What Is Crypto Exchange And How To Choose The Best One
Crypto trading is one of the most talked-about subjects in the finance world currently. Further, the opportunities arising from this avenue are huge. If you are new to the world of cryptos and wondering how to sell and buy cryptocurrencies, then a crypto exchangeis the place where you should be. These platforms are specifically designed to facilitate crypto trading for other assets, including fiat and digital currencies. This article helps you get detailed information about crypto exchanges, how they work, types, fees charged and how to choose the best crypto exchange. Read on!
What Is a Crypto Exchange?
A crypto exchange is a platform where you can buy or sell cryptocurrencies for other assets. It acts as an intermediary that lets you exchange digital currencies for other digital currencies or fiat currencies like the US Dollar or the Indian Rupee.
The bigger a crypto exchange is the more likely it is to facilitate the trading of a range of cryptocurrencies. Before you set up your account on a particular exchange, you will want to check if it accepts your favourite crypto.
How Does a Crypto Exchange Work?
Crypto exchanges like CoinDCX, Binance, Gemini and CoinSwitch Kuber act as intermediaries between a crypto buyer and seller. In exchange for their services, they charge a commission or a transaction fee.
Once you have decided to purchase or sell cryptocurrencies, you need to set up an account on a crypto exchange to carry out the trades. This account will allow you to convert one crypto to another, convert it into any currency, store it for future trades or withdraw as cash.
You can deposit money using various methods like UPI, direct money transfer or debit/credit cards to buy cryptocurrencies. Different platforms and apps offer different services. For example, some exchanges do not allow you to move your cryptocurrencies to your crypto wallet.
When choosing a crypto exchange, you should do adequate research about the platform’s history and credibility. You will want to set up your account with an exchange that allows you to trade your preferred coin, offers certain benefits for trading or helps you learn more about cryptocurrencies.
Also Read: How To Buy Cryptocurrency In India – A Step-By-Step Guide
What are the Fees that a Crypto Exchange Charges?
There are certain fees associated with crypto exchanges. These costs vary across different exchanges and include trading charges and withdrawal fees. Here’s what these fees mean and how they will affect your crypto investment:
Trading charges
A crypto exchange may charge a flat percentage of trading fees depending upon the amount of crypto you sell or buy. Or, crypto exchanges can draw a differentiation between orders of ‘makers’ and ‘takers’. Accordingly, they will charge a different percentage of fees.
Typically, a taker can be an order that features trading at the market price. Thus, if you buy or sell crypto at the visible price, you must pay the taker fee. If you sell or buy orders at a price different from the market price, you pay a maker fee. Note that the taker fee is often higher than the maker fee.
Withdrawal fee
Many crypto exchanges tend to charge a fee when you try to withdraw coins from their platform. It is typically a two-step process. First, you place a sell order. Following this, you can withdraw the money in full or partially after the reflection of funds into your account. Note that some exchanges charge a fee when you want to withdraw the funds into fiat currency, while others don’t.
Other charges
Some cryptocurrencies also tend to levy a few other charges, including deposit and joining fees. That said, some of India’s major and best crypto exchanges, including WazirX, Unocoin, ZebPay, etc., do not charge a joining fee. But you might have to pay a small charge if your account is inactive.
Meanwhile, a crypto exchange can charge deposit fees if you transfer a coin or an amount to the exchange to start trading. This amount depends on the way you want to transfer the money, such as via bank transfer, net banking or UPI.
What are the Types of Crypto Exchanges?
Typically, there are two types of crypto exchanges – centralised exchanges and decentralised exchanges. Both these categories feature their own sets of advantages and disadvantages.
Here’s a brief discussion on the types of crypto exchanges:
Centralised crypto exchange
A single organisation typically manages centralised crypto exchanges. These exchanges facilitate crypto trading by allowing individuals to convert their regular currencies directly to cryptocurrency. Most trading activities via cryptos take place under these types of exchanges. To begin trading via a centralised crypto exchange, you have to provide your KYC details.
However, CEXs are often at a higher risk of hackers since they hold the cryptos traded on their own platform. Most centralised exchanges have ramped up their security systems to address this situation. They also provide insurance policies to cover the losses of traders, if any.
Decentralised crypto exchange
A decentralised crypto exchange (DEX) operates without any intermediaries. They work closer to the true essence of cryptocurrencies, as they are open source and provide a P2P platform.
Moreover, experts consider DEXs to be more secure because these platforms do not feature a central authority to hack. In addition, a decentralised exchange charges a lower fee and offers faster transaction processing speed. However, note that some DEXs might not offer changes for regular currencies.
