When you first get into the cryptocurrency world, the first thing that you will probably do is search for a cryptocurrency exchange. This is a place where most buyers and sellers of cryptocurrencies will trade. It’s similar to a stock exchange but the difference is this one sells digital coins.
Today, there are 190 cryptocurrency exchanges in action. It is expected that this number will grow as the cryptocurrency market increases in popularity. Cryptocurrency is a highly lucrative space for more businesses to explore. Understandably, many fintech companies and investors are interested in getting on the cryptocurrency world because of the possibility that it entails.
One thing to keep in mind is that most of these exchanges don’t operate under any regulations. Therefore, if your money does end up getting lost because of the hacking, they won’t be held liable for it. However, this is subject to change especially as Japanese authorities recently introduced a law which makes exchanges liable for losses incurred during hackings.
In fact, one of the first exchanges to go mainstream, which was Mt. Gox ended up in bankruptcy. You don’t want to get into the cryptocurrency world without understanding the risks that you are getting yourself into. As much as the world of cryptocurrency offers you a possibility to get in on a lot of money, it also comes with the risk of you losing your money overnight. This may seem like an exaggeration, but let’s take a look at South Korea to analyze how a unique social structure attracted people to buy cryptocurrencies but it caused a huge tension within the country.
How did cryptocurrency impact South Korea?
In South Korea, the majority of their society is highly educated. Most of the population have a high school degree and most of them can to pursue their university degree. As a result, it created a highly educated society that the competition between the local community for jobs is very high. As a result, people are often overqualified for jobs available within the market.
The main ones that are feeling the impact of this structural discrepancy are the millennials in South Korea. Unfortunately for them, affording a decent life in South Korea has been so expensive that they can’t afford to buy a house of their own. Even investing in real estate have gotten expensive, which leaves them with little idea on how they can increase their wealth. Then, came cryptocurrencies. Suddenly, people had friends who were able to buy cars and houses that they were able to buy before the invest in cryptocurrencies.
For these millennials, cryptocurrency represents an opportunity for them to get a shot at being rich. A lot of them got into cryptocurrency, especially during the Bitcoin boom. People who got into the cryptocurrency world before the Bitcoin boom gained a lot more from the cryptocurrency compared to other. However, when the price quickly went down the month after, people started feeling the pinch of their investment that is seemingly failing to provide the returns that they were expecting. Many of these South Korean millennials were suffering from emotional struggles to deal with the aftermath of the Bitcoin boom.
Unfortunately, this can very well happen to you if you get into the cryptocurrency world expecting that it will provide you with profits so easily. This is not going to happen in the industry. You need to be willing to lose your money when you put your money into the cryptocurrency industry. In other words, if you are unable to live without the money that you are investing in cryptocurrency, you shouldn’t invest in the first place.
So, this article will detail how and where you can buy and sell your cryptocurrencies properly. One thing to keep in mind is that these assets are incredibly volatile and the price can go to extreme highs and lows. Therefore, you should never put in any money in the cryptocurrency space that you are not willing to lose.
Depending on where you live in, you need to see how your government classifies cryptocurrencies. In the US, the IRS made it clear that cryptocurrencies are viewed as property. This means that every transaction that investors engage in will be subject to capital gains taxes. So, make sure to keep a log of all of the transactions that you are doing with cryptocurrency so that you don’t get a headache when it’s time to pay your taxes.
1. Choose an exchange in your country
You should pick a cryptocurrency exchange that is in your country. This way, if anything goes wrong, it would be easier for you to get a refund. For instance, if you are based in South Korea, you should choose an exchange based in your country as well. However, if you belong to a country where there isn’t any reputable cryptocurrency exchange yet, you should choose a reputable exchange nearby.
2. Check for the address of the exchange
If you’ve never searched for the address of any services that you subscribe to, it’s time for you to do so. Knowing the address of the company will help you to know what legal steps to take when you are suing people that stole your money, especially when it is being hacked. Don’t overlook this simply because cryptocurrency exchange is popular.
3. Read the exchange policies
If you’re not someone who reads the fine print, you better do so with cryptocurrencies. You should have the discipline to read the fine print associated with these cryptocurrency exchanges. You don’t want to find yourself in trouble after you put a lot of money into a cryptocurrency exchange. If you don’t own any cryptocurrencies yet, you’ll need to find an exchange that accepts cash in your denomination. However, most of the major exchanges may not accept Asian currencies. Therefore, you need to figure out the denomination they accept.
Make sure that the exchange willing to work with you. For instance, Bitfinex has recently stated that they are no longer willing to accept any US payment because the regulations within the US is making it difficult for them to work with the currency.
4. Do independent research on the exchange reputation
For a cryptocurrency exchange, research their reputation. Search for recent hackings, possible market manipulation, and their refund policy. A simple Google search will reveal a lot of things ongoing with the exchange. In the case of a huge issue, you will find that there are dedicated websites or forums that discuss it.
Another method of communication which is great for cryptocurrencies is an online forum. This has been a magnet for cryptocurrency exchange information. There have been a lot of exchanges that were hacked. Hence, you need to do research on the most recent hacking that to avoid yourself signing up with them right after there was a hacking.
If you have a friend who is a customer of the exchange, you can ask them about their personal experience with the exchange. This is great, especially if traders are living in the same city and had a great experience with a particular exchange.
5. Check the security measures implemented
Major Bitcoin exchanges are a target for hackers as they trade a large amount of money daily. Most cryptocurrency exchanges today which are reputable will adhere to procedures that will verify the identity of customers and follow anti-money laundering procedures.
Although this can be seen deviating away from a decentralized nature of cryptocurrency, it is essential because it will avoid consumers from trying to run away from paying taxes or using cryptocurrencies as a means to pay for illegal acts. More importantly, this is done to protect your interest. On top of that, you have to make sure that the exchange keeps their funds offline. Check their method of assets storage to ensure that at least 95% of the exchanges asset are away from the Internet.
6. Research the transaction fees
Don’t get tempted by low transaction fees. The exchange may be trading off the safety of its users in exchange for lower fees. Therefore, there are some exchanges that will impose high transaction fees because they offer high security and faster transactions. Different exchanges tend to impose different rates. Be sure that your assets are well protected. Investing a bit more in the rates can go a long way in protecting your cryptocurrencies.
In addition to this, you must search for an exchange that has a high volume. A great resource for you to check with cryptocurrency exchange has the highest volume is by going on coinmarketcap.com. Having a higher volume tends to lead to higher prices.
Regardless of how much you’ve researched and verified exchange, you need to make sure you don’t put your money on the exchange for too long. Instead, always transfer your cryptocurrencies into an e-wallet online or a hardware wallet so hackers can’t access them easily. Once you get into a cryptocurrency exchange, get done with your transactions as fast as possible and get off them quickly.
If anything, you can never be too careful when you are getting in the cryptocurrency world. Hence, you must always take precautionary measures to make sure that you reduce the number of risks you take. As you already put in a lot of effort to trade cryptocurrencies, doing extra research on cryptocurrency exchange will help you keep your assets safe.
Also, know that cryptocurrency exchanges that offer quality features may come with extra fees. Hence, be sure to do research to compare between cryptocurrency exchanges. It makes a huge difference when you compare the pros and cons of each exchange. We also recognize that there is no perfect exchange out there but you can find one that fits the priority.