is slow, very slow. It can take from 2 to 5 working days.
Each exchange seems to have different processing time according to which country you send your money from.
Some things that increase slowness:
- you send your fiat currency money to an exchange located on the other side of the planet
- banks only work 9 to 5, Monday to Friday, and when there is no public holiday
- the exchange you go through needs extra time to process fiat deposit for safety reasons
You'll quickly learn that funding your account can take a lot of time.
One way to go around it if you're not funding with much money is to use a bank card instead of doing a bank transfer. You will be limited by the amount and the fees will be high (around 3%!) but you will have an "instant experience", which is sometimes worth it.
Unfortunately, often the only way to find out how long it takes to fund an account on a crypto exchange from a bank account in a given country is to try it yourself.
Fiat withdrawals: Processing time
Withdrawing fiat currency from a crypto exchange via bank transfer is slow, very slow.
Each exchange seems to have different processing time according to which country you send your money to.
Unfortunately, often the only way to find out how long it takes to withdraw from an account on a crypto exchange to a bank account in a given country is to try it yourself.
Crypto deposits: Processing time
As far as my experience goes, the processing time for receiving crypto currencies is always very fast.
Crypto withdrawals: Processing time
Usually, all exchanges execute transactions instantly: you send any crypto via the relevant network and only the speed of that network determines how much time the transfer takes.
However, there are exceptions such as Quoinex and Qryptos who have a 24h processing time. They say it is for safety reasons, as the funds of their clients are on cold storage.
Fees for trading, deposit
Fees across exchanges can change a lot. Some have flat fees: same percentage fee regardless of the type of trade. Some have different fees according to the type of trade.
My tip: you may not want to focus too much on fees since it can get quite time consuming to look into that, and taking certain trading decision "just" based on the fact that it'll make you save trading fees might not be the best
Quick explanation about "taker" and "maker" (mentioned below) on money.stackexchange.com/questions/63044/maker-taker-fees-can-somebody-explain-in-plain-english
But here are a few examples of fee structures:
- GDAX: zero “maker” fee but “taker” fees of 0.25% if BTC involved and 0.3% if ETH involved; deposits are free, withdrawal in fiat via SEPA costs 0.15 cents and withdrawal in crypto are free
- Quoinex: trading in base currency pair has zero fee, other trades costs 0.25% (BTC and BCH pairs) and 0.1%(ETH pairs); deposits in fiat are supposed to be free but sometimes Quoinex does have partnership with a 3rd party bank to receive your fiat deposit so this 3rd party bank takes a fee (around 4 usd); withdrawing fiat costs around 5 USD, but the price changes according to country
Volume
By volume, we mean the value of all the transactions being processed in a given time. For instance, how many bitcoins, ethereums and Litecoin were traded on GDAX during the last 24h, and what is the USD equivalent worth?
If an exchange has very low volume, then you can send your fund to that exchange, but there might not be enough other users on that exchange to exchange your currencies with.
Fiat currencies listed
If you are injecting money into the crypto world, then you want to find the exchanges that support the currency you send your money from.
Note: you might consider contacting your bank to set up accounts in different main fiat currencies (EUR, USD, else) in order to be able to send/receive to/from different fiat currencies (hence to/from as many exchanges as possible)
Crypto currencies listed
You're a beginner, maybe, but you will quickly want to have access to many different crypto currencies that you discovered and developed an interest for. So you might want to sign up to those exchanges that offer these currencies.
User Interface
Although not a major factor of decision, over time, one gets to experience many different styles of trading platforms and develops a preference one style over another.
As a beginner, you probably should try to aim for the simplest one, or experiment the complex ones with micro-money to avoid bad surprises.