To buy Bitcoin or other cryptocurrencies, you have multiple options. You can go to a Bitcoin ATM, accept them as payments for your goods and services, buy them peer-to-peer or from a brokerage. The most popular option for most is to head to a cryptocurrency exchange. Not all exchanges are used to buy Bitcoin with fiat currencies like the U.S. dollar or the euro. Some exchanges are primarily used to trade Bitcoin back and forth for short-term profits. This is very risky but, similar to online gambling, can be a fun and entertaining way of losing your money.
With the hundreds of crypto exchanges currently in existence, which one is right for you?
Cryptocurrency exchanges are magnets for hackers and fraud. Around 1 billion USD was pilfered from cryptocurrency exchanges in 2018, so a little research into crypto exchanges could go a long way to avoid using an exchange that loses your money (you want to lose your money yourself, after all).
What’s more, not all exchanges are created equal. Exchanges differ in features and coins available for trading. Some offer margins and futures, while others trade hundreds of obscure tokens with small market capitalizations. Others may only accept a handful of popular fiat currencies, such as U.S. dollars, or trade entirely in crypto itself.
Some other things worth looking out for are average daily volumes: A high number of trades exudes confidence in the exchange and shows liquidity. The percentage of funds in “cold wallets” is another factor—these are funds stored offline, making them more difficult to hack.
Let’s take a closer look at the top crypto exchanges. But before you start trading, make yourself familiar with your country’s local tax laws. In many places, such as the U.S. or Europe, each purchase or sale of Bitcoin, even against another cryptocurrency, constitutes a “taxable event,” meaning you need to separately declare it and compute capital gains taxes. For hundreds of trades per day, this can be very difficult and expensive!
Many cryptocurrency exchanges operate outside of a clear regulatory framework. While exchanges in the U.S. and Europe will report all your activities to your local tax authorities, offshore platforms might find themselves at odds with the law at any point and be shut down, together with any funds you may have deposited there.
1. Coinbase Pro
Coinbase, headquartered in San Francisco, is a mature player in the crypto space, having been around since 2012. It’s great for beginner users, works in over 100 countries, and accepts a range of fiat currencies including U.S. dollars.
At the time of writing, the exchange has never fallen victim to a hacking attempt—no mean feat given the sophistication of crypto heists. In August, it published a blog post detailing how it was able to rebuff a highly advanced attack.
Coinbase Pro stores 98% of its funds in a cold wallet, requires all users to undergo two-factor authentication prior to any transaction, and protects all sensitive data with 256-bit AES encryption. Needless to say, it takes security very seriously and requires employees to complete a criminal background check.
An additional bonus is that all online funds are covered by insurance.
2. Kraken
Kraken’s another veteran crypto exchange, starting operations in 2011. Registration is fairly straightforward, and the exchange supports fiat payments in U.S. dollars, Canadian dollars, and euros. It’s designed to appeal to both individual as well as business users, and an easy onboarding process takes you through the nuts and bolts of how to get started with crypto trades.
Users looking for advanced options can make use of features like margin trading and futures.
Kraken stores 95% of its funds in a cold wallet, relies on two-factor authentication, and has an active bug bounty program in place to uncover any security loopholes its team might miss.
3. Binance
Binance only started in 2018, but it’s quickly grown to be one of the most popular crypto exchanges in the world. It claims to process over 1.4 million transactions each second with a daily trading volume in excess of 1.2 billion USD. Originally headquartered in China, Binance shifted operations to Malta to escape regulatory pressure.
This exchange supports over a hundred altcoins including popular ones such as Ethereum, Ripple, and EOS. It initially started as a crypto-to-crypto exchange only, meaning you couldn’t use fiat currency to buy crypto, but it’s recently allowed credit card payments.
Earlier this year, Binance was hacked to the tune of 7,000 Bitcoin, or 40 million USD in fiat equivalent, but all users were compensated from an emergency fund that the exchange had set up, and the CEO kept things very transparent.
It charges a flat 0.1% trading fee on all transactions, with a 25% discount if you trade in Binance Coin (BNB).
4. Gemini
Gemini is the brainchild of the Winkelvoss twins, most famous for claiming that the idea of Facebook was theirs and not Mark Zuckerberg’s. However, they do know a thing or two about crypto and are passionate advocates for greater inclusion of it in mainstream financial circles.
The exchange recently passed a comprehensive security audit by Deloitte and, as is standard crypto practice, chooses to store only a small portion of its funds in the online, hot wallet. It accepts U.S. dollars as its only fiat currency and allows trade in Bitcoin, Bitcoin Cash, Ether, Litecoin, and Zcash.
5. Huobi
Founded in China, Huobi is now headquartered in Singapore and has offices in Hong Kong, South Korea, Japan and the U.S. It supports Bitcoin and a range of altcoins such as Ethereum, Ripple, Litecoin, and more. Users can buy cryptocurrencies with debit and credit cards and the exchange maintains a 20,000 Bitcoin reserve fund to deal with emergencies such as a hack.
It offers two versions: Huobi Pro is the advanced one, designed for lots of cryptocurrency trading options, while Huobi is meant for newcomers and beginners. Customer service via live chat is also accessible 24/7.