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Cryptocurrency Trade Ranking Methodology – Investopedia

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Should you’d wish to commerce or spend money on cryptocurrency, opening an account with a crypto trade is a straightforward option to get began. Cryptocurrency exchanges are platforms that will let you purchase, promote, and commerce cryptocurrency. However because the crypto market grows, increasingly exchanges have gotten out there, and every trade varies barely when it comes to safety, charges, options, and choices. 

Given the numerous choices out there, figuring out which trade is best for you could be a tough process. To make the method easier, we reviewed and rated 28 common crypto exchanges utilizing standards related to potential prospects. This information explains our analysis course of. 

Investing in cryptocurrencies, Decentralized Finance (DeFi), and different Preliminary Coin Choices (ICOs) is very dangerous and speculative, and the markets might be extraordinarily risky. Seek the advice of with a certified skilled earlier than making any monetary selections. This text shouldn’t be a advice by Investopedia or the author to spend money on cryptocurrencies nor can the accuracy or timeliness of the data be assured.

Our Ranking Course of

To objectively consider every trade, we collected knowledge on and in contrast 28 corporations throughout the next classes:

  • Safety
  • Charges
  • Choices
  • Availability
  • Options 

Inside every class, we thought-about a number of components, such because the variety of spot currencies and order varieties supported, complete international locations the place the trade is accessible, buying and selling charges, and extra. We scored every issue on a 0-to-1 scale (or as a zero or one, relying on the issue), with zero being the worst potential rating and one being the best potential rating. 

We then assigned a proportion weighting to these scores and established an general 1-to-5-star score for every trade. One star is the bottom potential score, and 5 stars is the best.

Information Assortment

Information assortment was a key a part of our analysis course of. We gathered knowledge from firm web sites and media contacts to make sure we had probably the most correct info potential to fee every crypto trade objectively. Our analysis workforce collected 924 knowledge factors (33 knowledge factors per firm) and weighted greater than 20 standards to find out firm rankings.

Safety

For these concerned with crypto buying and selling and investing, safety is an important issue to contemplate when selecting an trade. With this in thoughts, we evaluated a number of components associated to safety, assigning a zero or one rating to every and a proportion weighting based on significance:

  • Decentralized (10%)
  • Chilly storage (10%)
  • Know-Your-Buyer (KYC) requirements (2%)
  • Multi-factor authentication (10%)
  • FDIC insurance coverage (5%)

Decentralized

We evaluated whether or not every cryptocurrency trade was centralized or decentralized. With centralized crypto exchanges, transactions are facilitated by a 3rd social gathering. It is comparatively straightforward to get began with a centralized trade, and plenty of common exchanges similar to Coinbase and Gemini are centralized. 

With decentralized exchanges, transactions aren’t facilitated by a 3rd social gathering. As a substitute, customers management their funds and purchase, promote, and commerce immediately with different customers. Transactions are recorded on the blockchain upon which the trade is constructed. Due to this, decentralized exchanges are typically thought-about extra clear and safe. 

We assigned centralized exchanges a rating of zero in our analysis, and decentralized exchanges obtained a rating of 1. Whether or not an organization is decentralized accounts for 10% of its general star score.

Chilly vs. Scorching Wallets

We additionally thought-about whether or not the crypto exchanges we evaluated provided scorching or chilly wallets or a mixture of each. Scorching wallets are internet-connected, whereas chilly wallets will not be. On the whole, chilly wallets are thought-about safer, nevertheless it’s simpler to purchase and commerce cryptocurrency utilizing a scorching pockets. 

Exchanges providing chilly wallets or a mixture of cold and warm wallets obtained a rating of 1, whereas these providing no storage obtained a rating of zero. These scores make up 10% of our general star rankings.

KYC Requirements

Know-Your-Buyer, or KYC, requirements have been developed to assist reduce situations of fraud and cash laundering on monetary platforms. Crypto exchanges that observe KYC requirements require that customers confirm their identities. Sometimes, this includes sharing some private info or offering a duplicate of a government-issued photograph ID, similar to a passport or driver’s license.

Exchanges following KYC requirements obtained a rating of 1 in our analysis, whereas these not following KYC requirements obtained a rating of zero. These scores account for two% of our general star rankings. 

Multi-Issue Authentication  

Multi-factor authentication includes authenticating your account by SMS or a third-party service like Google Authenticator earlier than you may log in. Accounts with multi-factor authentication are typically thought-about safer than accounts that don’t supply this added layer of safety. 

