How to choose a safe crypto exchange or wallet?

How to choose a safe crypto exchange or wallet?

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Do you own any crypto coins?

The rapid growth of the cryptocurrency market leads to the emergence of many new trading platforms in different parts of the world. Most companies operate legally, and their founders are successful businessmen. But some of the exchanges were originally founded by scammers who are waiting for the growth in the number of participants and the accumulation of funds in their accounts in order to disappear without a trace with them. Therefore, before entrusting their assets to any trading platform, investors should study in detail the main aspects of the company’s activities.

Growing demand for exchange services

In recent years, cryptocurrencies have shown exponential growth, significantly increasing interest in products based on blockchain technology. Now not only business, but also institutional investors want to join this promising direction. At some point, some of the exchanges specializing in virtual currencies suspended the registration of new customers due to the fact that the available resources and capacities were not enough to fully provide services to all new participants.

At the moment, there are more than 1,500 different cryptocurrencies on the market, with a total market capitalization of more than $340 billion. However, not all digital currencies get listed, so there is still enough room to launch new services.

How to avoid scam?

Investors are always looking for promising areas that they can join in order to significantly increase the amount of equity capital in a short period of time. Cryptocurrency exchange business fully meets these requirements. But protecting it from hackers, system errors and other threats requires a lot of effort on the part of the owners. Recently, even some popular exchanges have been attacked, while others have turned out to be fraudulent projects.

There are a number of indicators that you should pay attention to in the process of finding and choosing a suitable trading platform.

1. Reliability level

The investor should find out how the service on which it is planned to conduct trading operations behaves during periods of high volatility. For example, when the market falls sharply and the trader tries to open a sell order, the platform does not respond to requests.

The best way to find out if a particular exchange has such flaws is to study thematic forums and groups on social networks where members discuss companies. Dr. Bora Ozkan, Associate Professor of Finance at Temple University, said: “Liquidity is what helps distinguish a mediocre marketplace from a good one.”

This is the main indicator of the confidence of traders, which should be paid attention to in the first place.

2. Control

It is important to find out whether the company has all the necessary licenses, permits to carry out activities, and whether it falls under the jurisdiction of institutional regulators. The presence of control significantly increases the responsibility of the site to users. For example, the Japanese exchange Coincheck, which was hacked, was unregulated. Bitstamp received the status of a full-fledged regulated payment company from the Luxembourg government in 2016.

3. Quality of support and customer service

Customer service is a common problem that exists even on the best cryptocurrency trading platforms. However, it is worthwhile to find out in advance the level of organization of the help desk for participants. If, when trying to contact support, only a page with answers to frequently asked questions appears, without an email address or other communication channels, then this is a clear signal that it is worth thinking about the prospects for cooperation.

4. Commission rates and the possibility of margin trading

Commissions and margin trading are very important aspects of the activity that have a direct impact on the bottom line efficiency. Some services provide customers with complete information about how much they will charge for the transaction until the transaction is completed, while others hide it. If you cannot find out the amount of the fee before confirming the transaction, then you should conduct very careful activities on this site. In addition, it is desirable to find out if the SegWit and Lightnin Network protocols are supported, as they significantly affect transaction fees and payment confirmation times.

Margin trading is not available on all cryptocurrency exchanges, but some traders may wish to use leverage to increase the size of a particular virtual currency transaction. Therefore, you can additionally check whether such a service is available or not. For example, BitMEX, Kraken, and Poloniex offer this feature.

5. Security

You should check on the Internet whether there have been cases of exchange hacking. If such facts are discovered and the service has not taken appropriate measures to strengthen protection, then this can easily happen again.

It is necessary to take into account the presence of different levels of user security in the authorization process. For example, some services require you to enter a new code using two-factor authentication each time you enter the site. If you try to authorize in the system from an IP address that differs from the usual one, you may need to go through additional verification before starting work.

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