Cryptocurrency Exchanges – What to Look for
There are a few things to look out for when choosing an appropriate cryptocurrency exchange. The two most important criteria are fees and security. While there are other considerations, these are the two most important things to consider when choosing an exchange.
Fees often vary depending on currency and withdrawal methods. Security has come a long way in the cryptocurrency world since some of the earlier hacks.
Aside from fees and security you might need to consider the user interface, though this is a secondary consideration for many. For those who want to get a certain cryptocurrency as painlessly as possible, there are platforms which may make it incredibly easy to purchase them. This ease of use invariably comes with a higher fee structure.
The customer service and verification procedures are also very important in choosing a cryptocurrency exchange. At present there is only one cryptocurrency exchange with an acceptable level of customer service, and this is a new exchange called Kucoin.
The customer service teams and the response times of cryptocurrency exchanges are well known to be abysmal, so you will generally have to take this on the chin and hope you don’t run into any issues with your verification and withdrawals.
Bear in mind there are three main cryptocurrency exchange types: trading exchanges, brokers and P2P platforms. Trading exchanges connect buyers and seller automatically through an online site (Coinmama, Bitpanda, Kraken, GDAX).
Brokers sell to you directly but charge a fee (Coinbase, Litebit, CEX, Changelly, ShapeShift). P2P platforms connect buyers and sellers directly (Local Bitcoins, Cryptopia).
Choosing the best exchange for Ethereum really depends on your individual user preferences including how much you intend to buy, how often, with what banking methods and which types of cryptocurrency are to be purchased.
Different exchanges have different advantages and disadvantages. Traders have different concerns to one-off buyers, and Europeans will have different needs than Americans.
While Ethereum might not be as easy to acquire as Bitcoin, in recent years more and more cryptocurrency platforms have been adding support for it. Being the first virtual currency on the market, Bitcoin has some advantages over Ethereum, but that doesn’t mean it’s not worth investing in.
Let’s take a look at some of the best Ethereum exchanges available on the market today.
No list of Ethereum exchanges would be complete without a mention of Coinbase, quite possibly the most well-known exchange in the world. Coinbase was established in 2012 and has a lot going for it. First of all, the user interface of Coinbase is intuitive, smooth and beginner friendly. Coinbase also lets users trade fiat currencies and cryptocurrencies on an open market.
It makes the cryptocurrency purchasing experience a dream, which is certainly not the case with many of the other exchanges.
Coinbase has both low fees and extremely high levels of security. Coinbase is essentially a bank for cryptocurrency including Bitcoin, Litecoin, Bitcoin Cash, and of course, Ethereum. Most cryptocurrency funds are not kept on an exchange but are kept in cold storage.
What this means is that keys to the cryptocurrency are kept on a server in a physical location that is not connected to the internet. This physical location is presumably guarded with security personal, cameras, eye scanners and other safeguards that are required to protect billions of dollars’ worth of funds. Most likely there are a number of these facilities and each server/computer is encrypted.
While nobody knows for certain the exact security measures, it can be safely said that Coinbase is one of the most secure exchanges in the world. And even if the online cryptocurrency gets stolen by hackers (despite the team of Silicon Valley cyber security experts guarding the network), you will most likely be refunded as Coinbase has third-party insurance on cryptocurrency deposits and FDIC insurance on fiat deposits.
Your Bitcoin, Ethereum, Litecoin, etc. funds are as safe as they are in the bank. Coinbase has been around since the beginning of cryptocurrency and has exchanged over $50 billion in cryptocurrency, serving over 10 million customers.
Aside from the high level of security, Coinbase also offers low fees. Coinbase charges 3.99% on credit card purchases of Ethereum, which is below the industry average. Competitors often charge between 5-8% depending on the amounts purchased.
It is free to deposit by ACH and SEPA transfer, though wire transfers will incur a $10 charge. Once you have made your fiat deposit it costs 1.49% to purchase your Ethereum. Credit card purchases are instant while bank transfers typically take between 3-5 business days.
There is a way to avoid Coinbase fees altogether. You can transfer funds using your bank account to Coinbase and transfer these funds for free to the Coinbase exchange, known as the Global Digital Assets Exchange (GDAX).
The fees are .25% for taker orders and 0% for maker orders. A SEPA withdrawal costs 0.15 Euro and ACH withdrawals are free.
Sound too good to be true? Well there are some drawbacks to Coinbase. Cryptocurrency purists avoid Coinbase because it has such a cozy relationship with the banks and regulatory authorities.
Cryptocurrency was intended as a way to avoid centralization and regulation, and some believe that Coinbase is simply a return to the same old managed (crypto)currency. Because it is so closely watched be prepared to file a tax return declaring your cryptocurrency gains or you will find yourself face-to-face with the IRS.
When using the GDAX exchange to avoid fees you will lose the smoothness and beginner-friendly appeal of the Coinbase website itself. The Coinbase website can go down often due to the influx of users, and customer support is awful.
Verification times can take between one and six weeks depending on how overloaded the team is. However, this is standard in the cryptocurrency industry. Coinbase is still the best place to purchase Ethereum right now. It is safe, cheap and user friendly.