In our analysis, we assigned exchanges providing multi-factor authentication a rating of 1, and exchanges that didn’t present this safety function obtained a rating of zero. These scores account for 10% of our general star rankings.

FDIC Insurance coverage

Whereas cryptocurrency shouldn’t be FDIC-insured, some crypto exchanges supply FDIC insurance coverage for U.S. greenback quantities held on their platforms. Usually, this insurance coverage is offered by accomplice banks. 

In our analysis, crypto exchanges providing FDIC insurance coverage by accomplice banks obtained a rating of 1, whereas people who didn’t supply it obtained a rating of zero. These scores make up 5% of our general star rankings.

Charges

Charges can fluctuate broadly relying on which cryptocurrency trade you’re utilizing. Provided that this is a crucial consideration for crypto merchants and traders, we in contrast varied charges throughout exchanges. 

We graded every trade’s charges on a 0-to-1 scale, with exchanges that provide decrease charges receiving scores nearer to 1. Scores have been then weighted as follows, for a complete of 20% of the general star score:

  • Buying and selling charges (10%)
  • Deposit charges (5%)
  • Withdrawal charges (5%)   

Buying and selling Charges

In our evaluation of buying and selling charges, we thought-about maker charges, taker charges, and derivatives buying and selling charges. We in contrast charges throughout every trade and assigned a 0-to-1 rating for every charge kind. These scores have been then used to calculate an general buying and selling charge rating, which accounts for 10% of our complete star score for every firm.  

Deposit Charges

We additionally checked out each crypto and fiat deposit charges for every trade, and firms that provided no charges or decrease charges obtained larger scores on our 0-to-1 scale. We then assigned an general deposit charge rating, which makes up 5% of every firm’s star score.  

Withdrawal Charges

Crypto exchanges additionally cost withdrawal charges in sure circumstances. Throughout our analysis, we checked out every firm’s crypto and fiat withdrawal charges and assigned a 0-to-1 rating for every. We then used the crypto and fiat withdrawal charge scores to develop an general rating. This rating accounts for five% of every firm’s complete star score.

Choices

In our analysis of every trade, we additionally thought-about its choices similar to what number of cryptocurrencies are supported. We collected knowledge on the next standards and assigned a proportion weighting primarily based on significance:

  • Crypto belongings (5%)
  • Derivatives (4%)
  • Order varieties (4%)
  • Over-the-counter (OTC) buying and selling (2%)
  • Third-party buying and selling bots (1%)

Crypto Belongings

Sure exchanges supply extra supported cryptocurrencies than others. Those who provided a better variety of supported belongings scored larger on our 0-to-1 scale, whereas people who provided a restricted variety of belongings scored decrease. These scores accounted for five% of every firm’s complete star score.

Derivatives

Derivatives are a sort of contract between a purchaser and vendor, and the worth of the contract is tied to an underlying asset. Within the case of crypto, a derivatives contract’s worth aligns with the worth of an underlying coin or token. There are a number of forms of derivatives contracts that can be utilized for various functions. As an example, merchants might use a futures contract to invest on the long run value of an asset, and the contract might stipulate sure purchase and promote commitments. 

In our analysis course of, we thought-about whether or not every crypto trade provided derivatives, in addition to the kinds they provide. We scored every firm on a 0-to-1 scale primarily based on the variety of derivatives it affords. Exchanges with a number of derivatives choices obtained larger scores. These scores make up 4% of our complete firm star rankings.   

Order Sorts

Totally different cryptocurrency exchanges might supply totally different order varieties. As an example, some might supply restrict orders, which let you specify a most value for which you’ll buy an asset or a minimal value for which you’ll promote an asset. Others might not supply this order kind. 

We collected knowledge on the totally different order varieties every trade affords after which used this knowledge to attain every firm on a 0-to-1 scale. Exchanges with a bigger variety of order varieties obtained a better rating than these with a smaller quantity. These scores accounted for 4% of an organization’s general star score.

OTC Buying and selling

If a cryptocurrency trade helps OTC buying and selling, it permits two events to conduct transactions immediately as a substitute of by the trade. OTC buying and selling is commonly utilized by those that need to purchase or promote a considerable amount of cryptocurrency. Some exchanges supply this selection for institutional merchants or high-net-worth people trying to make massive transactions. 

