Bitcoin and cryptocurrency have been hot topics over the past several years. From the introduction of many new millionaires to government regulation, you hear about it often today.
That’s why so many people have begun investing in Bitcoin. And when 46 million Americans have now invested in Bitcoin, it’s a sign that it’s worth trying for yourself.
You need to do your research when you choose Bitcoin trading platforms to avoid making the wrong choice.
Keep reading to learn every factor to look for when trading with Bitcoin online.
Check the Legality
Legality is the number one thing you should check for when looking for a Bitcoin trading platform. The laws regarding trading cryptocurrency vary a lot based on where you live. What’s legal in one location may not be permitted in another.
That’s why verifying the legality of the cryptocurrency exchange you want to use is critical. It’s not legal to use some trading platforms, depending on where you live. The websites may not comply with the financial rules that make the operation legal.
Take the United States, for instance. For a cryptocurrency exchange to legally operate in the country, it must verify the user base. They do this by performing a “Know Your Customer (KYC)” verification.
KYC is critical in these countries because many criminals use cryptocurrency for money laundering. By requiring people to submit identity verification, exchanges can offer some measure of accountability and help prevent financial crimes.
This means users have to prove their identity by offering photo ID and other forms for verification. You can’t trade on the platform if you don’t do this.
This means using larger cryptocurrency exchanges in most situations. Large exchanges will probably go through the motions to legally set up shop in the countries they operate. On the other hand, smaller exchanges may not have the resources to go through that process.
Verify Security
Security is a big deal in the world of cryptocurrency. Large exchanges have untold amounts of money. That makes them big targets for criminals.
Unfortunately, the history of cryptocurrency exchange security isn’t that good. Take the Mt. Gox exchange, for instance. Hackers were able to steal 840,000 Bitcoin from the exchange in 2014.
You don’t control your cryptocurrency wallet when you hold your Bitcoin on an exchange, so your funds are also at risk. The only way to avoid this is to move your holdings to a private wallet.
Check the security procedures of a cryptocurrency exchange to see if they have good platform trading security. Do they provide a secure login to stop people from spying on internet traffic? Can you use two-factor authentication to sign in to your account?
It also pays to look for a history of data breaches for the exchanges you consider using.
Try to work with bigger exchanges that have a good security history.
Look for Insurance
You take a lot of risks when you trade Bitcoin, but that doesn’t mean you have zero protection. No, you may not get insurance protection from your government if you invest in cryptocurrency. But that doesn’t mean some cryptocurrency exchanges won’t offer insurance to their users.
Many top Bitcoin trading platforms will insure your holdings up to a certain amount. It may not cover all your losses, but it offers some protection.
On top of that, many exchanges allow users to purchase additional protection to secure their holdings for higher amounts. This is great if you hold a lot of Bitcoin on exchanges and want complete protection.
Keep in mind, though, that you may not get everything back if a hack happens on an exchange and results in a lot of losses. Great insurance isn’t a substitute for security.
Look for Great Customer Support
Most bitcoin trading platforms are self-serve. You sign up for an account, verify your identity, deposit money, and start trading. In most cases, you won’t need to talk to anybody to get support.
But you never know when something will happen that’s outside of your control. Bank deposits and withdrawals can fail, and you may lose access to your account or suffer from other unknown issues.
The question is, does the exchange you use have a customer service team that can help?
You can’t afford to hold Bitcoin on a platform that doesn’t have excellent customer service. You need to be able to reach someone quickly to get help when there is money on the line.
One way to verify customer service is to see what other people have to say. Look to online forums and review websites to see what other people have to say about the customer service abilities of the big Bitcoin exchanges.
Look for Product Options
Buying Bitcoin coins isn’t the only thing you can do when investing in cryptocurrency. Yes, you can look at a chart and buy Bitcoin, but there are other things you can do to make more money.
At a bare minimum, ensure you have charting options and can buy Bitcoin directly. Most exchanges offer this ability, so this shouldn’t be an issue.
But you can also do things like trade futures and short Bitcoin. If you want to make larger bets on Bitcoin’s future, this is another excellent way to make more money.
Look into what’s involved with each of these trading strategies. They carry more risk, but there is also more reward if you make great trades.
Examine Trading Fees
You avoid the standard transaction fees for trading cryptocurrency when you use an exchange. Since your holdings are numbers on a sheet with an exchange, you don’t need to pay the standard transaction fees a wallet pays when sending Bitcoin to another private wallet.
