Decrypting Cyrptocurrency Exchanges

Maybe you stumbled on an article about that whole Bitcoin thing you keep hearing about every so often. Or maybe, like me, you heard about Ethereum’s recent meteoric growth from a savvy friend’s Facebook post. However your journey into the world of cryptocurrency began, rest assured that you do not divulge alone. With 3 million active users and rising, cryptocurrency – the 21st century disruptor to an economic system as old as human interaction itself – is here to stay.

As you dive into digital currency, you will eventually look to invest on an exchange. Cryptocurrency exchanges allow you to buy, sell, or trade your cryptocurrency for other forms of digital currency or traditional currency (also known as fiat currency), like the Euro or USD. As simple as it may sound, navigating the exchange marketplace can be fraught with fees, technicalities, and outright disasters. From safety to proximity, choosing the right exchange involves a close look at a variety of factors. Listed below are several criteria helpful in choosing the exchange that’s right for you:

  • Fees – Many exchanges impose fees for deposits, transactions, and withdrawals.
  • Payment methods – Whether wire transfer, PayPal, or credit/debit card, exchanges may use one or many payment methods relevant to you.
  • Security – A secure system inspires trust among users and nonusers alike.
  • Location – Geographical restrictions may rule out certain exchanges available to you.

With these factors in mind, let’s take a look at several of the largest cryptocurrency exchanges, listed in no particular order, on the market today:

 

Poloniex

As one of the most popular exchanges, Poloniex is a “pure crypto-cyrpto” exchange (sorry, you can’t deposit in USD or Euros here) based in San Francisco. With over 80 supported cryptocurrencies, 365 trading pairs, live chat, and a variety of interactive charts, it is easy to see why Poloniex is a giant in the exchange arena. However, with a hacking incident in 2014 and recent server issues, users should proceed with caution.

  • Current Market Cap.: $624,161,092
  • Fees: 0.2% flat, no fees for withdrawals. Volume-tiered, maker-taker fee schedule starting at 0.15% (maker – someone who provides liquidity to the market) / 0.25% (taker – takes away liquidity from the market); < 600 BTC.
  • Payment methods: USDT, a cryptocurrency asset tethered to corresponding dollars held in reserves by the Tether Platform.
  • Security: Two factor authentication, 24/7 monitoring of the platform for unusual activity, and claims that the majority of customer funds are held in cold storage (offline). Whether these measures are enough to prevent widescale loss is uncertain, as the exchange was hacked in 2014 resulting in a loss of 12.3% of all Bitcoin on the exchange, equivalent to $50,000 USD at the time.
  • Location: San Francisco, US

Kraken

Kraken is a powerhouse exchange in the European market, both in volume and liquidity. Unlike Poloniex, Kraken allows you to buy, sell and trade between digital currency, mainly Bitcoin and Ethereum, and traditional currency: USD/CAD/GBP/YEN. However, with less than 10 different cryptocurrencies available for trading and 59 total trading pairs, Kraken lacks the versatility in crypto-crypto trades of other big exchanges. Yet, with additional features such as margin trading and an emphasis on security, crypto-aficionados need not look elsewhere for their trading fix.

Gemini

Founded by the Winklevoss twins in 2015, Gemini seeks to bridge the gap between the mainstream financial markets of Wall Street and the relative Wild West of modern day cyrptocurrency. Because of its status as a limited liability trust (as opposed to a virtual currency business), Gemini allows both institutions and individuals to operate on its exchange. Anxious investors worried about shady business practices can rest easy knowing that the exchange is fully regulated by the New York State Department of Financial Services. With high profile leadership, a highly transparent operating structure, and regulatory oversight, Gemini is perhaps the most credible exchange out there. Investors outside the U.S. are out luck, however, as Gemini currently only allows U.S. citizens from 26 states to use the platform.

Coinbase/GDAX

Fresh off a $1 billion valuation, Coinbase (and its core product GDAX) has grown to become an industry mammoth in the cyrpto world. As the reigning Bitcoin wallet king, the exchange offers Bitcoin, Ethereum, and Litecoin-to-USD conversions in 32 countries. Coinbase also boasts multi signature vaults and FDIC insurance for fiat currency stored on the platform, which ensures customers will be taken care of in the event of a breach or insolvency. Additional support in the form of an iOS app allows mobile investors to trade from anywhere using only their smartphones. This plethora of investing and security features make Coinbase a one-stop-Bitcoin-shop. However, a quick peruse of Coinbase’s complaint-filled reviews point to less than stellar user experiences. As with any undertaking, investors should proceed with caution and heed the warning of many a warranty: user experience may vary.

Bitstamp

When first created in 2011, this Luxembourg based exchange intended to be the EU’s answer to the Asian monolith that was Mt. Gox. Fast forward to the present day and Bitstamp alone stands tall among the industry’s premier exchanges. Touting itself as “the EU’s first fully licensed bitcoin exchange”, Bitstamp offers a limited selection of USD/Euro trading pairs (BTC/XRP) and instant trades with all major credit cards supported. As with any veteran exchange, however, Bitstamp has encountered its share of external attacks and hacks. Embattled history notwithstanding, Bitstamp’s resilience provides a stable platform for investors and proves why the exchange remains a top player since its inception.

  • Current Market Cap.: $32,758,361
  • Fees: Fee rounding, fee % based off 30 day EUR/US volume.
  • Payment methods: Most major credit cards, wire transfer, SEPA
  • Security: Standard two-factor authentication, offline storage, and “subject to yearly audit by one of the Big Four”
  • Location: Luxembourg, EU

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