For those wanting to invest their money, cryptocurrency trading may be a great way to do this. In order to begin trading with cryptocurrency, those wanting to trade must do so with an exchange. Exchanges are the names given to the platforms that connect the real world to the crypto-realm, and make trading accessible. Exchanges will sell crypto-currency in exchange for the currency that the trader will use within the world (e.g. USD, GBP). This currency is often referred to in the crypto-currency world as fiat money. Exchanges will sell cryptocurrency for many different types of fiat currencies.
How to pick the best exchange
When picking the best exchange to trade with, it’s important to find a great platform, that is not only trustworthy but also has great exchange rates to work with. Some of the main qualities to look for in an exchange are as follows:
Reputable – a crucial thing all potential traders must consider is the reputation of the exchange. Reading reviews from other traders and looking back into its history (e.g. whether it has ever been hacked).
Valid – one of the major factors to take into consideration when wanting to cryptocurrency trade is to make sure that the exchange is available in your area. Some exchanges are only available in particular locations.
Exchange rates – as with the exchange of any two currencies, exchanges for cryptocurrencies will each have their own individual exchange rate from crypto to fiat currency. It’s important to make sure all potential exchanges are well-researched in order to get the best rates for this exchange in currencies.
Trustworthy/safe – similar to the point mentioned previously, it is very important to pick an exchange that is safe to use, that does not have a history of being hacked and requires ID verification before enabling access to the cryptocurrency.
Once verification has taken place and traders are given access onto the platform, trading can begin.
How to trade with cryptocurrency
Once on the exchange’s platform, it will offer a varied list of different coins to make a trade with. Through the platform, traders will be able to trade the cryptocurrency they initially purchased for other cryptocurrencies offered by the exchange’s market. As with the basic layout to any form of trading, traders can both buy and sell various different amounts of the cryptocurrency coins available on the exchange’s market.
How funds are stored in an exchange
Upon setting up an account, the exchange will have created a wallet in which to store the trader’s funds. There are two main types of wallets provided on exchange platforms, these being a hot wallet and a cold wallet:
Hot wallet – similar to a physical, everyday wallet that is carried around on the trader’s person. This type of storage isn’t as secure as a cold wallet, however does provide the trader with easier access to their funds when neede
Cold wallet – similar to a savings account, the money is more difficult for the trader to take out, however is a lot more secure than the hot, everyday wallet.
Traders can chose whatever wallet they think will be most beneficial to them, and upon picking this wallet, the exchange will then provide the wallet holder a public and private key. The public key is used to receive funds, and traders will need this key when wanting to withdraw funds from the exchange. The private key should never be shared with anyone, as it can be used to access an account holder’s wallet, and steal their cryptocurrency funds.