Cryptocurrencies are taking the tech and finance industries by a storm, and investors from all walks of life are rushing in to get a share of these new spoils. Unfortunately, many unwary ambitious new investors end up as victims of this newfound goldmine of the decade; reason being, they fell for a wrong cryptocurrency platform, which scammed capital out of them or offered close to nothing of what was initially promised.
This article is specifically for you, a new investor trying to find your way through the crypto maze, and it discusses five critical points to pay attention to while selecting a cryptocurrency platform.
However, before we start, let’s answer a few critical questions;
What is a blockchain?
To understand cryptocurrency, you will have to start with blockchain, which is a relatively new technology. It is a decentralized medium of transaction that runs on a distributed ledger technology; distributed in the sense that it is divided among the participating parties connected to it. These participants work together to verify every transaction that goes through the blockchain.
What is a cryptocurrency?
On the other hand, cryptocurrency is the digital asset or digital currency that is used as a medium of exchange within a blockchain. Just as traditional currencies are used for day to day exchanges, so are cryptocurrencies in a blockchain’s transactions.
Some common examples of cryptocurrency are Bitcoin, Ethereum, and Litecoin.
What are cryptocurrency exchanges?
As we mentioned earlier, cryptocurrency is more like fiat currency in a blockchain system. Additionally, just like fiat currencies have platforms that provide exchange services from one currency to another, cryptocurrencies have exchange platforms as well.
Crypto exchange platforms allow investors to purchase and sell their cryptocurrency assets, depending on the market’s predictions and preferences. Examples of reputable platforms are Binance, Bitmex, and Coinbase Pro.
Let’s have a look at what to consider when selecting one of these platforms
Blockchain technology is still very new, and many countries lack infrastructure and regulations to run it. Additionally, its decentralized nature threatens most governments’ control of the finance sector.
Therefore, before settling for an exchange platform, check and ensure that it meets the regulative standards set in your country. For instance, only Coinbase, Gemini and Bittrex are federally regulated in the United States. Investors from the USA find it hard to access services from any other platform. Since this is an investment opportunity, you would want to get everything right from the start.
2. Authenticity and Reputation
Cryptocurrency is yet to establish global regulations. Therefore, anyone can set up a platform and start collecting funds from unsuspecting new investors.
It is, therefore, prudent to verify the authenticity of your platform from the word go. The company should be legally registered to a governing body in its home country. Furthermore, it should have a physical address and an elaborate whitepaper.
Customer reviews on social media platforms are beneficial in verifying a platform’s authenticity.
Cryptocurrency platforms are at risk of being hacked at any time. To make sure your funds are safe, the platform should have anti theft measures in place. Features such as cold storage keep your assets away from hackers.
Additionally, a platform should provide a comprehensive insurance cover with a reputable insurance company for compensation in case of theft.
4. Fees and Rates
Exchanges charge deposit, withdrawal and trading fees. These fees vary from one platform to another. A platform like coinbase, which is the most newbie-friendly platform in the market, scares pro traders away due to its high prices. On the contrary, Binance offers considerable fees, but the platform is suitable for experienced traders only.
5. Trade Volume and Liquidity
Trade volume is the combined tally of all assets that has been traded on a platform within a given period. Trade volume is usually directly proportional to the platform’s liquidity, which is the rate at which trades are being executed in the market.
Large trade volumes are given priority than small investments hence, platforms that trade high volumes can complete trades faster than those with low volumes.
As an investor, you wouldn’t want to be in business with a platform with low trade volumes.
At the day’s end, the choice of a platform depends on you and your preferences including your trading strategies. However, it is crucial to be vigilant when dealing with cryptocurrencies due to their unregulated nature. And always remember, your success here is only as good as the trading platform you choose.
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