Bitcoin Exchanges –
by Joff Paradise | 28 Jan, 2019 10:01 am | News
Bitcoin exchanges are websites where users can buy, sell, or trade cryptocurrencies. While some offer the ability to exchange crypto for fiat currency, like US dollars or Euro, most only permit trading crypto-for-crypto. One should expect to provide identification and go through a verification process for bitcoin exchanges that also deal in fiat currencies. There are some considerations to make when choosing an exchange.
Types of Bitcoin Exchanges
Trading Platforms are sites which connect buyers and sellers. These platforms take a fee from each transaction made. Direct Trading platforms offer peer-to-peer trading and allow individuals from different countries to exchange cryptocurrency. Each seller on a direct trading platform sets their own exchange rate, and there is no fixed market price. Broker websites allow anyone to visit and buy cryptocurrencies at a price set by the broker, similar to foreign exchange dealers.
It is advised to choose an exchange with a solid reputation among other bitcoiners – however, this is not a 100% guarantee. Given the uncertainty regarding regulations in the crypto space, it is possible that rule changes could affect an exchange in the future. Therefore, it is advised to stay informed of the latest news. Those exchanges that allow you to remain anonymous could very well be a scam or money laundering front that the authorities will likely shut down sooner or later.
Exchanges can also close due to a lack of liquidity, especially during a down market when traders and investors hold back to see what direction the market takes. Should anything go awry with the exchange on which your coins are stored, it is likely withdrawals will be stopped.
Every user attempting to exit an exchange at once is bound to cause problems.
Bitcoin Exchanges: Location and Fees
It is also important to ensure the platform you use is fully accessible from the country in which you live, as well as the fees charged for deposit, transaction, or withdrawal. Payment methods may include credit or debit card, as well as wire transfer and many exchanges require a connection to your bank account. Lastly, select an exchange that uses cold storage for coin safety, and multi-factor authentication methods.
Securing Private Keys
Regardless of which of the numerous bitcoin exchanges you choose to use, the number one thing to remember is: never to leave assets on an exchange. Deposit what you want to trade or sell, but never keep significant amounts of cryptocurrencies on an exchange. Managing your own private keys means storing your assets in your own wallet – not a wallet on an exchange. When your assets are stored in an exchange wallet, i.e. Coinbase or Poloniex, you do not control the private keys, the exchange does. Should the exchange exit the market with your coins, there would be no recourse and this is not just theory – it has happened repeatedly. Should your account be frozen or closed, you would have little recourse depending upon the exchange and their reasons for such action. If the exchange was hacked and all the coins stolen, you would have no recourse other than to hope the exchange was liquid enough and willing to cover the losses.
Storing your coins in your own wallet, either on your desktop or in a hardware wallet, gives you full control over the private keys. This means they cannot be stolen should an exchange get hacked or the owners exit with everyone’s coins. It also means your coins cannot be confiscated by any government or entity, or the exchange itself. Of course, this means you are 100% responsible for taking the appropriate measures in regards to backups and secure passwords, but it is well worth the effort for peace-of-mind.