How to Choose a Bitcoin Exchange

5 mins read
by Angel One

Buying cryptocurrency is very easy nowadays, but investors should know from where to buy the digital tokens that their money remains safe and secure. The process starts from choosing the exchange, which is your marketplace to buy cryptocurrencies.

The first task to buy cryptocurrency is to finalize the exchange, and choosing the right one is critical. Always remember that one can give you suggestions, but investors need to do their homework. Here are key things one should note:

Location of the exchange 

One should know where the office of any exchange is situated as it will be governed by the law and legislature of that particular nation. It is highly encouraged that you buy cryptocurrencies from a ‘local’ or home-based crypto exchange.

Another advantage of buying from a home-based exchange is that you will save on the cost of currency exchange as foreign exchanges may not accept your currency. Read the details of currency and other things carefully before taking a call.

Complying with KYC 

For every user in India, who is investing in cryptocurrency, merely account opening is not enough. One needs to go through the process of KYC to redeem their profits. The process of KYC is not long, and it ensures that financial crimes are going to rule out from the scene.

Making Payment on the transaction

To invest in the crypto market, investors need to add funds to their account, which sometimes, is referred to as a wallet as well. An investor can pay through net banking, debit or credit cards, UPI payment, or another digital wallet.

Investors need to ensure the privacy level of making the purchase. However, cash transactions are not allowed in India to make crypto purchases.

Exchange fees

No exchange will let you work for free. So it will charge some money fees to make the purchase. However, the amount may vary from one exchange to another and one token to another or perhaps both.

For example- A may charge Rs 10 for purchasing one digital token PQR, and B may charge Rs 20 for the same. Similarly, A may charge Rs 15 for purchasing one digital token XYZ while that may not be available on B at all.

The fee structure of exchange may change over a while. Some exchanges charge additional

fees on the general transaction fees. Investors shall keep note of them.

Also, some exchanges charge at various steps comprising buying, selling, and redeeming the profit. Investors shall evaluate and calculate all the costs before making the decision.

Order Book Volume

Most of the exchanges are not shy of releasing their order book. It is a very healthy practice to ensure transparency. An order book is simply a list of buy and sell orders on the exchange that is being offered.

A strong order book indicates that more people are using the exchange and it has enough liquidity for the investors when it comes to exiting a particular cryptocurrency.

However, if an exchange does not release its order book, that does not mean it is illegal. It is possible that it might not have that function yet and/or has a smaller volume than other bigger exchanges.

Number of coins available

Investors shall see how many coins are available on a particular exchange and how fast it is adding new tokens. Sometimes, an exchange is very late to bring a token on their platform which makes it ‘expensive’ for the investors. Also, an exchange shall be swift enough to discard the obsolete tokens.

Transparency of the Exchange

There are many exchanges available in the country and many more players are eying to join the race. However, finding a transparent and trustworthy exchange is the key!

Transparent exchanges publish cold storage addresses or audit information on how to verify their cryptocurrency reserves. Audits are a good way to ensure transparency to the customers. Also, audit reports show that the exchanges have enough liquidity and are not running a fractional exchange.

Smoothness of Trade

Various exchanges may take different times to transfer the digital tokens into your account after the purchase. Also, it may vary from one token to another.

Make sure to also check if the exchange offers ‘locked in’ pricing, which means that the price you buy at, is the price you will be charged for even if the crypto tokens take a few days to arrive.

The Importance of Anonymity

Staying completely anonymous is very difficult. Make sure that your transaction follows Know Your Customer (KYC) and Anti-Money Laundering (AML) laws in your country.

Anonymity is an integral part of your cryptocurrency, but everyone is equal in front of the law. An exchange must know its buyer so that communication becomes easier for all.

Security of Deals

An investor must thoroughly check the safety and security measures taken by the exchange on both mobile and web. It must not be overlooked as digital tokens are prone to theft and hacking.

On the web, investors should always opt for HTTPS. Also, on mobile applications, investors should always opt for two-step authentication. An additional step may take a few seconds more, but provide you with better security.

The reputation of the Exchange

This is a question with a no plain vanilla answer. The response may be very luster and glossy if the exchange is paying heavily to the media firms to build up its reputation.

Investors must read reviews, discuss with friends and take professional guidance in this matter. There are various forums on the internet that give correct, honest, and unbiased responses about the exchange. Investor must share their experiences with other users to build a strong community.

Fraud Alert!

One should not become a victim of digital fraud. It must be the paramount high priority to protect hard-earned wealth. This means avoiding any scam exchanges that are designed to steal from you.


Disclaimer: Angel One Limited does not endorse investment and trade in cryptocurrencies. This article is only for education and information purposes.