A Short List of Things You Might Want to Check Out
Today there is a greater availability of cryptocurrency exchanges than ever. The number of active exchanges is greater than 350, without including DEX's (decentralized exchanges) and exchanges that deal with derivatives.
This creates a multitude of choices for traders and HODLer's who want to purchase or sell cryptocurrencies. While having more choice is great, some exchanges employ various tactics to enlarge draw in new clients. Some even take part in tactics such as wash-trading to make their exchange seem more popular than it is.
As such, we've compiled a list of things you should check before trading. If an exchange has more than one of the issues described, you might want to trade elsewhere.
Trading Volume Gaps
While looking at the BTC/KRW charts here, a strange irregularity was noted. That being flat horizontal lines on the charts. Additionally, the flat lines also correlated with the trading volume dropping to near zero.
These gaps seem to be indicative of a trading bot that essentially fakes trading volume. The flat lines and drops in volume seem to show a bot malfunction or temporary shutdown.
A good exchange would ideally have high liquidity to fill buy/sell orders and wouldn't need to "spoof" its trading volume.
Fake Followers or a Low Follower Count
Every trustworthy exchange has several social media channels. Be sure to verify that their channels have an amount of followers that somewhat mirrors their liquidity. Better known exchanges have more followers.
Additionally, try checking out if their followers are real or bots. There are a multitude of tools that you can use, such as Twitter Audit.
The world of regulations and laws regarding cryptocurrencies is becoming more complex by the day. Different countries tend to have very different laws regarding cryptocurrencies and how they should be handled or taxed.
Regardless, an exchange is a business that is usually based in a specific country. Try checking if they are registered as a business and has suitable licensing to handle and buy and sell cryptocurrencies.
Scams happen in the world of cryptocurrencies and not every exchange is trustworthy. As such, a look into reviews would be recommended.
It is completely normal for even the most trusted exchange to have some negative reviews as not every trader makes a profit. That being said, one should avoid an exchange with over-whelming bad reviews or no reviews what-so-ever.
Ideally an exchange will have a multitude of different deposit options that should include popular cryptocurrencies and fiat options. If an exchange only has one or two deposit/withdrawal options, it should raise some eyebrows.
Many popular exchanges allow for purchase of cryptocurrencies through a credit-card gateway. If that is the case in the exchange you are using, make sure that their payment processor is well known and trusted.
Stay safe and have a fun & profitable time trading!
Written by Jonathan Ganor
Writer & cryptocurrency aficionado