How Does a Cryptocurrency Exchange Work?
A cryptocurrency exchange platform is a place you can go to trade, buy, and sell cryptocurrencies. You can trade using fiat currencies, cryptos or digital currencies.
Some platforms are designed for novices while others are for experts. Make sure you pick the right one for your skill level and that utilizes the various cryptocurrencies you intend to use.
Types of Cryptocurrency Exchanges
There are three main kinds of exchange platforms:
Best Cryptocurrency Exchanges in Singapore (2020)
How Can I Buy Cryptocurrency in Singapore?
There are six main methods for buying cryptocurrency:
- • Credit card payments
• Prepaid cards
• Cryptocurrency transactions
• Cash deposit
• Bank transfer
• Online payment service (PayPal, Payoneer, etc.)
Bear in mind that some platforms only allow some of these options. You need to choose one that fits your payment preferences.
Pay attention to the different fees of each payment method. Each one has a different level of fees, processing time, and other limitations. Research before purchasing any crypto.
Crypto Exchange Fees
Pay attention to any fees that you may need to deal with. Once you know about these fees, you can figure out which one is best for you. Take a look at these typical fees:
Deposit Fee
Some platforms do require a small fee whenever you make a deposit. The fee will vary depending on how much you’re depositing.
Trading Fee
Most of the time, trading fees are a fixed percentage of the transaction. There are some platforms that offer a flat rate, regardless of the transaction. Others still offer differing fees depending on whether you are a market maker or a market taker.
Withdrawal Fee
These fees are pretty much the same as deposit fees. Again, they vary based on how much you’re withdrawing. That being said, some platforms do have a fixed withdrawal fee, meaning withdrawing more at once is better as you pay the same fee.
How can I Spot a Crypto Exchange Scam?
Platforms have regulators that are designed to protect you from such scams. Failing that, there are a few steps you can take to make it more difficult for you to get scammed:
Make Sure the Exchange Platform is Registered with MAS
All exchange operators need to be registered with MAS, or Monetary Authority of Singapore. If it isn’t, don’t use the platform.
Is the Platform Actively Regulated?
Make sure that any platform you work through is well regulated. If they are not enforcing the current laws, you do not want to go near them!
Research on Your Own
Don’t be fooled by anyone trying to get you to do anything. Check out the platform and look at reviews before doing anything.
Keep an Eye Out for Obvious Warning Signs
There are certain red flags that can be easily spotted when it comes to scams. Such things as no information page for the platform or an unusually perfect review score are some of these.
Watch Out for Sneaky Web Addresses
The website should contain “https” rather than “http”. If it doesn’t have an “s” in it, the website isn’t secured.
Use Reputable Exchange Platforms
Generally, going for platforms that are well-known are much safer than sketchy ones. Stick with these and you should be fine!
Trading Types
There are three main types of exchanges:
- • Fiat – Crypto
• Crypto – Crypto
• Both Fiat – Crypto and Crypto – Crypto
For those buying BTC with hard cash, or vice versa, you need a broker who allows that, such as the first option above. On the other hand, if you wish to exchange one cryptocurrency for another, you’ll need a broker that allows the second option.
If you tend to need both options as you shuffle your currencies around then sell them off, you will want the third option, as they can do both for you.
Trading Options
You need to know what types of trading you mean to do before choosing a platform. Take a look at the difference between a cryptocurrency and a fiat currency:
Cryptocurrencies
With over 1,600 different cryptocurrencies available to date, you can’t expect to find them all on a single platform. When exchanging cryptocurrencies, you need to learn which ones you mean to use so that you can find a platform that allows crypto-crypto and actually has all of the ones you want on it.
Fiat Currencies
When using fiat currencies, you mainly need to check with your platform that they accept them. If they do, then carry on. If not, look elsewhere.
Fees
As you exchange currencies, there will be certain fees to watch out for. Make sure that you utilize discounts and take advantage of times when a certain currency has a higher worth so that you end up saving more on top of the fees.
Limits
Most platforms have limits on regular accounts. If you plan to make big transactions and save a lot of your chosen cryptocurrency, you should look for a platform that has higher limits than most.
Effects of User-Friendliness on Trading Tools
Some platforms are designed to be user-friendly for the sake of novice cryptocurrency entrepreneurs. On the other hand, other platforms are designed for experts giving them advanced options and features.
Both types of platform are beneficial to certain people. Make sure you choose a platform that suits your needs.
Ease of Access
Most if not all crypto platforms will be designed with easy access from any PC, laptop, tablet, smartphone, etc.
Loyalty Promotions and Discounts
Sticking with a particular platform for the long-term will likely see you getting promotions and discounts every once in a while. These promotions and discounts help reduce the impact of fees and help you earn more in a shorter span of time.
Every platform is different, so check out promotions they tend to offer before joining.
Exchange Rates
Bitcoins vary in cost on a daily basis. Every time someone buys or sells a cryptocurrency, that currency’s value changes. Make sure you keep track of this and take advantage of better exchange rates when they present themselves.
Liquidity
The liquidity of your cryptocurrency is quite important as well. A cryptocurrency with low liquidity is much more difficult to trade with than one that has high liquidity.
Check out CoinMarketCap to find out the liquidity of the cryptocurrencies you intend to purchase.
Methods of Payment
Some platforms have limited payment options. Make sure to check the type of payment you intend to use, such as bank transfer, credit card, PayPal, etc. Ensure that your chosen platform supports this method.
Modes of Verification
If you don’t wish to be known on a platform, look for one that doesn’t require upfront ID. That being said, the more verification a platform requires, the safer your currency will be. A platform that doesn’t require any personal details will also be much easier to get into.
Processing Time
When it comes to choosing a platform, you will also need to consider how long it takes for transactions to be processed. Make sure you pick one that suits your level of patience!
Security Options
You really want a platform that has lots of security. It may be annoying to jump through hoops, answering questions and filling in security measures. However, for something as important as this, you want it to be as safe as possible.
Restrictions
Every platform also has specific restrictions and regulations to help keep trade honest and efficient. Make sure to research the exchange regulations of your chosen platform before locking into it.
Some of these regulations limit certain countries as well. If you intend to trade internationally, make sure to choose a platform that fits the countries you mean to trade through.
Customer Support
You don’t want to join a platform that has poor customer support. You need to know you can trust the platform and the people who manage it. Be sure to check out reviews from your fellow traders before making any decision.
Is This Platform Reliable?
The best way to learn if a platform is reliable or not is by reading the reviews of people who have used it before. If most of these reviews are positive, then you should be okay. If not, consider using another platform.
Will All Crypto Exchanges have a List of Every Single Type of Cryptocurrency?
You need to check that the crypto exchange platform you are considering lists the cryptocurrency you want to trade.
Should I Use an Online Crypto Exchange Platform for Large Trades?
Any trade above $50,000 should be done through an over-the-counter service, just to be safe.
Do Any Crypto Exchanges Utilize Leverage Trading?
There are a few that do. Take a look at our cryptocurrency margin trading guide to learn more.
Is There a List of All The Crypto Exchanges in the World?
Yes, you can look on sites such as CoinMarketCap to find all crypto exchanges.
Why Do I Need to Verify My Identity?
Exchanges are required to put steps in place to follow Anti-Money Laundering and Counter-Terrorism Financing regulations. (Also known as AML/CTF) This is why you must have some form of ID before using them.
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