Local Ethereum is similar in many ways to Local Bitcoins. Both are P2P exchanges which means that they simply connect buyers and sellers of Ethereum. You are not dealing with a corporation but rather an individual Ethereum seller.
The seller will have an ad on the site that stipulates the terms and conditions of the trade, so you can essentially filter for your payment methods, price and for seller feedback. The advantage of this is that you have a huge choice of payment methods not available on typical exchanges, which generally only offer 3 or 4 payment methods.
P2P sites are incredibly secure and protect the buyer even more than the seller due to the escrow system. A seller with over 10,000 trades is not going to rip you off and jeopardize his or her reputation for the sake of $1000. And it is not possible to do so in any case, as the funds are held in escrow.
The platform acts as an intermediary, and in the event of a dispute you can show the platform that you sent a payment. The funds will then be released from escrow.
The Ethereum is in escrow before the trade. When the payment hits the sellers account the funds are released as per the trade conditions. If the seller for some reason does not release the funds from escrow you file a dispute and the funds get released anyway.
Local Ethereum is easy to use and 100% safe. As for the fees, they can range from moderate to high depending on payment methods.
This is the real disadvantage, but you can find sellers offering very generous fees that are cheaper than large exchanges, though generally the fees are higher overall.
You can expect to pay between 1-5% on fees, with bank transfer being the cheapest and PayPal the most expensive payment method. Local Ethereum will charge 1% and the seller will put a markup on this price depending on the payment method and expected profit.
The total price is reflected in the buying price displayed on the website, so there are no hidden charges unlike on many of the larger trading exchanges.
Kucoin and Binance
These two exchanges have been lumped together because of their similarities. Both were formed in the last year, both have their own exchange coin, and both offer the lowest fees on the cryptocurrency market.
They have experienced explosive growth in the past year because their coins work as speculative investments. Kucoin and Binance are based in Asia and are quicker to add new coins than their larger competitors. They both started in China but moved their headquarters due to the unsafe regulatory environment. China is not a cryptocurrency-friendly region, unlike its neighbor Japan.
Binance is geared towards traders and its coin is the Binance Coin, the BNB. It is not as intuitive as Coinbase but it offers lower fees and the chance to make money with the BNB.
Binance is also easier in terms of verification. You can even avoid verification altogether if you stay below the withdrawal limit, which is more than high enough for anyone except traders and those with large portfolios.
The verification process is much faster and straightforward than Coinbase. Binance fees are among the lowest available at just .05% when using the BNB. The BNB appreciates in value the more people join Binance.
Kucoin follows a similar structure to Binance. The Kucoin token is the Kucoin Share (KCS). The KCS pays dividends in the form of a diverse portfolio of cryptocurrencies. Like Binance it offers a large list of cryptocurrencies to trade which are not listed in other exchanges.
Kucoin is the only cryptocurrency exchange with a working customer service, known as Kucoin Telegraph Chat. There will be a representative there to answer queries 24/7.
Binance has stopped accepting customers but Kucoin is still open for business, and it could still have tremendous upside as its trading volume is $250 million as opposed to the $6 billion of Binance. If the KCS reaches half the level of the BNB, investors can make a handsome profit.
The downside for both these exchanges is that you cannot buy Ethereum directly. They do not accept fiat money so you have to get your cryptocurrency somewhere else and then deposit it on the exchange. You can then exchange this for Ethereum.
Binance and Kucoin are exchanges with their own coins which can act as speculative investments that offer ultra-low fees with lax verification procedures. If you want to make money fast then visit these exchanges. But be aware that your funds are not as safe as they would be on Coinbase and other established exchanges.
Kucoin and Binance are new entrants to the cryptocurrency industry and do not disclose how funds are managed or stored. Buy your coins and then remove them from the exchange.
Ethereum Exchange Summary
The best Ethereum exchange really depends on user preference. You can pay pretty much nothing on Coinbase/GDAX and rest easy knowing your funds are completely safe.
However, you will be working with a corporation with long and lengthy verification procedures and times, and you will have to wait 3-5 days to deposit your funds via bank transfer and 3-5 days for withdrawal. You will also have to get used to the GDAX exchange which can be a little challenging.
You can also use a service such as ShapeShift or Changelly. You could have your Ethereum by the end of the day in your own wallet. These platforms are very easy to use, intuitive and smooth.
But you will be paying via credit card and the premium will be around 6-10%. For frequent and large traders these platforms are out of the question due to fees.
If you want to avail of a distinct payment method then a P2P platform like Local Ethereum may be the best option. Your funds are safe and you can pay between 2-5% which may be reasonable for some. Verification is only required if you need to withdraw a large amount of cryptocurrency.
If you are eager to see as large a return as possible in the shortest possible timeframe, then consider Kucoin and Binance. They are new to the market and may not be the safest, but so far their coins have exploded in value and the platforms have tiny fees, along with free deposits and transfers.
Of course, you initially need to buy cryptocurrency in the first place, so this will bring you back to square one. You cannot get your Ethereum here, but you can buy Ethereum with another cryptocurrency.
There is no shortage of Ethereum options. Identify your chosen payment method, how much you are willing to pay in fees and how quickly you need your Ethereum. Use this list to choose the Ethereum platform that best suits your needs.