Last Updated: May 1st, 2019
When someone is first introduced to Bitcoin and cryptocurrency, one of the first services they interact with is an exchange. In order to experience the beauty of Bitcoin, you first must acquire it. There are a number of ways of getting your hands on some crypto, but the easiest method is by far signing up to an exchange and purchasing it with fiat.
There is a massive amount of cryptocurrency exchanges on the market. Some are better quality than others, some have less fees than others, and some are outright scams. Instead of overwhelming you and listing each exchange available, we handpicked the top 5 cryptocurrency exchanges for you to use, especially if you are in the US. The exchanges below are not listed in any particular order, but each have their own unique strengths depending on what you’re looking for.
One of my personal favorite exchanges, Binance is a top choice if you are looking to trade cryptocurrency on a daily basis. Binance is a cryptocurrency exchange based in China that was launched in 2017.
The exchange grew so quickly that it set the record for the fastest profitable startup to achieve unicorn startup in history. If you didn’t know, for a startup to achieve unicorn status they must have a valuation of over $1 billion. Binance was able to go from a valuation of $0 to more than $2 billion in under 6 months.
When it comes to its platform, Binance has one of the smoothest interfaces and fastest trade engines. While minor hiccups occur here and there, overall the exchange has one of the best reputations on the market thanks to its CEO Changpeng Zhao.
If you are looking to trade crypto on an exchange with high volume, fast trade engine, and bulletproof security then Binance in the right choice for you.
Some love it, some hate it, but if you are a US resident looking to purchase cryptocurrency with fiat the easiest and simplest way possible, then Coinbase is the right choice for you.
Being a US based exchange, Coinbase is subject to strict regulatory guidelines. That’s one of the reasons that the company receives so much backlash from the crypto community, as inherently most people in crypto are against rules and regulations. Nevertheless, when it comes to purchasing crypto with fiat, Coinbase provides an unparalleled platform to do just that.
It’s important not to confuse Coinbase with Coinbase Pro – a digital asset exchange. The difference between the two platforms is the former is mostly for buying crypto with fiat and storing it, and the latter is an exchange in the traditional sense similar to Binance.
Gemini is a US based cryptocurrency exchange that is owned by the Winklevoss Twins. The exchange is meant for more institutional investors but is open to the general public as well. If you are looking for a reliable exchange to make withdrawals and deposits of crypto to and from your bank, Gemini is the right exchange for you.
Gemini is used to dealing with large deposits and withdrawals and has a great relationship with various banks. Once fully verified, you are able to convert crypto to USD and withdraw it via ACH or Wire Transfer and receive it the next day in your bank account. Moreover, if you would like to support the Winklevoss Twins, using their exchange is the best way to do so.
This list wouldn’t be complete without including a decentralized exchange (DEX). It’s 2019 and DEXs are all the hype right now. Using a Decentralized Exchange means you don’t have to risk your balance and if the exchange goes down you still have access to all your coins. Essentially you get all the benefits of a traditional cryptocurrency exchange with none of the risk associated with it.
The Binance DEX is a newly launched exchange that only has one token listed so far – Mithril. Nevertheless, it’s worth making an account on the exchange and keeping a close eye for any future listings as the price of any newly listed cryptocurrency will most likely spike either after the announcement or after the actual listing.
For our last featured exchange in the list we had to include CryptoBridge. This is a much more developed decentralized exchange that already has dozens of tokens listed on it. It’s extremely easy to get set up with CryptoBridge and by doing so you will get to experience a decentralized exchange firsthand.
The exchange includes a desktop client that you can use so you don’t actually have to go to their website at all. CryptoBridge has an assortment of tokens that you might not find on other exchanges so if you like to trade smaller cryptocurrencies you should definitely check out CryptoBridge.
One drawback to choosing CryptoBridge over the Binance DEX is if you are a US citizen you will be required to undergo user verification prior to being able to use the CryptoBridge exchange.
What are Bitcoin / Cryptocurrency Exchanges?
If you still aren’t sure what Bitcoin and cryptocurrency exchange are, don’t fret. This is an extremely common question that is often overlooked. In order to understand what crypto exchanges are, it’s best to first understand what problem they are trying to solve.
Back when Bitcoin first came out in 2009, if someone wanted to get a hold of some cryptocurrency there were only two options – mine it or buy it from someone else. If you wanted to get $100 worth of Bitcoin you would have to either fire up those ASICs or find someone on a forum to sell it to you. Finding someone to sell you some Bitcoins has a few drawbacks, first you have to actually find someone willing to part with their Bitcoins and second you need to either use an escrow service or establish some sort of trust between you and the other party.
