Welcome to Vaultavo’s beginner guide to using crypto exchanges! The crypto exchange is a gateway to the world of blockchain and we know using them can be intimidating for newcomers, but with this handy guide you’ll master the crypto exchange in no time!
We will take you the basics of how to exchange crypto and how to identify the best crypto exchange for you. If you want to be a part of the future of finance you have got to grasp the railways that currently make it possible. Let’s get started!
What is a crypto exchange?
Bitcoin and Ethereum are blockchain technologies that have proven to be one of the best investments of the last decade and have become household names. There are hundreds of other useful cryptocurrencies each with their own unique use case. In order to buy these currencies either to use them or to hold on to them as an investment you will need to use a crypto exchange. There is more than one type of crypto exchange: there are centralized and decentralized exchange. Centralized exchanges are companies that facilitate the exchange of cryptocurrencies between people and profit by charging a small fee on trades. A centralized crypto exchange will also help with liquidity provision and offer additional services such as staking, educational resources and trading tools.
A decentralized crypto exchange by comparison is software that eliminates the middleman company and enables traders to exchange their crypto-assets directly, it is censorship resistant and eliminates unnecessary rent extraction. Using a decentralized crypto exchange is somewhat more complex and there is more room for error as anyone using uniswap on Metamask will tell you. There are hidden fees on the Ethereum blockchain which can increase the cost of a transaction by hundreds of dollars when the network is congested, this has prevented the broader adoption of decentralized exchanges and seen large centralized crypto exchanges like Binance, Coinbase, KuCoin, Kraken and FTX flourish.
What to look for when choosing your crypto exchange
If you are on the hunt for the best crypto exchange there are a number of things we should be on the lookout for. First and foremost remember to use only licensed and registered exchanges in your area, hopefully including fingerprint authentication crypto. Next, in no particular order are some aspects you should consider when looking for the best digital asset custodian service and how to never lose private keys.
Look and feel
Firstly, you want an interface that is simple and intuitive, especially if you are new to crypto trading. Some crypto custody exchanges are so packed with features that doing even the most simple of tasks is made difficult as your vision is obscured by a litany of icons, charts, offers and advertising. A clean and simple interface is the way to go and will prevent you from making some unnecessary mistakes.
Secondly, make sure your exchanges have your preferred cryptocurrencies on offer. Crypto exchange can range widely in the number of assets they host on their platform, from less than ten to hundreds and even thousands when you include NFTs. You can check which platform offers your favorite cryptocurrencies by searching through their site. Which stablecoins are available may also be important to some traders.
The best exchange for beginner trading is definitely one that has an easy fiat on-ramp. Can you exchange cryptocurrencies using your national currency? That depends on your currency, most trading platforms accept dollar and euro deposits but not all currencies, so be sure to choose an exchange that supports your national currency. This is essential for you to make a deposit and to start trading. Also, what are the methods by which you can deposit your fiat. Some exchange allow Paypal, Venmo or CashApp deposits, others allow debit or credit card deposits and other accept bank wire transfers also.
If you are into crypto trading strategies you more than likely will need an exchange with a decent set of trading tools. Some basic features that an exchange should have is the ability to buy and sell at market price and to set limit and stop-limit orders. Although we advise against leverage trading, this is another aspect that you might want to take into consideration if you are an advanced trader. Charting tools like Bollinger, bands, RSI, stochastic oscillator, etc. are not available on all trading platforms so be sure to check before settling on a crypto exchange and crypto custody service.
The fees on the majority of crypto exchanges are quite low, as this is necessary to stay competitive, but it is very important that you check the terms and conditions as it relates to transaction fees as some exchanges offer discounts on trading fees if you meet certain conditions such as using their native token as the trading-pair. Transaction fees can be exorbitantly high when trying to transfer stablecoins such as Tether using the Ethereum ERC-20 route. Be sure to check if the crypto exchange has Algorand, Tron or Solana blockchains enabled that allow you to transfer assets like Tether at a significantly lower cost.
Be sure to check that the crypto exchange of your choice has been around for more than three years, gets good reviews and is registered and certified in your region. Ideally you should know someone who has actively used it for years and can vouch for its legitimacy. There are many fake exchanges around that just copy and paste code that makes for a convincing website but are created just to steal your money and crypto. If you are new it is best to stick to high profile exchanges and be sure that you are using the correct website and not an imitation.
If you have privacy concerns it is best to use open source decentralized exchanges so you can be certain that your financial information is not tracked in any manner. Most centralized crypto exchanges require your personal information in order to comply with KYC (know-your-customer) and AML (anti money laundering) regulations. To avoid this you will need to use a decentralized exchange which can be accessed using a decentralized crypto wallet such as Metamask, Trust Wallet or a range of others depending on the blockchain you intend to use. Vaultavo has more articles dedicated to crypto wallets if this topic piques your interest.
