Do you know what a cryptocurrency exchange is? They are key cogs in helping people get into the cryptocurrency universe, which has been expanding at a rapid pace since the emergence of Bitcoin in 2008.
If you are interested in getting started in the world of cryptocurrencies, it is important to know what a cryptocurrency exchange is, what activities are developed and how to find the best broker for your case.
What is a cryptocurrency exchange?
The word “exchange” means, by definition, an act of giving one thing and receiving another in return. Thus, a cryptocurrency exchange can be understood as an intermediary that facilitates the exchange of assets between people or companies.
They are electronic platforms that act as brokers of this type of virtual currency. Through them, the person makes the purchase, sale, exchange and custody of their cryptocurrencies or other digital assets, such as tokens.
By connecting sellers and buyers, exchanges ensure that both sides comply with everything that was previously negotiated in terms of values, offering both parties maximum practicality and security in the operation.
How does a cryptocurrency exchange work?
A cryptocurrency exchange works in a very similar way to stock exchanges that operate in the conventional financial market. Their main activity is to intermediate transactions between sellers and buyers, involving assets that are, in this case, digital currencies.
But they also offer other services, such as payment solutions using cryptoassets and the custody of cryptocurrencies, in case you don’t know how to trade or don’t want to have your own digital cryptocurrency wallet.
Check out the main features that rule the operation of cryptocurrency exchanges:
Registration
To become a customer, the person or company must register, filling out a form available on the electronic platform itself (via web or app) and confirming the identity as well as other information.
From there, the person will be ready to use their account, buying cryptocurrencies and using the exchange services in question.
Offer book
Each cryptocurrency broker has its own offer book indicating the cryptocurrency that the platform allows for transactions and that are available for trading.
Specific Rules
Online brokers have their own rules regarding the way they relate to each client, which are different from other brokers.
Issues related to fees and forms of collection, deadlines for completion of operations and banks, for example, are defined by the exchange itself and can be changed over time, depending on demands and needs.
Quotation differences between brokers
Each exchange works individually as a kind of stock exchange independent of the others.
Businesses involving digital currencies are carried out according to the logic of the internal demand for supply and demand for cryptoassets. This makes the quotation of the same asset differs between competing brokers – but the difference is not usually large.
Although this variation rarely exceeds 3%, the difference is already enough for people who have been operating longer or more often to opt for the so-called “arbitrage transactions”. These are purchase and sale transactions on different exchanges to get the best possible prices on each operation.
Tax benefit
Tax legislation benefits people who use exchanges in their cryptocurrency businesses. This means that anyone who sells digital assets for less than US $188,000.00 in a month and benefits from the operation is exempt from paying income tax on the proceeds.
In other words, those who invest in cryptocurrency ETFs (exchange-traded funds), which are traded on stock exchanges, are usually taxed at 15% on what they received, regardless of the amount traded.
Non-stop operation
Cryptocurrency exchanges work in a non-stop system, 24 hours a day, seven days a week, conducting operations continuously, online. This differs from traditional stock exchanges, which operate during business hours determined by U.S. Securities and Exchange Commission – SEC (entity that manages the stock exchanges in the US), only from Monday to Friday.
How do I choose the best cryptocurrency exchange?
Choosing correctly the cryptocurrency exchange that will be the business platform for your transactions is just as important as knowing what a cryptocurrency exchange is. This requires a series of precautions, to avoid falling into blows and keep the pocket protected.
Unfortunately, there are fake cryptocurrency exchanges throughout the world that grow driven by the staggering promises of profitability, made in crypto groups in instant messaging applications and also by other types of fraudulent actions. This leads many people and companies to deal with losses that could have been prevented.
For that reason, it is important to use clear and objective criteria to identify the one that is the best cryptocurrency exchange to meet your needs and thus stay well away from headaches!
Check out the criteria that should be considered when choosing the best cryptocurrency exchange:
Verify the brokerage history and associated people
Search for all the registration information of the cryptocurrency exchange, verifying the veracity of data such as the registered number, physical address, telephone, e-mail and other contacts provided is essential.
The same should be done regarding the people associated with the brokerage firm itself. Consult notary offices and the Civil and Criminal Justice itself to find out if there are processes or any derogatory marks against them.
Verify the reputation of the cryptocurrency exchange
It may be that there are no ongoing lawsuits against the electronic platform or its owners, but that still doesn’t mean that everything is right.
Figure out how the cryptocurrency broker is doing in the market. To do this, talk to exchange clients to tell you how the experience has been so far.
Another tip is to consult reliable sources to check if there is anything against the company, such as websites specializing in economic and financial news, comments posted on the exchange’s social networks, moderated discussion forums and other consumer protection platforms.
Analyze the amounts and rates of fees charged
Visit the website of the cryptocurrency exchange and check the amounts or rates that it debits from its customers in operations such as withdrawals, deposits and transfers (of cryptoassets and fiat currency), as well as the limits of each operation.
Usually, information regarding taxes is available on the websites of the electronic platforms. If you’re having trouble finding it, Google the expression “exchange fees” followed by the broker’s name.
Assess whether the offer book meets your needs
Each exchange has its own book of offers, indicating which cryptocurrencies it works with and which are available to carry out purchase, sale and transfer operations.
It is important that the person or company interested in carrying out transactions in the crypto market is aware of the cryptocurrencies available, especially if they want to trade assets other than traditional Bitcoin and Ether.
Bitso Cryptocurrency Exchange
For those who want to enter this market by simply buying and selling cryptocurrencies or expand their operations as crypto trader, Bitso is one of the fastest growing cryptocurrency exchanges in Latin America, with more than four million people registered on the platform.
The Bitso operation is on a global scale and regulated by the Gibraltar Financial Services Commission (GFSC) and registration can be done either by the Bitso website or by the app, simply, quickly and with total digital security.
Bitso Alpha
If you want to go beyond the operations involving the purchase and sale of digital currencies, Bitso Alpha is also available for deeper analysis of the crypto segment, with access to indices and graphs of the different cryptocurrency markets, as well as trade operations.
Bitso currently operates with more than 20 different cryptocurrencies, having in its list from the most traditional assets (Bitcoin and Ether) to some of the most recent internationally traded cryptocurrencies.