This is where cryptocurrency exchanges come in, you are able to use a service to purchase cryptocurrency without dealing with the logistics of finding someone to sell you coins, establishing trust, exchanging the fiat etc.
Moreover, when we refer to cryptocurrency exchanges, we mean both those services that allow you to buy crypto with fiat (Coinbase, Gemini), and those platforms that allow you to trade one crypto coin for another (Binance, Binance DEX, CryptoBridge).
What are Decentralized Bitcoin / Cryptocurrency Exchanges?
Now that you understand what a basic cryptocurrency exchange is, let’s step it up a level and go over decentralized exchanges. We will use the same method of understanding what problem the services are trying to solve exactly.
Decentralized exchanges were born as a response to the constant hacking of exchanges which resulted in customers losing their balances. Imagine you are trading Bitcoin for Ethereum on an exchange. You deposit some coins and trade it for Ethereum, you decide to hold the Ethereum and leave the balance on the exchange. A few months goes by and you read on the news that the exchange has been hacked and someone has siphoned off all the funds. You realize that you had your ETH on the exchange and now that the exchange has lost all of its coins, so did you.
The beauty of decentralized exchanges is that they don’t have a central database that can be hacked. Moreover, you never really send your coins to the exchange’s wallets, the coins remain on your computer. As such, even if the decentralized exchange is hacks or goes offline, the funds are still in your possession and thus can be recovered.
There is no real drawback to decentralized exchanges form a consumer point of view. However, when it comes to developing such an exchange, it’s much harder to code because you can’t use traditional development methods that rely on centralized databases.
Is There a Difference Between a Bitcoin Exchange and a Cryptocurrency Exchange?
The terms Bitcoin exchange and Cryptocurrency exchange both mean the same thing. Bitcoin exchange is more of an older term for those services that only deal with Bitcoin and not other cryptocurrencies. These days most exchanges that support Bitcoin also support a handful of other coins. Because cryptocurrencies operate with the same blockchain technology, it’s easy for services to add an assortment of cryptos rather than just using Bitcoin all by itself.
Are Cryptocurrency Exchanges Safe?
The answer to this question heavily depends on the specific exchange we are talking about. At the end of the day, any traditional exchange will have vulnerabilities that may allow hackers to empty customers’ balances. However, most top exchanges have had a great track record the past few years of not having any major issues with losing customer balances. Moreover, if you want to be completely safe you should use a decentralized exchange (CryptoBridge, Binance DEX) which reduces the risk of losing your balance to essentially zero.
Should I Use a Bitcoin / Cryptocurrency Exchange?
If you are looking to either acquire cryptocurrency with fiat or convert one crypto to another, then using an exchange is the best way to do so. Depending on which exchange you use, you can easily buy Bitcoin, Ethereum, Litecoin, XRP and much more cryptocurrencies with your bank account or credit card. You can also convert these coins into any other cryptocurrency you desire assuming the exchange has it listed.
Top 3 Cryptocurrency Exchange Mistakes to Avoid
There are some key mistakes you should try to avoid when using any cryptocurrency exchange.
1. Don’t store coins on an exchange for a long period of time. If you are looking to hold a certain cryptocurrency for a prolonged period of time (a few months+) then it’s best to transfer those coins to a wallet to which you own the private keys to. There is a phrase: “If you don’t own your private keys you don’t own your coins.” Cryptocurrency exchange wallets usually don’t give you access to your own private keys, so on the off chance that the exchange gets hacked you will lose your balance. By transferring the coins from the exchange to a wallet you fully control you avoid absorbing the risk of losing your balance through a hack.
2. Make Sure to Enable 2FA. Another often overlooked mistake is not enabling 2FA when using exchanges. 2FA means Two Factor Authentication, and it’s a method of authentication that requires a second “factor” which is usually another device. With 2FA, in order to log into your account you not only have to input the password, but you also have to input a code that is usually sent either to your phone or email. This makes the account much more secure and harder to hack. To step it up a level some exchanges even employ 3FA – Three Factor Authentication.
3. Don’t trade on emotion. This applies not only to trading cryptocurrency on exchanges but also to trading any stocks or commodities in general. Never make any impulse decisions based on emotion. The market has its cycles and if you push the red button any time a fluctuation happens that makes you uncomfortable you will end up in the hole more than if you waited for the market to stabilize or rebound.