- Crypto exchange is a platform on which you can buy and sell crypto assets.
- Opening an account on a crypto exchange is like opening a Demat account.
The boom of the crypto industry over the last couple of years has led to massive adoption of the crypto space. With newer tokens and various projects being worked on every day, the rise of crypto enthusiasts also saw a rise in the number of crypto exchanges. The rising interest would ultimately result in any curious crypto investors needing to make decisions about how to start investing in crypto assets for some passive income including how to store their digital assets.
To explain crypto exchange in simple terms, it is a platform on which you can buy and sell crypto assets. Any interested party can make use of the exchanges to trade one crypto for another, or they can simply use their choice of fiat currency – like INR or USD – to buy crypto tokens. These crypto exchanges provide the marketplace for crypto tokens, very similar to how e-com platforms like Amazon or Walmart, to be then chosen by any trader or investor or their portfolio. These exchanges also help facilitate a user to deposit money via methods such as direct bank transfer, net banking or P2P, etc, and charge a minimum commission or fee for every transaction done using its services. However, this rate is dependent on the exchanges. Any crypto exchange displays the current market prices of the crypto tokens they offer.
Crypto exchanges work similarly to how a broker works. It gives the traders all the tools they will need to execute the trades, like buying Bitcoin, Ethereum, or other altcoins. However, there are certain criteria that need to be considered before choosing a crypto exchange.
1. Do your research
While choosing a crypto token for investment requires thorough research, choosing a crypto exchange to execute those trades also requires intensive research. While doing your research, look for the market sentiments regarding the exchange, and what the company is saying about itself. Have there been issues with security in the past, or have the exchange faced any hurdles along its journey so far; look for how has that exchange addressed those problems.
2. Go with higher security
While conducting your research, making a note of all the security measures set in place for the exchanges is also important. Keep an eye out for their Product Feature blogs, which will surely mention their security measures in detail
3. Transparency of the Exchange
Trust and transparency are an important part of the exchange’s behalf as many countries still do not have crypto regulations set in place. To identify a reliable exchange, evaluate the audit information of the exchange as they help in understanding the financial health of a company.
4. Coins And Tokens
While the above points are very crucial, it is also important to see if the exchange has a history of mass coin listing and delisting. Exchanges like CoinDCX have a 7M Model in place, which conducts a rigorous check on any new token before listing them on their platform.
Opening an account on a crypto exchange is like opening a Demat account. Once you are done selecting an appropriate exchange, all you need to do is update your KYC details.
Crypto is an extremely volatile market, which means you should invest carefully and only invest the amount you are comfortable with.
(Neeraj Khandelwal is co-founder of CoinDCX).