How should beginners choose a cryptocurrency exchange? What should they pay attention to in order to enhance security? This is a question that many users have. This article will provide detailed information on the details to consider when choosing a cryptocurrency exchange.
Table of Contents:
What is a virtual/cryptocurrency exchange?
What should users pay attention to when choosing a cryptocurrency exchange?
Key factors in choosing an exchange
Security assessment: Reserves of the exchange
Global ranking of cryptocurrency exchanges
Top ten overseas cryptocurrency exchanges
Recommended local cryptocurrency exchanges in Taiwan
Precautions and how to avoid pitfalls when using exchanges
Five major precautions
How to avoid pitfalls
The future trend of exchanges
Choosing a cryptocurrency exchange is a major focus for every beginner entering the industry. Due to rampant scams in the cryptocurrency industry, it is necessary for users to know how to select a secure exchange from the many options available worldwide.
This article provides the basic points to consider when selecting an exchange to help you choose a relatively secure one from the vast market.
What is a virtual/cryptocurrency exchange?
In addition to providing the functions of buying, selling, and exchanging cryptocurrencies, most overseas exchanges also offer various derivative financial products that allow traders to invest in the cryptocurrency market using more complex strategies.
These derivative services include perpetual contracts, coin staking, leveraged trading, etc., which allow users to invest in the future price of cryptocurrencies or hedge their positions. Additionally, cryptocurrency exchanges can be classified into two forms based on whether they are centralized or decentralized:
Centralized Exchange (CEX): Refers to exchanges controlled by a centralized institution.
Decentralized Exchange (DEX): Refers to exchanges purely controlled by smart contracts.
The content below will mainly focus on “Centralized Exchanges.”
What should users pay attention to when choosing a cryptocurrency exchange?
When choosing a cryptocurrency exchange, users should evaluate its security, fee structure, user ratings, supported currencies, and regulatory compliance.
A good exchange should provide strong security measures, reasonable transaction fees, good customer service, and convenient access to funds. Therefore, it is important to conduct research and compare different options before choosing an exchange.
Key factors in choosing an exchange
The following are several key factors to consider when choosing an exchange:
Security: The primary consideration is the security of assets. Users can check whether the platform’s reserves are sufficient, the level of cybersecurity protection, whether there have been past hacking incidents, and other factors.
Liquidity: A high liquidity exchange can ensure quick execution of trades and reduce slippage caused by market fluctuations.
Customer service: Whether the exchange can provide timely user support to resolve any issues that may arise during the trading process.
Product diversity: Different exchanges may offer significantly different products, even for similar types of products. Factors such as transaction fees, product returns, etc., can be considered.
Reputation: Although the FTX incident has proven that reputation does not equate to “safety,” there are currently many fraudulent exchanges. Before using an exchange, it is advisable to confirm whether there are many users, the reputation, establishment time, etc., in order to filter out many fraudulent traps.
Security assessment: Reserves of the exchange
Since security is the most important aspect when choosing an exchange, readers who want to know the reserves of various exchanges can visit CoinMarketCap and CoinGecko to check the current disclosed reserves.
A good exchange should conduct regular security audits and disclose reserves to ensure the proper protection of user assets.
Global ranking of cryptocurrency exchanges
It is best for users to choose large and mainstream exchanges as they are relatively safer. For example, according to the rankings on CoinMarketCap, exchanges with green scores indicate platforms with a relatively large number of users. If the score is orange or red, it is advisable for users to be cautious about the risks of using the exchange.
CoinMarketCap scores exchanges based on average liquidity, trading volume, and the confidence level of the exchange’s reported trading volume. Below is the current top 10 ranking of exchanges provided by the platform:
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Top 10 ranking of exchanges. Image source: CoinMarketCap
Top ten overseas cryptocurrency exchanges
Currently, among the top ten global exchanges, except for Coinbase, which announced in September 2023 that it would no longer serve users in Taiwan due to security and compliance issues, and Upbit, which requires a Korean mobile phone for registration, the registration process for the other eight exchanges is relatively convenient for Taiwanese users.
