As bitcoin continues to soar, what should you look out for in an exchange?

February 10 2021
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Bitcoin has continued to climb to new record highs on Wednesday as investors pile in on the news that Tesla backed the cryptocurrency with an investment of over US$1.5 billion ($1.9 billion).

Bitcoin, the now infamously volatile cryptocurrency, has climbed to US$47,204 after surging past US$44,000 a day earlier.

But bitcoin is not the only crypto Elon Musk has chosen to meddle in, with the world’s richest person also fuelling the surge in the price of dogecoin, with the tongue-in-cheek crypto featuring a Shiba Inu dog as a mascot, hitting a record briefly on Monday.

According to a financial expert, crypto has been thrust into the mainstream due to both increasing interest from retail and institutional investors, increasing levels of mass adoption, and record-low global interest rates.

With crypto now well and truly in the limelight, Nigel Green, CEO of deVere Group, explained that new investors looking to jump on the craze need to know what to look for in an exchange.

“More and more people are wanting to invest into cryptocurrencies, knowing that they are the future of money,” said Mr Green.

“But many, even those who have extensive knowledge of the stock market, have concerns about selecting the right cryptocurrency exchange.

“The total capitalisation of the cryptocurrency market is now an estimated $1.2 trillion, but it is still lightly regulated. This means that it’s vital that investors know what to look for in an exchange,” he cautioned.

According to Mr Green, there are five fundamentals to look out for.

But he warned: “Investing in cryptocurrencies remains highly speculative, and it is not for everyone – but one of the keys to success would be selecting the right crypto exchange.”

First, security.

The system of a private exchange for saving consumer documents as well as funds should be as decentralised as possible, as if it’s all on a couple of web servers, that makes them easy hacking targets.

“Investors should also look for a system that utilises two-step verification throughout login, such as a password, and also quick-expiring codes received through the app,” said Mr Green.

He advised new entrants to avoid exchanges that offer cheap trade costs or services but are based in areas around the world where investor security is weak.

“In addition, investors ought to assess exchanges as well as the businesses behind them as they would certainly do with any other organisation that they would depend on to protect their money,” Mr Green said.

Second, costs.

Mr Green explained that while some exchanges are proficient at addressing costs in advance, others hide them.

“Go for the exchanges that are upfront and transparent.”

Third, simplicity and ease of use.

“Take into account that you’re not always going to trade from your desktop.

“In fact, finding an exchange that focuses on ‘on the move’ trading via a secure app is often a better option,” Mr Green advised.

Fourth, dependability.

According to Mr Green, one of the most important questions to ask is, does the exchange run efficiently when trading quantity is high, or when the currencies rate is see-sawing?

“Some exchanges are notorious for their system accidents and trading stops.”

Fifth, client service.

“Make sure an exchange has a chat or fast communication service integrated.”

About the author

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

About the author

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

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