5 Key Criteria for the Best Crypto Exchange
As of February 2019, over 36 crypto exchanges have closed. Many more have been broken into by criminals, with users losing 7, 8, or 9-figure sums each time. Given these statistics, it’s fair to say that the risk of a crypto exchange closing or losing your money is very real.
The silver lining is that modern exchanges have learned from other projects’ past failures. In fact, if you know which specific features and qualities to look for, finding a reliable one is easy.
To wit, our own exchange – CoinCola – processes over 100,000 monthly transactions and has been online for over 5 years with no incident. In this article, we’ll share what we learned in this time, going over the key features a safe, reliable crypto exchange needs to have.
#1 – Trading Volume
Trading volume is an indicator of several things. First and foremost, a high trading volume means that a large number of users is frequenting an exchange. This is a strong indicator of trust and stability, both of which are important in the crypto space.
Second, trading volume means there’s an active trading market, which in turn means you can buy and sell crypto quickly, easily, and at a fair price.
For these reasons, trading volume is one of the best predictors of whether you should use an exchange or not. Try to stick to services that process large numbers of transactions.
#2 – Community
Crypto exchanges that are built to last tend to have one of two things. First, an active community that interacts via a Telegram channel, a public forum, or a social network page.
Second, a knowledge base (like the one you’re reading right now) that strives to educate their users about cryptocurrencies and blockchain technology.
The reason is simple. Creating a community and/or knowledge base is time-consuming and resource-intensive. If an exchange has one, it’s very likely that the company is genuinely providing added values to the users who invest in its own long-term success – another predictor of stability and user safety.
Should an exchange have both? Not necessarily. For example, OTC crypto marketplaces are already social in that sellers and buyers interact directly with one another. Conversely, some trading platforms have strong communities but no knowledge base.
What matters is that some kind of valuable assets exists outside of just a “trading” platform, proving that an exchange is both credible and functional.
#3 – Fees
There are two extremes here. On one hand, you should never trust any exchange or marketplace that claims to charge users 0%. As the old adage goes, if something seems too good to be true, it probably is.
On the other hand, you want to avoid platforms that are clearly going for a cash grab by charging high fees. As a rule of thumb, watch out for OTC fees in excess of 1.5% and exchange fees in excess of 0.5%.
#4 – Reputation
Can you find any suspicious news about an exchange you’re considering?
Simply run a Google search and check if an exchange appears on reputable, popular media sites, such as CCN, AMBcrypto, and CoinTelegraph. Media coverage and exposure should be present, given that an exchange wanted to receive validation from the public.
Another thing to look for is the number of online reviews, or possibly poor reviews. Of course, every product has its fair share of critics, but lots of negative feedback is a bad sign.
#5 – Security
Which kind of security features does an exchange or marketplace use to protect your assets? Below are some of the most important ones (all of which we’ve implemented here at CoinCola):
- 2-factor authentication: This uses SMS messages, e-mails, or passcodes to verify your identity before granting access.
- Multisig transactions: A feature that requires multiple digital keys before completing a transaction (preventing hacks!).
- Cold storage: wherein cryptocurrency reserves are stored in an offline repository, safe from cyber criminals.
If an exchange looks good across the above 5 criteria, you can most likely trust it. Still, use your own common sense and best judgement – especially when dealing with large sums of money.
Founded in 2016, CoinCola is a Hong Kong based company offering both over-the-counter cryptocurrency trading and crypto-to-crypto pair trading exchange. CoinCola now serves millions of users from over 150 countries with our fast, secure, and reliable trading services. We support BTC, ETH, BCH, LTC, USDT, DASH, and XRP. Visit www.coincola.com for more information.
Disclaimer: Trading and investing in cryptocurrencies, also called digital currencies, altcoins, crypto assets, and so on) involves substantial risk of loss. All informations are used at your own risk, and any content on this site should not be relied upon as advice or construed as providing recommendation of any kind. Please do your own due diligence. CoinCola is not responsible for any losses incurred as a result of using any content on our site, including without limitation videos, images, articles, telegram group discussion, social media channels updates or any other content.