The following article was written by Tony Philips.
When choosing a platform for cryptocurrency exchange, many experienced and budding traders tend to immediately settle for whichever option they encounter first. That, however, rarely proves to be the best choice.
Exchanges of cryptocurrencies have gone through some sort of revolution in the past decade. Numerous new exchange platforms have been launched with unique features that even the major players in the industry find difficult to rival. For example, many of the top crypto exchanges nowadays give users the option to utilize a hardware wallet, which is the safest way of storing coins.
But why should you consider different cryptocurrency exchanges before making a decision regarding which one is best for you? Read on to learn more about it.
Trading On The Short And Trading On Leverage
Although Bitcoin and other cryptocurrencies have actually experienced meteoric growth recently, it hasn’t been without some interruptions. Since early 2018, a lot of cryptocurrencies have been going down.
Fortunately, some cryptocurrency derivatives platforms provide users the chance to perform shorting in the market. It means that traders can speculate whether or not a specific asset will experience a decline in value. It, in return, allows traders to profit easily in the face of a declining market.
Short trading of bitcoin and other cryptocurrencies using cryptocurrency derivatives, no doubt, can be a profitable process alone, but it’s actually possible to drastically increase its profitability potential by trading on leverage. Leverage trading is a process where traders temporarily borrow funds to increase market exposure.
While it’s true that the ability to do margin trading was previously reserved only for the highly experienced and most advanced traders, great strides have been made in recent years in terms of usability. Nowadays, regardless of experience levels, traders can benefit from leverage of up to 100x at some exchange platforms. Take a look at different cryptocurrency exchanges and make sure to choose one that allows you to trade on the short and trade on leverage.
Robustness Of The Cryptocurrency Exchange Platform
Exchange platforms that don’t innovate often are those that allow you to register even without anti-money laundering measures like KYC or know-your-customer guidelines. That means you can usually register using only an email and password. When it comes to structural robustness, one can easily find out how well a cryptocurrency exchange performs during market crashes or pumps. A responsible exchange platform will notify you as a user about any scheduled downtime or server maintenance, and it’s one of the key attributes that definitely separates a good platform from the bad ones. Make sure to take robustness into account when coming up with your final choice out of the many different cryptocurrency exchanges you considered.
Hidden Costs Can Be A Problem
While there are many crypto exchanges that attempt to offer the most competitive trading fees, two of the several costs you should consider when selecting a cryptocurrency exchange are the low taker and maker fees.
The spread is also another important consideration. It’s actually the difference between the highest sell price and the lowest ask price on a platform. The tight spread is what indicates that one market order will get filled at a value that’s close to what the market has. A large spread, on the other hand, can result in market orders that are being fulfilled at rates that are actually worse than expected.
As a result, although many cryptocurrency exchange platforms charge fees that are between 0.1% to 0.25%, users still experience significantly reduced profitability as they trade after factoring in the spread. Likewise, high spreads result in a lack of liquidity, leaving traders vulnerable to any market manipulation. It happens since the order books are usually too thin, making it difficult to absorb attempts to alter the market’s price dynamics.
The Exchange’s Market Presence And Its Diversity
The game is already changing. Localized exchanges will no longer thrive. You’ll see mutual growth and more partnerships of cross-country exchanges. It’s something that was previously impossible because of the significant differences when it comes to crypto regulations. In 2020, what traders will see are cryptocurrency exchange platforms having real brick-and-mortar operations in various locations around the world. It definitely is a positive development, mainly since it boosts the confidence of users, knowing that they could actually get local support coming from a few countries when the need arises. Such a novel approach among cryptocurrency exchanges, of having a presence in different distinct geolocations, will only bring benefits to people who are planning to trade in these countries. Also, market presence expansion will provide a hassle-free transition, especially for those modern digital nomads who always travel and work from different locations.
On top of the aspects mentioned above, there is another reason why you should consider different cryptocurrency exchanges. It is the importance of choosing a platform that features the various tools necessary for executing advanced trading strategies, while still giving traders the option to select which features they need to access and when.