Choosing the Right Bitcoin Exchange

Bitcoin was the first cryptocurrency to take the world by storm in 2009. While it has since been joined by a multitude of other cryptocurrencies, known within the industry as altcoins, bitcoin remains the most popular and widely accepted of virtual currencies. For those who are just getting started investing in or using bitcoin, the first step is to find a reliable Bitcoin exchange. This article will offer comprehensive insight into what users need to know to make an informed decision.

What Is a Bitcoin Exchange?

A Bitcoin exchange is an online platform that allows users to buy, sell, and trade virtual currency. There are plenty of exchanges out there, but they’re not all created equal. In fact, they don’t even all work in the same way. Some preclude payments with credit cards, while others subject users to lengthy wait times with each transaction and to make matters worse, there are even some exchanges out there that don’t have adequate security. The best exchange platform is one that allows users to trade bitcoin quickly, efficiently, and safely.

How Bitcoin Exchanges Work

Traditional Bitcoin exchanges allow consumers to exchange fiat currency from all over the world for virtual currency. The user must first set up a Bitcoin wallet, then transfer funds via a bank transfer to the exchange. He or she can then purchase bitcoin.

Traditional exchanges typically impose a several-day wait time on users. This is uniquely inconvenient given that bitcoin’s value is known to fluctuate far more than stable fiat currencies. Some exchanges impose wait times only on new users, while others impose them on every transaction. Just about all exchanges charge fees to cover commissions paid to the exchanges, transfer fees, and the width of the bid-ask spread.

Once the user has purchased his or her bitcoin and the transaction has been approved, the bitcoin will be added to the user’s wallet. He or she can then use it to purchase goods and services online and at participating retailers, send bitcoin to other users, or just hold on to it until the time is right to sell. There’s no going back, though. Once the user purchases bitcoin, the transaction can’t be canceled.

Traditional Exchanges vs. Secure Lending

Those looking for a better way to trade bitcoin may want to skip traditional exchanges entirely. Secure lending platforms like the marketplace allow users to perform peer-to-peer lending. Users can just sign up for an account, then use any preferred payment method to borrow as much bitcoin as they want almost instantly.

With lending platforms, users can pay with credit cards or even Paypal. The bitcoin will be transferred to their wallets, where they can hold it indefinitely, spend it on whatever they want, and even return it to get their money back if they decide that bitcoin isn’t for them. The interest fees charged by are also lower than the commissions and other fees associated with using traditional exchanges. Interest payments don’t change based on loan terms, so borrowers will know exactly how much they will have to spend before each transaction.

What to Look for in an Exchange

Don’t just sign up for an account at any old Bitcoin exchange. It could wind up costing users a lot of time, money, and hassle. Instead, do some research first to figure out which one will be the best fit. Here’s what to look for:

Multiple Purchase Options

Most traditional exchanges only allow users to purchase bitcoin via wire transfer. That’s not ideal for most users given that wire transfers typically take several days to go through and, depending on the bank, may come with substantial transfer fees. Look for an exchange that also accepts other payment methods, including credit cards and PayPal.

Some exchanges may accept cash payments. Most users don’t want to bother with the hassles associated with cash purchases, though. It requires finding a Bitcoin ATM and paying additional transaction fees. Most Bitcoin ATM fees are charged as a percentage of the transaction, not as a flat fee. The average transaction fee at Bitcoin ATMs is 8.93%, which can add up quickly for large transactions.

Country of Origin

Most experts recommend that investors and traders buy bitcoin in their home countries. For US cryptocurrency enthusiasts, the state of origin is unimportant. What’s important is that the exchange follow United States laws and regulations.

Some exchanges accept multiple fiat currencies, regardless of where buyers live. Users should check the fine print or get in touch with a representative before signing up for an account if they plan to use anything other than U.S. dollars to purchase bitcoin in the United States.

Reasonable Exchange Fees

There’s no way to get around paying exchange fees entirely. They vary from one exchange to the next, though, so users should check transaction fees before signing up to make sure they’re competitive with the rest of the market.

Most cryptocurrency exchanges charge multiple fees. They may include trading fees such as Maker and Taker fees, which add to or subtract liquidity, per-trade transaction fees, percentages of 30-day trading volumes, commissions, and others. In some cases, exchange fees may decrease with increased trade frequency, though, and some exchanges don’t charge commission fees for trades worth $10,000,000 USD or more.

When working with a lending platform instead of a traditional exchange, expect to pay a onetime interest fee when paying the loan security deposit. Borrowers will also need to pay for bank transfers or payment processing and may need to pay a loan origination fee. This may sound complicated, but it’s really not. It’s both easy and affordable to use Bitcoin lending platforms, especially in comparison to traditional exchanges.

Order Book Volumes

Most popular exchanges publish what are known as order books. These publications list available buy and sell orders. For savvy investors, they can also offer information about the exchange’s liquidity. An exchange with a high-volume order book is being used more frequently and can be assumed to have plenty of liquidity.