Binance:
Headquarters: Unknown
Supports Chinese: Yes
Number of currencies: 404
24-hour trading volume: $17.2 billion
Established by Canadian engineer Changpeng Zhao (CZ) in 2017, Binance is currently the largest cryptocurrency exchange in terms of trading volume globally. Users can engage in spot, perpetual contracts, leverage, NFT trading, and other services on the platform. Binance’s reserves can be verified through the Proof of Reserves.
Note: Click on the referral link of Dynamic Zone, or use our referral code: O1DYUZDE to register, and you will permanently enjoy a 10% trading fee discount, which is more cost-effective than registering on your own.
Coinbase:
Headquarters: United States
Supports Chinese: No
Number of currencies: 242
24-hour trading volume: $3.5 billion
Coinbase is the largest cryptocurrency platform in the United States and the first publicly-listed cryptocurrency exchange. It is also the largest custodian of Bitcoin spot ETFs in the United States.
Bybit:
Headquarters: Seychelles
Supports Chinese: Yes
Number of currencies: 549
24-hour trading volume: $4.5 billion
Bybit offers services such as spot, contracts, and liquidity mining. Bybit’s Proof of Reserves can be viewed here.
OKX (formerly OKEx):
Headquarters: Seychelles
Supports Chinese: Yes
Number of currencies: 319
24-hour trading volume: $1.5 billion
OKX also provides various functions such as spot, perpetual contracts, Web3 wallet, etc. OKX’s Proof of Reserves can be viewed here.
Upbit:
Headquarters: South Korea
Supports Chinese: Yes
Number of currencies: 190
24-hour trading volume: $3.1 billion
Upbit is the largest cryptocurrency exchange in South Korea. Due to regulatory restrictions in Korea, Upbit only offers spot trading, but its security isThe Korean regulatory authorities also provide additional security.
Kraken:
Headquarters: United States
Supports Chinese: Yes
Number of currencies: 250
24-hour trading volume: $1.5 billion
Established in 2011, headquartered in San Francisco, United States. In 2014, Kraken and Coinbase were selected by Bloomberg Terminal as cryptocurrency data providers.
KuCoin:
Headquarters: Seychelles
Supports Chinese: Yes
Number of currencies: 765
24-hour trading volume: $1.4 billion
Established in 2017, currently serving users from over a hundred countries worldwide, providing services including spot trading, futures trading, mining pools, loans, etc. KuCoin’s reserve proof can be viewed here.
Gate.io:
Headquarters: Cayman Islands
Supports Chinese: Yes
Number of currencies: 1,928
24-hour trading volume: $1.3 billion
Also known as Sesame Open Exchange, it has a large quantity and fast listing speed of tokens. However, these tokens also have relatively high volatility, so investors need to be cautious of risks. Gate.io’s reserve proof can be viewed here.
Bitfinex:
Headquarters: Hong Kong
Supports Chinese: Yes
Number of currencies: 176
24-hour trading volume: $540 million
Bitfinex, also known as the Green Leaf Exchange, is best known for its stablecoin lending feature. Bitfinex’s reserve proof can be viewed here.
Bitstamp:
Headquarters: Luxembourg
Supports Chinese: Yes
Number of currencies: 85
24-hour trading volume: $310 million
A cryptocurrency exchange that primarily serves European users and is licensed and regulated by regulatory agencies in countries such as Luxembourg, New York, and the United Kingdom.
Bitget:
Headquarters: Singapore
Supports Chinese: Yes
Number of currencies: 698
24-hour trading volume: $1.3 billion
Headquartered in Singapore, Bitget’s main features are contract trading and copy trading. It ranks among the top four in global cryptocurrency contract trading volume. It holds licenses such as Canada MSB, US MSB, and Australia DCE in terms of regulation. Bitget’s reserve proof can be viewed here.
