As cryptocurrency has gained popularity in the world, a new breed of companies has emerged, in particular trading platforms or exchanges. These companies enable individuals to buy and sell cryptocurrency. As a large-scale marketplace, they are not that simple to understand. It takes some research into the various intricacies of the industry to best understand which companies to put your money into and buy Bitcoin or other cryptocurrency kind.
**Why do we need trading capabilities?****
It would be natural to look at the trading industry and think that it seemed to be a zero-sum game. The act of repeatedly buying and then selling currency to make small profits doesn’t add any sort of value to the world, and for every person who wins, there must be an equal number of people who are losing.
But there are also a lot of ways that trading helps industry to develop. It gives a more precise and up-to-date value of a company and measures the effects of policies and worldwide changes on consumer sentiments, which then will get included into the market value of a good.
Pitfalls of cryptocurrency trading
When someone first begins to trade cryptocurrency, the industry can feel like a daunting and opaque place to put one’s money in. There are tons of different trading platforms and a lot to understand as you enter the industry.
There are two major problems with cryptocurrency trading. First, trading platforms are great targets for hackers. Second, cryptocurrencies are not subject to regulations, and there is no method of pursuing recourse for wrongdoing at this point in time.
● Hackers have been coming up with schemes to defraud owners of Bitcoin since the very beginning. There have been all kinds of scandals, but, perhaps, the worst was when Mt. Gox was attacked and had a significant amount of their customers’ money stolen. As a result of the $400 million theft, they went out of business. Exchanges are always trying to find ways to protect their customers’ funds better, but it isn’t the easiest task yet.
● Regulators have been slow to come up with a stance on cryptocurrencies. This is partly because the legal authorities underestimated them and partly because it will be very complicated to regulate. By its nature, Bitcoin is designed to make cross-border payments easy, protect privacy, and have irreversible transactions. These are all things that make it difficult for any regulator to effectively intervene. The maximum any regulators can do is to declare that all proceeds from Bitcoin trading are taxable, but no legislation is in place in any major country that would result in it being more tightly regulated.
Different characteristics of exchanges
When you examine different exchanges, there are a few key characteristics that stand out. Some exchanges place a considerable emphasis on being convenient for newcomers. They want cryptocurrencies to be simple to buy for the uninitiated users and the sign-up process and buying methods enable that.
For other exchanges, the goal is to provide stronger trading capabilities for the users who have previous trading knowledge and are looking to do more than a standard buy-and-sell. Finally, there are the companies who place a massive emphasis on making sure that funds are secure and there is no chance your cryptocurrency can be compromised.
All of these characteristics are strong positives for an exchange, but they often work in contrast to each other and can create trade-offs. What some people do is turn to different exchanges so they are diversified.
The cryptocurrency trading industry is currently fractured into a bunch of companies, and in the future, we can expect to see some of the smaller ones die out as competitive advantages and network effects are harnessed.
5 of the most well-known exchanges
**Coinbase
**Coinbase is the most popular exchange in the world right now because of how easy they have made it for people to invest in cryptocurrencies. They have the largest number of customers in the world (13 million) and offer Litecoin, Bitcoin, and Ethereum. You can deposit money via credit/debit cards, as well as bank transfers, but the fee will vary.
CEX.IO
Based in the United Kingdom, CEX.IO was founded in 2013 as a cloud mining provider and then extended into a multi-functional cryptocurrency exchange. It offers Bitcoin, Bitcoin Cash, Bitcoin Gold, Ethereum, Dash, Ripple and Zcash trading services. Deposit/withdrawals can be made using several options, including payment cards, wire transfers, and CryptoCapital. CEX.IO is considered to be a safe option, and that is a major draw for traders who are looking for cold storage options for their coins.
Bitstamp
Bitstamp is another European exchange. Founded in 2011, it is one of the oldest cryptocurrency exchanges that boasts some of the lowest fees and supports a variety of currencies, in particular, Bitcoin, Ethereum, Litecoin, and Ripple. Bitstamp also accepts a number of payment methods like credit/debit cards and international wire transfers.
Kraken
Kraken is one of those services which is centered around increased functionality and allows the people to trade on margin as well as offers some of the less popular coins (Ethereum Classic, Ripple, Monero, etc.) Although they only accept wire transfers, they have very robust security, which could make up the inconvenience.
Coinmama
Coinmama also allows for payments to be made using credit cards or cash, and is known to be one of the best services for the first-time Bitcoin purchasers. They only deal with Bitcoin and Ethereum, which can be a bit limited for those looking for something on the more advanced side of things.
There are clearly lots of different options available, and the one you choose will depend on your specific needs in regards to convenience, sophistication, and security. Against the backdrop of a rapidly changing market, new solutions to cryptocurrency trading emerge. One of such solutions is using a cryptocurrency trading bot. Cryptocurrency is extremely volatile and the prices can change in a matter of minutes. Bots become common-use among traders as they are programmed to analyze market trends and patterns within exchanges and do automated trading when certain criteria are met. This helps to maximize profits and minimize losses. The most popular types of bots are trade bots and arbitrage bots.