Don’t expect smaller exchanges or alternative platforms like peer-to-peer Bitcoin lending sites to publish order books. It doesn’t mean they’re not legitimate. In the first case, it may mean that the exchange just hasn’t set up that function yet, while in the latter it just isn’t relevant.

Full Transparency

One of the best ways to tell whether an exchange is legitimate and rule out scams is to look for one that publishes cold storage addresses or other audit information that allows users to verify the exchange’s liquidity. Avoid exchanges that don’t offer full transparency, including a full explanation of the fee schedule and Bitcoin audits. It’s not worth risking unexpected fees or, even worse, winding up with an exchange that can’t cover the value of all Bitcoin sales.

When working with a peer-to-peer lending platform, look for clear information about what fees the platform charges. At, different lenders will charge interest rates based on what they believe the market can bear, but the platform will display only the lowest of them. This system offers an incentive to lenders to charge low interest rates.

It’s equally important when using a peer-to-peer lending platform that the platform itself offers a guarantee of Bitcoin payment. The platform should have an automated system in place for transferring bitcoin from the lender to the borrower’s wallet immediately and should only allow transactions to move forward if the lender has sufficient bitcoin to cover it.

At, borrowers can also view the blockchain transaction data for their bitcoin directly through the site. Just check the number of “Confirmations” on the Activity screen or click “Tx code” to get detailed confirmation information. Just bear in mind that while the bitcoins are removed from the lender’s wallet as soon as the borrower’s payment goes through, the transfers typically take between 10 and 40 minutes.

Speed of Transactions

When using an ordinary Bitcoin exchange, buyers should expect to wait several days for their payments to be verified and the transaction to be finalized. Good exchanges offer locked-in pricing, which means that buyers won’t be charged more money if the price of bitcoin goes up after they have made payments. Unfortunately, there’s really no way to speed up this process when buyers work with traditional exchanges.

Peer-to-peer lending platforms get around the problem of transaction delays by allowing users to borrow bitcoin from each other instead of buying it outright. This subverts the need for a waiting period. Borrowers just need to pay a security deposit, which acts as collateral for the loan As soon as the payment goes through, the bitcoin will be moved to their wallets. Users can then spend the bitcoin as they see fit or pay it back at their convenience to get their fiat currency security deposit back.

Security Protocols

Choose an exchange that offers secure logins with two-factor authentication and uses secure protocols. The easiest way to tell if an exchange has a secure protocol is to check the URL. If it begins with HTTP instead of HTTPS, look elsewhere. The “S” tacked onto the end is important because it indicates that the exchange is secure.

When users turn to peer-to-peer lending sites, it’s also important that the platform have a system in place for verifying lenders’ Bitcoin wallet amounts. The site should only allow borrowers the option of sending a security deposit to those lenders who have sufficient bitcoin in their wallets to cover the full amount of the loan. Once the borrower pays the deposit, the system should transfer the bitcoins automatically from the lender’s wallet to the borrower’s, eliminating the possibility of lender fraud.

Established Reputation

It’s always best to work with an exchange that has been around for a little while. Since the very concept of cryptocurrency is only a little over a decade old, it’s unreasonable to expect users to resign themselves to using only exchanges that have been around from the beginning. However, working with one that has been open for long enough to develop a reputation will give users a better idea of what to expect. Read through testimonials, check third-party review sites, or talk to other bitcoin investors or users about their experiences.

Avoiding Bitcoin Fraud

While bitcoin and other established cryptocurrencies are the real deal, the same can’t be said for all Bitcoin exchanges. Unfortunately, bitcoin fraud is relatively common and there are plenty of scammers just waiting to take advantage of the uninitiated. Here are two of the most common forms of fraud to watch out for:

Fake Exchanges

It’s not uncommon for social media users to be taken in by fraudsters claiming to sell bitcoin for under market value. They’ll get a message or see a post that directs them to a fake exchange, where they’ll be asked for their financial information to initiate a transfer. Once the buyer has sent his or her hard-earned cash via the fake exchange, they’ll be out money since the bitcoin will never arrive.

There are two easy ways to avoid this scam. First, check to make sure the exchange is HTTPS secured. Second, perform a basic Internet search. Most of these fake exchanges come and go very quickly, changing domain names almost daily to avoid getting caught. If there’s no information available about the exchange on any third-party sites, chances are, it’s a fraud.

Phishing Scams

Phishing scams involve sending an email to a bitcoin user that appears to be from a legitimate company but links to a fake website. The user will be asked for his or her login information, which can then be used to gain access to financial information. The easiest way to avoid phishing scams is to ignore links in emails and type in the URL directly.

The Bottom Line

Not all Bitcoin exchanges are created equal. Those who prioritize fast, convenient, affordable transactions are better off opting for a lending platform like, rather than an exchange, but ultimately, every investor has to make his or her own decision. Hopefully, the extensive information offered above will help.