You cannot just purchase cryptocurrency from your bank or investment business. Once you’ve opted to purchase Bitcoin, Ethereum, or another cryptocurrency, you’ll need to open an account with a cryptocurrency trading platform in order to swap your US dollars (or other money) for digital assets. Some, like as Coinbase, have been present since the early days of Bitcoin, when there was significantly less regulation over how cryptocurrency was purchased, sold, and exchanged.
Others like as Robinhood and PayPal, are more renowned for other services and have just lately begun to allow clients to trade cryptocurrency within their current accounts. Here’s everything you need to know about why picking the correct crypto exchange is critical, as well as the benefits of doing so.
What exactly is a Crypto Exchange?
A cryptocurrency exchange is a website where you may purchase and sell cryptocurrency. You may utilize exchanges to convert one crypto to another, such as Bit coin to Litecoin, or to buy crypto using ordinary cash, such as the US dollar. Exchanges display the current market value of the cryptocurrencies they provide. You may also swap cryptocurrencies for US dollars or other currencies to keep as cash in your account (if you wish to trade back into crypto later) or withdraw to your regular bank account.
Cryptocurrency is not guaranteed by any central entity, and your cryptocurrency assets are not as safe as bank deposits or traditional investments. Some exchanges, like as Coinbase and ftx 거래소 store any holdings in US dollars in FDIC-insured bank accounts However, FDIC insurance does not cover bitcoin holdings.
Some exchanges have insurance plans in place to protect the digital currency users keep within the exchange against hacking or fraud. Coinbase, for example, has a $255 million insurance coverage. Account holders would be safeguarded if Coinbase’s reserves were hacked and any quantity of cryptocurrency up to $255 million was stolen.
Whether you want to maintain your crypto assets in an exchange or merely have them there for a short time before transferring them to your own wallet, the security of the exchange should be a top consideration.
Examine how much of the exchange’s assets are kept offline, in hard storage, for example. This is especially crucial when the value of cryptocurrencies rises, as higher values make potential robbers more appealing targets. There were 28 total crypto exchange hacks in 2020, with the biggest stealing more than $200 million in bitcoin assets from Asia crypto exchange KuCoin.
You may also seek for standard online security features, such as two-factor authentication, that you may be acquainted with from other sites. That means that, in addition to your username and password, you’ll have to authenticate your identity each time you log in by entering a code sent to you by text message.
In general, you may feel safer sticking with more popular exchangers with a huge consumer base. Doing business with smaller or younger exchanges that don’t explicitly state their security procedures and products online may put you at more danger.