How to Select the Best Crypto Exchange?
To select the best Crypto Exchange, along with fees and charges, you must also consider the following factors:
Security
Although no exchange is completely secure, you must consider choosing one that has been operating for a long time and has many users. You can usually find these details on the crypto exchange’s website.
Liquidity
Know that a crypto exchange with higher trade volume tends to work in favour of investors. Additionally, liquidity is also a major factor during times of volatility in the market. Note that less liquidity in an exchange can worsen the volatility, resulting in a dramatic rise and fall in crypto prices.
Ease of use
If you are new to the crypto world, consider choosing an easy-to-use exchange with plenty of educational resources. This will assist you in understanding the various complexities associated with the crypto market.
5 Best Crypto Exchanges of 2022
Choosing the best crypto exchange to start your investment journey can be daunting, considering so many exchanges exist in the market currently. However, there are a few crypto exchanges that provide a safe trading environment along with high liquidity and ease of use. Find the best crypto exchange list below:
WazirX
This crypto exchange app allows traders to track, analyse and manage their digital assets. The platform features more than 12 million users and is undoubtedly one of the most sought-after crypto exchanges in India.
WazirX also provides knowledgeable tools to help users understand the complexities of the market. It charges a small fee of 0.02% on each trade’s trade value and provides a discount on WRX holdings.
CoinSwitch Kuber
This crypto exchange app features backing by Sequoia and aims to make crypto trading more convenient for the common population. It has partnerships with some of the major crypto exchanges, making it one of India’s most famous crypto exchanges.
The primary aim behind their launch is to challenge the status quo and extend every other individual the right to earn money. Further, you have to complete KYC requirements on this platform to start investing. This adds an extra layer of protection.
Unocoin
This is one of the oldest crypto exchanges in India, which came into existence way back in 2013. Unocoin offers dynamic charges for high-volume trading and also charges gas fees. The platform even allows users to access trading API.Since its launch in India, Unocoin has not just played a critical point in facilitating the crypto trade but has also fought for crypto rights in the country. You can sign up for this platform in less than 10 minutes. Its easy-to-use app makes it the perfect crypto exchange for beginners.
ZebPay
Since its founding in 2014, ZebPay has claimed to process crypto transactions worth $10 billion. Moreover, after its relaunch in India, the company commits to bringing cryptocurrencies to the common public.
The platform pays increased focus on security. More than 98% of all tokens in this platform feature storage in cold wallets instead of online servers. Besides, its strong internal control ensures that individuals’ assets remain safe.
CoinDCX
Featuring a rather recent launch in 2018, CoinDCX rose to popularity in a short span. The platform has more than 10 million users, making it a popular crypto exchange in India. CoinDCX undertakes constant audits to improve its security protocols.
Moreover, it utilises COSMEX, which provides traders access to around one-third of the global crypto liquidity.
Also Read: List Of 7 Most Popular Types of Cryptocurrencies In India
Final Word
Evidently, crypto exchanges feature a distinct set of characteristics. Thus, you must consider the above-mentioned factors before choosing a crypto exchange. This will ensure that your investment remains safe and you generate higher amounts of wealth.
If you are looking for investment opportunities other than Crypto, you can visit Navi Mutual Fund to start investing today!
Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
FAQs on Crypto Exchange
Ans: During the Budget announcements for 2022-2023, India’s finance minister, Nirmala Sitharaman, announced that transactions relating to digital assets would feature taxation at 30%. This will also include a 1% TDS. These rules are applicable from April 1 2022.
Ans: Cryptocurrency is a digital currency that works on blockchain technology. You can utilise these virtual coins to buy products and services or convert them for cash. In addition, you can use cryptocurrencies as an alternative investment avenue.
Ans: Blockchain is a digital ledger of transactions that are distributed and duplicated across the computer network on the blockchain. This system record information in a manner which makes it impossible to hack, cheat or change the system.
Ans: Besides starting your investment journey through a crypto exchange, you can also consider a few other options. These include investment apps and cash and payment apps. Nowadays, many investment apps allow crypto investment. In addition, payment apps, such as PayPal, also allow users to buy cryptos.
Ans: One of the biggest advantages of centralised exchanges is that they offer beginner investors a familiar trading experience. If you are a user of a centralised exchange platform, you can simply log into your account, view your account balance and perform other functions in a simple way.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.
Not in bold, in smaller font size, at the very bottom – This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