Recommended “Local” Cryptocurrency Exchanges in Taiwan
Although the trading volume of “local” exchanges in Taiwan is not large and liquidity is lower, they are currently a relatively convenient and secure choice for using New Taiwan Dollars as a means of deposit and withdrawal.
Therefore, the following are three “local” exchanges in Taiwan that support fiat currency deposit and withdrawal and have bank trust:
Max: Max Exchange provides fiat currency deposit and withdrawal in New Taiwan Dollars and cooperates with Far Eastern International Bank for New Taiwan Dollar trust. Users can click the link to confirm whether they can bind a bank account for New Taiwan Dollar deposit. Users who want to use New Taiwan Dollar deposit function need to pass LV.2 authentication.
XREX: XREX provides fiat currency deposit and withdrawal in New Taiwan Dollars and US Dollars. It cooperates with Far Eastern International Bank for New Taiwan Dollar trust and Customers Bank in the United States for US Dollar services. Users can deposit New Taiwan Dollars using any bank account, and US Dollars can also be deposited using any foreign currency account (fiat currency deposit and withdrawal requires KYC authentication).
BitoPro: BitoPro provides fiat currency deposit and withdrawal in New Taiwan Dollars and cooperates with Far Eastern International Bank for New Taiwan Dollar trust. In addition to binding a bank account for deposit and withdrawal, users can also add value at convenience stores. Currently, it provides convenience store value-added services at “FamilyMart” and “Hi-Life”.
Additional Reading:
XREX Exchange Registration Tutorial: KYC Identity Verification, Bank Binding, Security Settings (Fully Illustrated)
Exchange Precautions and How to Avoid Pitfalls
5 Major Precautions
Verify Platform Legitimacy: Before any transaction, confirm whether the exchange has relevant financial institution permits or registrations and check evidence of its legal operation.
Evaluate Security Measures: Check the exchange’s security features, such as two-factor authentication (2FA), encryption technology, cold wallet storage, etc.
Understand Fee Structure: Different exchanges have different fee structures, so clearly understand the costs of transactions, withdrawals, etc.
Read User Reviews: Look for and analyze community users’ reviews and experiences, especially regarding customer service and fund withdrawals.
Beware of Scams: Always be vigilant, double-confirm any seemingly unusual requests or notifications, and avoid clicking on unknown links or sharing private keys.
How to Avoid Pitfalls
Diversify Investments: Do not store all assets in one exchange to prevent problems or attacks on the platform.
Monitor Continuously: Regularly check account activity and exchange announcements, and take immediate action for any abnormalities.
Use Cold Wallets: For large assets, use cold wallets for storage instead of exchange hot wallets to provide additional security.
Withdraw Regularly: After completing a transaction, if possible, regularly withdraw funds to a private wallet, especially after completing large transactions, for higher security.
Avoid New Platforms: Exercise caution with newly established exchanges or those with limited background information if there is insufficient trust.
Stay Informed: Follow blockchain-related news to understand industry trends and security alerts and respond to risks in a timely manner.
Future Trends of Exchanges
With the continuous advancement of blockchain technology and the maturation of the cryptocurrency market, the future development trends of cryptocurrency exchanges can be predicted from the following aspects:
Regulatory Compliance: As governments around the world gradually improve regulations on cryptocurrencies, exchanges will need to strengthen compliance efforts to meet the requirements of different countries’ laws.
Enhanced KYC/AML: Exchanges will continue to improve customer identity verification (KYC) and anti-money laundering (AML) measures to prevent illegal fund flows.
AI Assistance: Exchanges may use artificial intelligence for market analysis and provide users with more accurate trading strategy recommendations.
Diversified Services: In order to attract and retain users, exchanges will provide more diversified services, such as asset management, wealth management, etc.
Interface Optimization: Exchanges will continue to improve user interfaces and user experiences, including more intuitive operation interfaces and more comprehensive customer service systems.
In summary, the future of cryptocurrency exchanges will focus on both technological innovation and regulatory compliance. Therefore, users should pay more attention to the technology and regulatory content related to exchanges.