Bitcoin experienced its biggest frenzy yet at the end of December 2017, and it led to Coinbase, one of the premier bitcoin exchanges, halting bitcoin trading after prices plummeted leading to a crash in volume. There are growing pains among other cryptocurrency exchanges as digital money gains in popularity, increase in cryptocurrency exchanges and overwhelming systems.
Japan’s Coincheck is currently under heavy scrutiny after their systems were hacked and lost $530 million in January 2018, and if investigations confirm the theft, it will go down as the biggest theft ever recorded. It will eclipse the theft of $450 million from Mt. Gox, a Japanese exchange in 2014.
Bitcoin traders in the lightly regulated $700 billion market see such rapid growth that they cannot ramp up fast enough. However, the Commodity Futures Trading Commission and the Securities and Exchange Commission have issued a statement saying that they are welcoming Congressional powers to protect cryptocurrency owners from problems arising from cryptocurrency exchanges.
According to Dr. Bora Ozkan, an assistant professor at Temple University’s Fox School of Business, also an expert in the capital market says that the blockchain, the technology used by cryptocurrencies is secure because of decentralization. However, the individual exchange systems used to store customer records face a security risk due to centralization on a few servers. For now, cryptocurrency investors need to carry out their due diligence before the exchanges can sort out the security issues. Here is how to choose the best bitcoin or cryptocurrency exchange.
Evaluate Coin Exchanges
Investors ought to evaluate the exchanges and the companies behind them just as they would any other institution they choose to entrust their money. Richard Hendrix, a cryptocurrency analyst at Montreal-based venture capital firm, Real Ventures, suggest that one ought to look among other things; how long the exchange has been operational, the companies running the exchanges, are they insured, and their reputation in the cryptocurrency exchange market. Most insiders suggest using exchanges in countries with strong consumer protection policies.
Evaluate their Systems
Customers ought to seek out exchanges that suit their needs; a good example is systems that serve investors with easy systems for limit and stop-limit orders. Some of the systems in place restrict beginner account to a small dollar amount and investors can apply for a higher dollar limit. Experts say that a good system will offer safety against money laundering, investor’s identification, smartphone apps for tracking of prices and trading, as well as a straightforward way to transfer cash from the bank to the exchange’s cryptocurrency wallet.
According to John Quinn, the co-founder, and Chief Revenue Officer of Storj Labs, poor government regulation makes Reddit and Twitter the best places to evaluate an exchange’s reliability. This is because customers participate in debates on their investments. To be safe, Quinn suggests that investors store cryptocurrencies and cash in a wallet separate from the trading site. The best exchanges are those that use a two-step authentication when logins in, such as a password and a code from an app that quickly expires when not used.
These are the major tips to help in choosing the best cryptocurrency exchanges. However, to be safe, avoid storing money in a single exchange and do not leave money in the exchanges. Transfer the amount to trade, after the trade; transfer the remaining money to a separate wallet.