What Is a Crypto Exchange and Tips to Find One?
Like most countries globally, the NZGovernment does not consider Bitcoin or crypto illegal, meaning it can be bought and sold on exchanges if proper anti-fraud measures are adhered to.
Cryptocurrencies are becoming more popular, and as the market grows, the need for crypto exchanges increases. So, what is an NZ crypto exchange, and how do you find one right for you?
A crypto exchange is a platform where you can buy and sell cryptocurrencies. They vary in terms of security, features, fees, and countries supported. It is essential to do research before choosing one.
This article will give a brief overview of what to look for when choosing a crypto exchange.
What is a Crypto Exchange?
Crypto exchanges are websites where you can swap your fiat currency for cryptocurrency and vice versa.
Cryptocurrency is a virtual currency that uses cryptography for security purposes to regulate its creation and management. The first cryptocurrency was Bitcoin which an unknown programmer created in 2008 as a payment system independent from any central authority such as banks or governments. Today there are over 2,000 cryptocurrencies with more than $200 billion market capitalization.
How Does a Crypto Exchange Work: Basics
The current price of Bitcoin in New Zealand is NZ$16,130.60; however, this amount changes every minute. Hence, if you want to buy some Bitcoin, you need to find a reputable crypto exchange. But how does a cryptocurrency exchange work?
When you want to purchase or sell Bitcoin, you need to find a willing counterparty. The best place to do this is on a cryptocurrency exchange. The platform has a digital ledger that keeps track of all the transactions that have taken place.
It is important to remember that the price of Bitcoin and other cryptocurrencies are highly volatile. It means that the price could go up or down by a significant amount quickly.
Crypto exchanges match buyers and sellers and take a small commission for facilitating each trade. They also offer other services such as wallets to store your digital currency.
When you set up an account on a crypto exchange, you must verify your identity. It is done by uploading a copy of your passport or driver’s license. Once your account is verified, you can buy and sell Bitcoin and other cryptocurrencies.
Types of Crypto Exchanges
Here are the basic types:
1) Centralized exchanges
Centralized exchanges are the most popular type of exchange. They look and feel a lot like traditional brokerages or stock exchanges, and they offer many of the same features. Most importantly, they match buyers with sellers and facilitate trades.
One significant advantage of centralized exchanges is that they offer direct fiat-to-crypto pairs, which means you can use your government-issued currency to buy Bitcoin and other cryptocurrencies. It is helpful for people who don’t already have any cryptocurrency to trade.
There are also a few disadvantages to centralized exchanges. Because they act as intermediaries, they can be subject to hacks and theft. In addition, centralized exchanges usually charge higher fees than other types of exchanges.
2) Decentralized Exchanges (DEXs)
A DEX is an NZ crypto exchange that does not rely on a third party to hold or manage users’ funds. Instead, trades are facilitated directly between users (peer-to-peer). DEXs are often lauded for their increased security, as funds are not held by a centralized entity that could be hacked or bankrupt.
However, they can be more complex than centralized exchanges and often have lower trading volumes.
3) Fiat-to-Crypto (Currency) Exchanges
fiat-to-crypto exchanges allow users to buy cryptocurrencies with traditional fiat currencies. These exchanges usually accept deposits via bank transfer or credit card.
Things to Consider While Choosing an Exchange Platform
1) Decide The Type Of Exchange Platform You Need
There are different types of exchanges suited for different purposes. You might want to use a simple platform that allows you to buy and sell cryptocurrencies if you’re starting.
However, if you’re planning on doing more advanced trading (like margin trading or day trading), you’ll need to use a more advanced platform that offers features like stop-loss orders and margin trading.
2) Consider The Fees
Different exchanges charge different fees for their services. Some charge a flat fee per trade, while others charge a percentage of the total trade value. Make sure to compare the fees charged by different exchanges before choosing one.
3) Consider The Payment Methods
Most exchanges accept payments via bank transfer or credit/debit card. However, some also accept other payment methods like PayPal or cryptocurrency.
Whether you’re a first-time buyer or an experienced trader, finding a crypto exchange that meets your needs is essential. It can be overwhelming if you don’t know where to start as there are so many available options. However, with research, you can find the best place easily.