We collected knowledge on whether or not or not every crypto trade we evaluated helps OTC buying and selling. Exchanges that assist this selection obtained a rating of 1, whereas people who didn’t obtained a rating of zero. These scores make up 2% of an organization’s general star score.

Third-Get together Buying and selling Bot

We additionally thought-about whether or not or not exchanges we evaluated assist third-party buying and selling bots. These buying and selling bots, which permit customers to customise their buying and selling expertise, can combine with an trade’s API. They might supply added worth to high-volume customers or these trying to automate their trades. 

Exchanges that assist third-party buying and selling bots obtained a rating of 1 in our analysis, whereas these that don’t obtained a rating of zero. These scores make up 1% of our complete star rankings for every firm.  

Availability

Throughout our analysis course of, we additionally thought-about the provision of every crypto trade on our listing. We seemed on the following components on this class and scored every trade on a 0-to-1 scale primarily based on its availability. Then we assigned a proportion weighting to every and used these percentages to calculate our general star rankings.

  • International locations out there (5%)
  • Fiat funding choices (8%)

International locations Accessible

As a consequence of regulatory components, crypto exchanges typically aren’t accessible in each nation. As an example, Bitfinex shouldn’t be accessible in the US. Exchanges that have been out there in additional international locations obtained a better rating in our analysis, and these scores accounted for five% of our general star rankings for every firm.

Fiat Funding Choices

To evaluate availability from a funding perspective, we additionally thought-about which fiat funding choices every firm affords. We checked out three various factors associated to this class and got here up with an general fiat funding rating, then every rating was weighted and used to tabulate our general star score. 

Classes and proportion weightings are as follows:

  • Funding by way of on-line service (3%)
  • Funding by way of ACH switch (3%)
  • Funding by way of wire switch (2%)

Options

As you’re evaluating crypto exchanges, you need to be sure that every trade has the options you need. As an example, you could be concerned with making use of for a bank card that earns crypto rewards or incomes curiosity in your crypto. Some exchanges might supply these options whereas others might not. 

In our analysis of options, we thought-about the next standards, scored every on a 0-to-1 scale, and assigned proportion weightings primarily based on significance:

  • Bank card with crypto rewards (2%)
  • Skill to earn curiosity with crypto (2%)
  • Crypto lending (2%)
  • Buyer assist (5%)
  • Different rewards choices (3%)

Credit score Card With Crypto Rewards

Sure exchanges supply co-branded bank cards that will let you earn crypto rewards to your day-to-day spending. As an example, BlockFi affords a Visa bank card that permits customers to earn 1.5% again in crypto rewards on their purchases. We thought-about if exchanges provided a crypto rewards card in our analysis, and this issue accounted for two% of every firm’s complete star score.

Skill to Earn Curiosity With Crypto

Some traders need to earn curiosity on their crypto holdings by holding it on an trade or lending it to others, so we additionally thought-about this in our firm evaluations. The choice to earn curiosity on crypto makes up 2% of every firm’s general star score. 

Crypto Lending

Should you’d wish to borrow in opposition to your crypto holdings, some cryptocurrency exchanges supply this selection. We collected knowledge on whether or not or not an trade provided crypto lending, and the provision of this selection makes up 2% of our general firm rankings.

Buyer Assist

Since many crypto exchanges are comparatively new, they might not supply many choices for buyer assist. However as a buyer, having the ability to entry buyer assist is important for those who encounter issues or have questions on your account. Given this, we collected knowledge on buyer assist choices and scored every trade on a 0-to-1 scale primarily based on the variety of choices out there. Buyer assist scores make up 5% of our general firm star rankings.

Different Rewards Choices

Sure exchanges supply rewards for particular actions, like referring a good friend or sustaining a excessive steadiness of a selected asset. Rewards might are available in just a few varieties, together with bonus earnings or discounted charges. We assigned a 0-to-1 rating to every trade primarily based on the variety of rewards it provided.     

Selecting the Proper Cryptocurrency Trade for You

For these concerned with buying and selling or investing in crypto, choosing the proper trade is essential. However a number of components will doubtless affect your resolution.

Utilizing publicly out there info, we evaluated a number of high cryptocurrency exchanges and rated them primarily based on components of significance to potential prospects. As a part of our analysis course of, we thought-about security measures, charges, choices, availability, and different components. Whereas we strived to be as goal as potential in our rankings and opinions of every crypto trade we evaluated, figuring out which trade is best for you will rely in your particular person wants and preferences. 

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