However, that doesn’t mean you can trade at zero cost. Every exchange has its own transaction fees that you need to consider.
This may not be a big deal if you’re buying and holding Bitcoin long-term. Yes, your transaction fees will take some from your holdings, but it won’t be much since you don’t constantly trade.
Things are different if you plan to buy and sell regularly to try and make a profit with a Bitcoin trading strategy. Take a short-term trader, for instance. You rely on the daily price fluctuations for Bitcoin to make a profit.
If you have hefty trading fees, that can impact your trade profitability. In the worst situation, it will make a profitable trade unprofitable.
Examine the trading fees on each platform to make sure you know what they are and decide if they’ll work for you.
Check Deposit and Withdrawal Limits
It doesn’t matter how long or short-term you want to hold your Bitcoin. It’s hard to do what you want with your holdings if you can’t buy and sell as much as you want.
Many trading platforms have limits on deposits and withdrawals. They do this because of financial regulations. But others do so because they want to reduce risk.
That’s why it’s critical to check those limits before you deposit money. Sometimes, that limit may be lower than the amount you want to deposit, so you may need to do it in batches.
This is also important when you want to withdraw your Bitcoin for cash. If you did well in the market and made good money, you may be unable to withdraw it all at once. Make sure the platform you choose will meet your needs for this.
Look at the User Experience
Even if a Bitcoin exchange can meet all your needs, that doesn’t mean you should sign up. You want to make things as easier as possible when buying cryptocurrency. It’s hard to do that when an exchange has a complex user interface.
Of course, there will always be some complexity with cryptocurrency exchanges. You’re looking at market activity, so there needs to be a way to display that data.
But some exchanges do a much better job of displaying that information to customers. They also have easier ordering methods and don’t require users to jump through hoops.
You can view how the trading charts look on most exchanges before signing up. It’s also possible to view video reviews of exchanges on YouTube and other platforms to see the buying and selling process. Find a platform that makes things easy to ensure you don’t run into hurdles in making transactions.
Verify Withdraw Options
As mentioned above, you don’t have complete control over your Bitcoin when you hold it on an exchange. The platform you use controls your wallet, which means they can move your funds as they see fit. You’re also at risk if the platform gets hacked since hackers can drain your holdings.
That’s why many people who hold Bitcoin transfer it to private wallets. You have complete control over your private wallet. Nobody else can access your funds unless they have your private key.
You may also want to be able to withdraw your cash using a Bitcoin ATM. Click for more information about how that process works.
You need to ensure that the exchange you purchase Bitcoin at will allow you to transfer your holdings. There should be an option to send your Bitcoin to an external address. If not, avoid doing business with that exchange.
Some exchanges also limit the time you can make those withdrawals. Many companies do this under the guise of security. If you deposit money with a bank account, the exchange wants to be sure that the funds clear your bank.
Much of the time, you’ll need to wait 10 days before you withdraw any money to a private wallet. Make sure this is okay with you if you plan to move your funds.
Verify Liquidity
Markets need liquidity to function. The market maker provides that liquidity when you trade on a cryptocurrency exchange. If you get involved with DeFi, the traders provide liquidity on a DeFi exchange.
You won’t have liquidity issues on larger exchanges. You can see the public books to monitor how much Bitcoin is on the exchange. However, not all exchanges have a lot of liquidity.
Make sure you examine liquidity levels before picking your exchange. This is especially important if you plan to branch out and invest in another cryptocurrency besides Bitcoin. Not every small coin has enough liquidity on exchanges to make safe trades.
Read User Reviews
The final step of determining which Bitcoin exchange to use is reading what other users say. Even if an exchange sends all the right signals, there may be other factors you can’t see that make an exchange not worth using.
Luckily, cryptocurrency users are more than willing to talk about their experiences trading. Look to online forums that allow people to sign up and post reviews. These reviews will tell you both the good and the bad about trading platforms.
There are also professional investors who review trading platforms. Some of these people post blogs about the subjects, while others create videos on YouTube for people to watch.
Now You Can Choose Bitcoin Trading Platforms
Bitcoin has made a lot of people a lot of money, but that doesn’t mean it will do the same for you. Yes, you have a good chance to make cash when you invest in a down market. But you’ll need to do things right to put your investment in the right place and keep your holdings secure.
A reputable Bitcoin trading platform is what will help you invest with success. Remember the guide above when you choose Bitcoin trading platforms to ensure you find a secure platform that will help you meet your investing goals.
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