Cryptocurrency has become a household name. Whether you’re interested in accepting Bitcoin as a payment for your small business or investing in Ethereum as part of your personal portfolio, digital currency has incredible potential for continued growth and development. These days, there are many different “alt-coins” besides the popular Bitcoin and Ethereum, and many of them use blockchain technology in ways beyond simply sending and receiving online money.
If you plan to buy cryptocurrency, first you’re going to need to choose an exchange. Fortunately, there are plenty of options that offer CAD transactions for Canadian residents. Read on to learn how to select the right exchange so you can make your first transaction a success.
What Is a Cryptocurrency Exchange?
A cryptocurrency exchange is a website that allows you to purchase, sell, and sometimes exchange digital currency. Some exchanges only allow you to purchase major cryptocurrencies such as Bitcoin and Ethereum, and others allow you to also exchange those for lesser-known cryptocurrencies such as VeChain, NANO, Icon, and Enigma. Some exchanges only allow you to transfer Bitcoin or Ethereum, and do not allow purchases with fiat money. Here are some tips to help you decide on an exchange.
Determine Your Goals
If you know which coin you’re interested in purchasing, first make sure that a potential exchange has it available. You can search for your preferred coin on CoinMarketCap, then look under the Markets section to see which exchanges carry your coin. From there, you need to decide how to fund the purchase.
For example, if your goal is to purchase Ethereum, Bitcoin, or Litecoin, an easy option is to use the Coinbase exchange, as it accepts payments in CAD. On the other hand, say your plan is to purchase VeChain. VeChain’s VEN coin cannot be purchased directly with fiat money, as of February 2018, so you need to purchase Bitcoin or Ethereum and send it to another exchange such as Binance, where you can exchange the Bitcoin (BTC) or Ethereum (ETH) for VeChain (VEN). This may seem complicated, but it’s actually quite straightforward in practice.
Depending on the size of your purchase, exchange fees can add up quick. Before you use an exchange, read all of the fine print to determine how much you’re spending on fees. Some exchanges charge a percentage for buying cryptocurrency, while others charge a small percentage per trade. Some may charge both. Using a credit card can also be more expensive than a debit card or bank transfer. Don’t confuse any of these charges with the miner’s fee. The miner’s fee is standard across all exchanges, and it’s a small amount used to compensate the people who allow their decentralized computers to be used to verify transactions.
While there’s no guarantee that an exchange is going to be 100 percent secure, there are ways to reduce the chances of running into a problem. First, research the exchange’s history to make sure there are no red flags. For example, Bitgrail is an exchange that was hacked, so you naturally want to avoid that one.
Next, make sure you have a storage solution ready to go for your coins. You should never hold your coins on an exchange long-term. Depending on the token, you can use either digital or hardware wallets to keep your coins secure.
Finally, you may also want to look into the exchanges’ insurance policies. Most exchanges don’t have insurance in place, but larger exchanges, such as Coinbase, may offer recourse if your coins are lost by no fault of your own.
Follow the Community
The cryptocurrency community is very large and growing every day, and there are plenty of people who regularly contribute to relevant online forums. If you search online forums for information on exchanges, you should quickly be able to get a feel for how people feel about them. If someone is wronged, they often post about it immediately to warn others. If you’re not able to get a general idea of an exchange’s reputation, you may want to move along, as an exchange without community recognition probably isn’t established enough to be trusted.
Check Processing Times
While processing times vary depending on the cryptocurrency you’re dealing with, some exchanges take longer than others to process transactions. Those waits can also vary based on your payment method. For instance, on Coinbase, you can buy cryptocurrency instantly with a debit or credit card, but you may have to wait a week for a transaction that uses a bank transfer. The market can fluctuate quite drastically in a short period of time, so make sure you know how long you need to wait so you can plan your purchase when prices are low.
Talk to People You Know
One of the easiest and most effective ways to choose a cryptocurrency exchange is to simply ask around. These days, you probably have a friend, family member, or co-worker who has gone through the process already. Of course, you should always do your own due diligence, but seeking information from people you know and trust is one of the safest ways to get informed. After all, you never know when a stranger may be providing biased information — shilling is very common in the cryptocurrency world.
With that in mind, always do plenty of research before you spend a cent on cryptocurrency and before you allow others to pay with cryptocurrency at your business. It’s an unregulated market, and anything can happen. As long as you proceed with caution and only do business with reputable exchanges, entering the vast world of cryptocurrency can be a very exciting — and potentially profitable — step for yourself or your small business.