When you’re trading cryptocurrencies and trying to engage in the markets in the most efficient way possible, one of the biggest factors you’ll need to consider is surprisingly your exchange of choice. A good exchange can really make or break a strategy and can potentially damage your investments if you’re not positioning yourself in the best way possible. For example, exchanges that impose larger fees for trading individual trades can eat away your margins if your strategy is to simply accumulate small amounts of more minuscule fains in larger quantities and volume. Adversely, if speed is your priority, you’d want to find the exchanges that are more focused on providing speed and agility, typically at the cost of higher fees. In that case, you should prioritize higher fees and what not. There are multiple factors that need to be considered when you’re choosing which exchange to trade on and use as an arsenal for any potential strategies.
Keep in mind, no matter which exchange you use, there is going to be a heavy reliance rather on your own utilization. An exchange can provide the lowest fees, the best speeds, the most efficient executions, and the highest levels of securities, however if you don’t know how and when to use them, they’ll essentially be useless. With this in mind, it’s always important to really attempt to comprehend certain exchanges and tools prior to really getting deeply involved with them. Figure out their fees, terms and conditions, their levels and security, and any other attributes that could lead to your benefit. YouTube tutorials, comprehensive guides, and other factors are traditionally the best way to go. Nonetheless, here are some of the more hesitant crypto exchanges to potentially understand more, approach with a careful eye, or avoid altogether.
EtherDelta is one of the more complex exchanges in the atmosphere. It’s a decentralized exchange, otherwise known as a “DEX” that functions mainly through the Ethereum blockchain. All transactions and orders are placed directly on the blockchain creating a financial market exchange that is based mainly on the Ethereum Virtual Machine. Although it’s not the absolute worst of possibilities, there are a few very large downsides that can cut into your margins.
Although EtherDelta namely states it has “no fees”, the exchange does still require compliance with Ethereum, so that means you’ll need to pay Gas fees or “GWEI” for withdrawals, order placements, and even deposits onto the EtherDelta exchange. Although many have considered this fine to deal with, if you’re looking to maximize off of small order compositions and what not, EtherDelta may not be the best option. These fees tend to add up. Also, EtherDelta was previously hacked in a widely publicized event where users lost millions of funds. Additionally, many are aware of the SEC fine for EtherDelta in conducting unregistered transactions of securities. Although these aren’t entirely necessarily game changers as EtherDelta does in some cases serve as actually viable, they should be adhered to when deciding which exchange to choose from.
Those who are seasoned veteran users of Bitcoin and cryptocurrency in general are probably aware of the cryptocurrency exchange Paxful. The exchange works more so on a peer to peer basis where users log on, offer up Bitcoin or a specific cryptocurrency at a certain premium, and then indicate in which method will the cryptocurrency be acquired or exchanged. This traditionally ranges from ways such as PayPal, gift card, or even in person meetings. Despite this range of usage and the different methods for which you can actually buy cryptocurrency, Paxful should be avoided for those who are seeking legitimacy and larger margins on exchanges. The main reasoning for this being not mainly that Paxful itself as a centralized organization is bad for business, but rather there are a very large influx of scammers and unreliable vendors of cryptocurrency on Paxful.
Not to mention, Paxful is in many cases one of the go to exchanges for beginners in Bitcoin or cryptocurrency. The main reasoning for this is arguably because it is so easily accessible. To log onto Paxful and initiate a trade is fairly a fast process, however, it comes at a cost. Many times exchanges like Paxful will imply higher fees because of the more P2P nature. Paxful should probably be avoided; or at least approached in a very cautious manner.
This may come as a surprise to many; why would Coinbase be an exchange to avoid? We’ll delve a bit deeper into this, as Coinbase isn’t necessarily an exchange to entirely avoid, however, if you’re looking at trying to incorporate the best possible outcomes, Coinbase might not be the best option. Coinbase is considered to most as a retail level exchange. It’s a quick, easy option to get started buying cryptocurrency, however, past that it incurs hefty fees. Not only this, but Coinbase implies a larger than normal fee for not only purchasing cryptocurrency but also selling it as well. Many times as well, you’ll get the market price of the cryptocurrency you’re buying also, not the exact limit.
Coinbase is a great beginner’s option, and if you’re trying to purchase cryptocurrency as soon as possible, it can be an excellent choice. However, if you’re an institutional sized trader, it may be worth pursuing their other options such as Coinbase Prime, so that you don’t pay abnormally high fees.
