Buying, selling, and using cryptocurrencies for several purposes is not as simple as it seems. Before doing so, new, and curious crypto investors first need to understand how things work. They have to start off by making decisions on how to invest and store their digital assets. Investors are required to evaluate and understand where and how to transact for cryptocurrencies. This even includes the analysis of whether staking tokens is worth it or not.
Many people stake their assets to earn rewards or interest for holding a certain percentage of crypto. All of this inevitably points to the use of crypto exchange. There are countless crypto exchanges available for users to use. In most cases, the specific choice of a crypto exchange can either make the trading experience a walk in the park or turn it into a complete nightmare. There is a high chance that a user might come across an exchange that is too good to be true.
On the other hand, many exchanges have previously scammed users. Most recently, FTX, a well-known crypto exchange is on the brink of collapse. The CEO of the exchange, Sam Bankman-Fried, approached rival exchanges and multiple banks to raise funds. However, FTX is undergoing an abrupt collapse as many of them have refused to lend a helping hand. Therefore, the funds of millions of people are at risk too.
Choosing a Safe and Secure Exchange
There are some factors an investor must keep in mind before choosing a crypto exchange.
FTX aside, avoid businesses/exchanges/projects that:
– are not profitable (musical chairs)
– survive by selling their own tokens
– give high incentives for locking your tokens
– have a large total supply, but only a small circulation supply
– involves loans
Stay #SAFU 🙏
— CZ 🔶 Binance (@cz_binance) November 11, 2022
- Staying Vigilant About Trading Volume: The exchange in which a user deposits his money must fulfill his buy and sell orders smoothly without making him pay any surcharge. Exchanges have to be liquid, because they have a high daily trading volume. On the other hand, less liquid exchanges tend to have a smaller user base and are the most fraudulent.
- Keeping an Eye Out on Fees: Crypto exchanges rely heavily on fees every time a user carries out a transaction. Fees usually vary up to a 4.5% mark. If they are higher, an investor is most likely walking into a trap. Exchanges that offer unbelievable incentives and rewards are also usually scamming people.
- An Exchange Selling its Own Tokens: A major red flag to look out for is a crypto exchange selling off its own tokens. If this exchange relies on the sale of its token, it can lead to several problems later. A non-profitable company cannot protect the assets of consumers.