Additional Earning Features
Certain crypto exchanges provide staking yield, where you lock your crypto with the exchange for a predetermined period of time and they pay you back with interest after that period. This is a good way to earn passive income on your investment. Other earning features might include yield farming, or, liquidity pools in which you provide crypto in the form of trading pairs to the crypto exchange. If you have signed up for a digital asset custodian service as well, also inquire if they provide any opportunities.
Creating your trading account
Centralized crypto exchange
Creating your crypto exchange account will differ slightly depending on which exchange you choose but all centralized exchanges will have the same basic process. You will start by joining the exchange via their website. You will be prompted for your full name and email address which will then send an automated email to your email address in order to verify that it belongs to you. This email will contain a link that you must follow which will return you to the site which will greet you with some message that confirms your verification.
The next step will be to verify your identity. Not all centralized exchanges require this personal information but it is becoming the norm as know-your-customer and anti-money-laundering regulations tighten around the world. Typically, you will be asked to post a photo of yourself holding a clearly discernible identification document such as a passport or driver’s license as well as a note with your name and the current date. An automated program will then log this information onto the system and verify your personal identity within a matter of minutes. Once this step is completed your profile is active and you need only add payment information to begin trading.
The final step will be to deposit funds into your crypto account. The methods for doing this vary with each exchange but most accept debit and credit card deposits as well as e-cash solutions such as Paypal, Venmo or Cashapp. With this step completed you are ready to begin trading!
Decentralized crypto exchange
In order to use a decentralized crypto exchange you will first need to download a decentralized wallet. This can be acquired as an extension on your web browser or as an app on your mobile device. The most popular decentralized wallets are Trust Wallet and Metamask but each blockchain has a wallet that is specific to it and its native assets, so be sure to get the right one for your needs.
Once you have downloaded the wallet you will receive a seed phrase which you can think of as the password for your wallet, make sure to safely store this seed phrase and do not share it with anyone that you do not deeply trust. The seed phrase can be used to restore your wallet and access your funds. There are no KYC or AML requirements for these wallets but remember that it is connected to your device and thus there is still room for phishing, exploits and hacks.
It is important to note that decentralized wallets generally do not have fiat on ramps and thus in order to trade crypto on decentralized exchanges you will need to deposit crypto from a centralized exchange to your decentralized wallet.
Be sure to watch some tutorials online before you start trading on a decentralized crypto exchange as there are some aspects that make it complex and intuitively for new traders.
How to execute a basic trade
Once you have created your profile on a centralized exchange as we explained above you can start trading. Executing a basic trade is very simple. First, you must convert your fiat currency into cryptocurrency. Fiat-cryptocurrency trading pairs are normally not available for all cryptocurrencies, generally this only applies to Bitcoin, Ethereum and stablecoins like Tether (USDT) and Circle (USDC).
That means if you want to buy Bitcoin or Ethereum you can likely do so directly with your national currency, however if you want to trade other cryptocurrencies you will have to buy a stablecoin (a cryptocurrency is pegged 1-to-1 with the dollar) first, which can in turn be traded for other cryptocurrencies. Your crypto exchange should allow you to set the details of the trade. A spot trade will immediately execute a crypto purchase or sale at the current market price while a limit order will only execute the trade if the crypto reaches a price that you predetermined as the purchase or selling price. Always be on the lookout for a service that validates trades using biometrics.
This concludes our guide to crypto exchange! We hope it will prove valuable as you search for the ideal crypto exchange for you and get to the point where you too can start trading while securing digital assets. A crypto exchange is the best way to acquire crypto, however it certainly is not the best place to store it!
If you want to protect your crypto it is best to remove it from your crypto exchange and store it using Vaultavo’s biometric smart card which grants vastly superior security while still being easy to use.
Crypto exchange FAQs
Should I store my crypto on a crypto exchange?
Crypto exchanges are notorious for incurring exploits. It is best to look into self-custody crypto assets off of exchanges which are vulnerable to high level attacks. Personal hardware cold wallets and digital custody solutions like Vaultavo’s biometrics smart card are much more secure ways to store your crypto.
What is a stablecoin?
Stablecoins are cryptocurrencies that instantiate some other asset by pegging its value one-for-one with that asset. In cryptocurrency most stablecoins are pegged on-for-one with the dollar which allows people to easily trade between cryptocurrencies with the dollar stablecoin acting as the unit-of-account and medium of exchange.
Are crypto exchanges safe?
Crypto exchanges have definitely improved their security profiles over the past decade. Binance is famous for its 2017 exploit and many crypto exchanges have faced similar disasters, however these seem to be decreasing in frequency. It is still best to look into self-custody crypto for securing digital assets.