BitBay is a community favorite amongst the masses and is widely regarded as one of the more admired exchanges. It’s been around for quite some time, however, their fees are one of the largest in the open market. BitBay incurs a .43% maker and .43% taker fee. That means when buying and selling your cryptocurrency you will in most cases be paying .43% on both transactions. This is in comparison to some other exchanges with higher liquidity that only take fees of .05 – .1%. The vector between the two is significant, and it is large enough that’s noticeable as well. I
BitBay has been used for quite some time, however, because of its longevity, it has also suffered hacks. This also places a slight concern on the concept of safety and user funds. In 2015, they reported a hack of over 5,000 Bitcoin, which is a lot. Although at the time it wasn’t necessarily as much as what it’s worth today, a previous security falter is indicative of a not-so secure infrastructure. Although exchanges do learn from their mistakes, an incident such as this is absolutely enough to have to reevaluate existing strategies, in combination with the comparatively high rates of fees, it’s enough to double take on deciding whether or not BitBay is a top tier exchange.
Now, bare with me on this one. Let’s be clear prior to anything; Gemini is a top tier exchange. The Winklevoss twins, the founders of the exchange, are amongst some of the most contributing forces in general cryptocurrency and have emphasized a focus on legitimacy, regulation abidance, and bringing blockchain and cryptocurrency to the forefront of the globe. You can’t walk down New York City without seeing a taxi, poster, or billboard that is advertising Gemini’s exchange. Gemini is also a registered Trust company, so they are to a large extent federally insured and can offer a layer of security that many other exchanges cannot. However, at a retail level of usage, it should be noted that Gemini factually has a bit larger imposition of fees in comparison to some other available exchanges out there. This is not to say that Gemini as a whole should be avoided. However, if you are looking for exchanges that offer the absolute lowest fees possible, then Gemini may not be the answer you’re looking for. That’s all that is meant; Gemini is still a very dominant force in the cryptocurrency space and will more than likely continue to be as well.
Let’s take a look at the numbers; Gemini imposes a maker/taker model, that is based on making an order or “taking” an order in their books. It runs on a tier model, similarly to Binance or other popular exchanges. The maker fee on Gemini is 1%, and so is the taker fee. Once you surpass $25,000 in 30 day trading volume, you are levied an additional .25% discount. However, the fact of the matter is not all users, and the larger majority of pretty much all retail users, are not going to surpass $25,000 in 30 day volume; so this does consequently that retail usage of Gemini may not be the optimal solution, and is definitely something that should be accounted for. From a safety and institutional perspective, however, Gemini is a very valid contender.
Bitfinex is one of the biggest names in cryptocurrency. It’s been known as one of the highest volume generating exchanges in the world, however, despite these impressive numbers it has run into a pretty big amount of controversy when it comes to things such as security and overall safety. Bitfinex suffered one of the largest hacks in cryptocurrency exchange history, and is still facing the immense controversy surrounding its alleged stablecoin child “Tether”. People are relatively unsure if there is, or will ever be, extensive clarity surrounding the Tether coin, however it should be noted Bitfinex has an underlying pairing to Tether. With this in mind, if Tether ever turns out to be an absolute fraudulent scam, then your gains won’t exist and neither will your initial investment. The entire amount that you place into your account will evaporate if Tether ever actually does turn around as a complete scam. Things wouldn’t be looking very good in that case.
Safety and security wise, Bitfinex has recently showed relatively good consistency. They haven’t suffered any major hacks, so it is a pretty reliable exchange. Volume and trading wise, however, Bitfinex has seemingly run into a bit of controversy with surrounding analysts and programmers claiming they’re able to spot Bitfinex’s “wash trading”, programmatic and empty trades that essentially are only used for the purpose of faking volume and attracting more users. These reports cause some additional wary in assessing whether or not Bitfinex should be your primary exchange. Although it definitely shouldn’t be completely ignored in assessing which exchange is the best option, an additional level of weariness and analysis should be underwent if you’re planning on using Bitfinex.
LocalBitcoins is another age-old cryptocurrency exchange that has been in existence and widely used for quite some time. It’s similar to Paxful in that’s it is a more P2P-based system that relies heavily on other users instantiating market trades on alternative methods so that you can trade Bitcoin. You can use cash, PayPal, or even coupons or discount codes to swap your Bitcoin. However, LocalBitcoins is just that; a P2P exchange, so that means fees and premiums put on Bitcoin are user set. A user can set a sell price of their Bitcoin to 2x the market price of Bitcoin, and newer users may have no idea and buy into the trickery. Since it’s not a financially recognized or regulated exchange, it means that there is room for scamming and incorrect pricing of assets that can go unnoticed.
LocalBitcoins additionally implies withdrawal and trade fees as well. Not only will you be paying the peer set premium, but you’ll also be incurred additional smaller fees on top of that. For best results in trading and a safer regulatory outlook, LocalBitcoins should more than likely be avoided.