Bitcoin nearly jumped four times in 2020 and has astonished everyone with its growth. The rally of bitcoin’s price has attracted and impressed many first-time buyers to bitcoin and crypto exchanges. While bitcoin marketing is extremely volatile and understands the challenges and risks of investing in bitcoin, it is highly important to carefully select a crypto exchange to deal in cryptocurrencies. Choosing the right exchange is an important task that every investor must do before experimenting with traditional or fiat currencies. It is crucial to consider all the factors mentioned in the forthcoming paragraphs to select crypto exchanges.
Factors to consider in choosing the crypto exchange
Nature of KYC
If we talk specifically about India, central banks or the government haven’t provided any specific guidelines that will constitute Know Your Customer (KYC) at bitcoin exchanges. Moreover, many crypto exchanges have developed their mechanism and regulators of KYC according to the regulations that central authorities like banks follow. Different countries have different regulations as China has introduced its new cryptocurrency that can be traded by Bitcoin Secret
The chief executive of ZebPay stated that “If exchanges have set their mechanism of KYC, this means that the process might be negligent. It seems that onboarding to investors will be easy, but if we see in the long run, there will be problems or challenges in the KYC process”. Indian investors need to make sure that the compliance by the crypto exchange is on the good and higher side, or it might cause problems.
If you have entered bitcoin trading, you must be aware of the order book, but let’s discuss it if you are new. An order book is a complete list of all orders or purchases and sales for security to help investors make the right and informed decisions. Moreover, the order book is different at different exchanges. Sometimes, some investors place large orders that might cause slippages, which means that different investors may receive different prices than one proposed.
Most crypto exchanges of India often disclose the depth of their order book, making it easy for them to evaluate and make a comparison and learn about the current status of their order book.
Recordkeeping is the process of keeping records of accounts, and the main purpose of Recordkeeping is for income tax and personal accounting. It is a fact that the qualities of reports that are made available with crypto exchanges often have big differences. For every investor, it is important to ensure that records provided by crypto exchanges are real and can be easily managed and tracked. All crypto exchanges charge different transaction fees and often have a difference in the prices of cryptocurrencies. While crypto exchanges can create a huge difference if the trading volumes of cryptocurrencies are high, the exchanges have joined in depicting similar prices, which are an important factor in selecting a crypto exchange.
As the crypto industry is thriving and adopted in the mainstream, this has generated a huge demand for bitcoin and other cryptocurrencies. This has even led to an increase in cyberattacks like scams. Therefore, investors must protect themselves from scams made in crypto exchanges.
When we talk about stock exchanges, NSE and BSE are mainly responsible for matching the orders of buy and sell of security. In contrast, the National Securities Depository Ltd and Central Depository Services Ltd are responsible for managing the custody of security. But in the case of crypto exchanges, bourses do order matching and even offer high custody of securities. While you choose an exchange, you must make sure that you are comfortable with the security that exchange offers and confident about the technology and processes that exchange offers for protecting digital assets.
Investors must take recommendations from experts about crypto exchanges and check out the volume of particular crypto exchanges. Also, make sure that that particular exchange is listed amongst the reliable and reputable exchanges across the world. Ensure that the exchange you are choosing is legitimate and know about the engagement level of users of that exchange.