Before we go into ranking the best bitcoin exchange I would like to clarify that we are going to be rating exchanges ONLY on BTC/USD trades NOT any BTC/Altcoin trades.
There are countless exchanges out there, they vary from transparent operations to anonymous off shore servers, some of which are scams and some of which are legitimate. We will go over and review all the criteria for the exchanges but first we need to narrow down our participants so a single digit list and then pick the best bitcoin exchange from those candidates. Lets take a look at this chart taken from BitcoinCharts:
The pie chart above shows the distribution of trading volume of BTC among the top exchanges. We are going to look at the top 4 exchanges by volume, they are: BTC China, BitFinex, BitStamp, BTC-E These are going to be our candidates for the best bitcoin exchange of 2014.
BTC China is a fixed-rate exchange where bitcoins can be bought and sold. The only currency that can be bought/sold for bitcoins by this exchange is Renminbi (CNY). Based in Beijing, China, the trading platform is the oldest cryptocurrency exchange in China as it began in June of 2011. The exchange benefited from $5 million dollars from investors which helped fund development after the initial investment by three founders including CEO Bobby Lee.
BTC China is a transparent operation which requires personal information in order to create an account. They adhere to their own KYC (Know Your Customer) regulation’s just like Bitstamp or Coinbase. However, the personal information is only needed if you would like to withdraw cash to a bank account, so if you are simply looking to trade BTC -> CNY you do not need to provide anything other than a phone number for 2FA. For conclusion, BTCChina is the best bitcoin exchange around for BTC/CNY traders because of its huge volume and transparency. If you are trading from China then that is the exchange for you, however if you are based in the United States there are better options for you.
As we see above, if you are a bitcoin trader on btcchina then the only fee you really have to worry about is the withdrawal fee which is 0.0001 BTC for each withdrawal. This exchange offers some of the lowest fees available so if you are a chinese trader this is the place to go. We give this exchange a 5/5 because it is both secure and has the highest volume. The only problem is that if you are not a Chinese trader there are better options out there.
Bitfinex is a crypto exchange which offers the following trading pairs: BTC/USD, LTC/BTC, and LTC/USD. It provides for much more freedom of action and leverage. The leverage is limited to 3:3:1 but that is more than enough for such a volatile market. Bitfinex allows to limit, market, stop, trailing stop, and fill/kill orders. Meaning that is has much more freedom/room to play around as a trader. Furthermore, it allows to borrow or lend liquidity on a free market contract for difference exchange. The main pro about BitFinex is that it allows you to short BTC, something which you cannot do on most exchanges.
The above chart shows the fees for BitFinex. Unlike BTCChina BitFinex has no withdrawal or deposit fees but has much higher trading fees. 0.2% is actually a pretty high taker fee so that is going to knock off 1 starr of our rating.
While this exchange offers great functionality it lacks in the security aspect. So if you are looking to trade huge amounts of coins go ahead, but make sure that you do not keep them on Bit Finex for too long. You can read about all the security/bug complaints HERE, HERE, and HERE
To conclude, BitFinex has great functionality, but it lacks in the security aspect, so it receives a total of 3/5 stars for our BTC/USD exchanges. Security is the most important part of an exchange, no matter how much functionality there is, if traders do not feel that their funds are secure then they will be more reluctant to use such an exchange. In addition, high trading fees on every trade make it harder to day trade and still make a profit. Bit Finex is definately a great exchange but it is not the best bitcoin exchange for US traders. If you are looking for more functionality and features in an exchange the BitFinex is the way to go, but if you are looking for a more anonymous and safe exchange Bitstamp or BTC-E are the next candidates.
Next is our beloved exchange the almighty Bitstamp. If you are a local trader on locabitcoins you will notice that most people use Bitstamp as the price indicator when trading. Bitstamps has the third largest volume of all the bitcoin exchanges right after Bit Finex. Bitstamp does not allow you to short bitcoin so there isn’t many novel features available on the trading aspect. However, it is one of the most secure exchanges out there unlike Bit Finex.
The only problem with Bitstamp is that they have very strict KYC regulations. In order to become a trader you must be verified with an ID and a utility bill in your name. The irony here is that bitstamp’s KYC regulations are more stricter than that of any United States bank.
Furthermore, Bitstamp has even higher trading fees than Bitfinex, here is the distribution of the fees based on monthly trading volume:
Given the above facts, if you are a trader that mostly is concerned about the safety of your investment and are ready to provide personal identification to the exchange and pay ridiculous fees then this is the exchange for you. However, if you are looking for an anonymous way to trade bitcoins stay away from Bitstamp. Our rating for Bitstamp is a 3/5 because of the harsh KYC regulations and high fees, but the exchange does have high volume and great security.
Last but not least, BTC-E. This is an exchange which does not require any personal identification information in order to start trading, just like BitFinex and BTCChina. It is the 4th largest bitcoin exchange by volume and has been around for a long time. The servers are hosted off shore and nobody really knows where exactly they are hosted at. It is very hard to put in cash into the exchange so it’s best use is to deposit bitcoins into it and trade that way.
The withdraws are relatively fast and just like many other exchanges it offers a built in tumbler, so that when you withdraw your coins it does not link to your deposit address. This exchange is also very secure and had no histories of breaches or hacks.
The current trading fee for BTC-E is 0.2% which is not great but is much better than all the other exchanges (except BTCChina of course)
If you are a trade that is looking to trade coins anonymously and securely the BTC-E is the way to go. We give this exchange a 4/5 because it offers both anonymity and is proven to be safe. The only downside to this exchange is that if it ever decides to pull a MtGox then the traders with coins on the exchange would have no way of creating a class action lawsuit since the operation is not transparent that is why we took off 1 star.
In conclusion if you are a bitcoin trader looking for the best bitcoin exchange to trade Bitcoins anonymously BTC-E is the way to go. With low trading fees, nonexistant KYC, decent trading volume, and proven security BTC-E is the best bitcoin exchange for anonymous and high volume trading. Don’t get me wrong, Bit Finex and Bitstamp are great exchanges if you are looking for more trading options or higher security for your funds. The downside of using BTC-E is the fact that the owners are anonymous also means that they can vanish with your Bitcoins any day, also if they were to get hacked there would be no way to hold them accountable for poor security.
If you have any input/experience with any of the above mentioned exchanges feel free to post a comment below. Thanks for checking out our review of the top Bitcoin Exchanges and happy trading!
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