Bitcoin and other cryptocurrencies were the hot topic of 2017 and, as a result, millions of people invested in digital currencies. Some made as much as 1800 percent on Bitcoin – provided of course that they sold at the right time in December. Still, even those who invested in the middle of the year and are still holding, are sitting on returns of 2 to 300 percent. Between December and late March, the price of bitcoin fell as much as 65 percent. However, it’s now beginning to climb again, and for those that missed out last year, this may be the ideal time to get involved.
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The first step toward investing in Bitcoin, or any other cryptocurrency, is to choose an exchange and open an account. You don’t need to trade through an exchange – but it certainly makes things easier if you do. The following is a checklist to help you choose the exchange that’s right for you.
Narrow down your options
Firstly, you should draw up a shortlist of 10 to 15 exchanges. You can start by having a look at the bestbitcoinexchange.io site which lists over 40 exchanges that offer Bitcoin trading, and in most cases, offer other cryptocurrencies too. Find the exchanges that have good reviews and seem to cover your needs, and try them out.
Eliminate exchanges outside your country
Because cryptocurrency regulations are still evolving, things can get complicated if an exchange is overseas. In some cases, it’s illegal to trade through an offshore exchange, while in others it may become illegal in the future. To keep it simple, it may help to keep things local.
Look at the coins you can trade on each exchange
You’ll probably want to consider investing in other cryptocurrencies at some point – so you can further eliminate any exchange that only offers Bitcoin. It’s a good idea to choose an exchange that offers trading in most of the top ten cryptocurrencies (you can find those on the coinmarketcap site), but not an exchange that offers hundreds of coins. An exchange that offers every coin available may not be very focused.
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How do you transfer cash to the exchange?
Some exchanges don’t accept fiat currencies, which is fine if you already own cryptocurrencies, but is no good if you are a first-time investor. Some take debit cards, but not credit cards. Others accept PayPal payments and wire transfers. Decide what works for you and cross those that don’t accept that payment method off the list.
Look at the fees
Now it’s time to compare the fees. If any of the exchanges that are still on your list have fees that are a lot higher than the others, they can be eliminated. This doesn’t mean you should automatically choose the cheapest exchange. It’s worth paying a little more for the right levels of liquidity, service and security.
Check the liquidity
As a retail investor, you don’t need as much liquidity as the largest investors. But you need some. The Bitcoinity site will give you an idea of how much liquidity each exchange has. Try to stick with exchanges that have at least 1 percent of the overall volume.
Do some research
There is no objective way to determine how well an exchange handles security and customer service. The best thing to do is Google all the exchanges you are still considering, and see what people have to say about them. Have they been hacked? Do people struggle to get money back from them? Do they respond to queries?
Conclusion
By the time you’ve gone through this process you’ll probably know a lot more about the well-known exchanges, and have a good idea of the one that’s right for you.
