Everything You Need To Know Tech Tribune France

Introduction

You cannot go to your bank or an investment agency and acquire cryptocurrency. After deciding to buy Bitcoin, Ethereum or another cryptocurrency, you will need to open an account with a crypto trading platform to convert your US dollars (or other money) into digital assets.

As the CEX Crypto Exchange Platform and Coinbase, some have been active since the early 2010s, when there was far less regulation regarding how cryptocurrency was bought, sold, and traded. Others, such as Robinhood and PayPal, are better known for their other services and have recently started allowing customers to trade cryptocurrency in their existing accounts.

Here is everything you need to know about why choosing the right crypto exchange is so important and what aspects experts suggest you consider before deciding.

What is a crypto exchange?

A cryptocurrency exchange is a site where digital currencies can be bought and sold. Exchanges can be used to exchange one cryptocurrency for another – for example, changing Bitcoin to Litecoin – or to buy crypto with fiat currency such as the US dollar.

On exchanges, cryptocurrency prices are based on current market prices. You can also use an exchange to exchange cryptocurrency for US dollars or other currencies, which you can keep in your cash account (to later exchange for crypto) or withdraw to a traditional bank account.

According to Tyrone Ross, Financial Advisor and CEO of Onramp Invest, a crypto investment platform for financial advisors, no one crypto exchange is right for everyone. Instead, he recommends assessing your crypto interests and finding an exchange that matches your goals.

For example, maybe you are looking for a certain coin or want to learn more about investing in cryptocurrencies.

What to look for in an exchange

  • Accessibility
  • Security
  • Costs
  • Liquidity
  • Parts offered
  • Tax information

Accessibility

Depending on your jurisdiction, you may not be able to buy or sell cryptocurrencies on certain exchanges due to state or national regulations. Some countries, like Chinaoutright banned the use of cryptocurrency exchanges.

There is a lot of regulatory uncertainty surrounding bitcoin in the United States, and several states have enacted their legislation. New York, for example, requires exchanges to obtain a BitLicense before operating in the state and only allows licensed organizations to offer recognized coins.

You can typically see information regarding an exchange’s geographic constraints and associated accessibility issues, such as the national currencies accepted on a website or in terms of service.

Security

A government does not guarantee cryptocurrency, and your cryptocurrency assets are not insured in the same way as bank deposits or traditional investments. Some exchanges, such as Coinbase and Gemini, keep all of your US dollar balances in FDIC-insured bank accounts. However, bitcoin balances are not covered by FDIC insurance.

Whether you want to keep your crypto holdings on an exchange for a long time or just have them there for a short time before transferring them to your wallet, the security of the exchange should be a primary consideration. For example, look at how much of the exchange’s assets it stores offline in hard storage.

Costs

Fees are another consideration, but don’t let a high cost structure deter you from participating in an exchange. According to Spencer Montgomery, CEO of Uinta Crypto Consulting, a crypto education program for new investors, “the easier they make it for you to buy, the higher the fees you are going to pay.” Larger and more popular exchanges may offer better warranties and insurance at a higher cost, an acceptable compromise.

Liquidity

If you want to trade, sell, or buy bitcoin, make sure the exchange you choose has enough trading volume to keep your assets liquid, which means you can sell them whenever you want. There is another occasion where size matters. Often, the most popular exchanges have the highest trading volumes.

Parts offered

Not all of the thousands of cryptocurrencies are available on every exchange.

If you are looking for a popular coin like Bitcoin or Ethereum, you will definitely find it on any exchange of your choice. Newer altcoins, currencies with modest market sizes, and meme coins, on the other hand, may require a bit more research.

Remember that these coins are often much riskier bets than the already highly speculative and more established cryptocurrencies.

Many experts advise investors to stick with well-known names like Bitcoin and Ethereum. Only trade monetary value that you are willing to lose with any cryptocurrency you plan to buy on an exchange.

Taxes

As if taxes weren’t confusing enough, reporting bitcoins can add another level of complication to your tax return.

All crypto transactions you make must be reported as capital gains on your tax return. This means that you will need to know the value of your cryptocurrency both when you buy it and when you sell it in US dollars.

Because Robinhood is a platform-only exchange, it produces a Form 1099-B which tracks your cost base, wins and losses, which is not the case on other traditional exchanges.

Conclusion

Learning as much as you can about crypto before investing is one of the best things you can do, as we’ve heard from pros time and time again.

Consider what pricing structures and security measures you are comfortable with and what additional steps you will take to protect your cryptocurrency.

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Everything You Need To Know Tech Tribune France


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