Your first step into the cryptocurrency world will most likely occur through an exchange or brokerage. There are two main types of exchanges that we will discuss in this guide.
The first type of exchange are called fiat exchanges.
These exchanges allow the direct conversion of US Dollars, Euros, and most government-backed currencies into cryptocurrency.
The second type of exchange are called cryptocurrency to cryptocurrency exchanges.
These allow cryptocurrencies to be traded with each other. Crypto to crypto exchanges will be covered more in-depth on the second half of this page.
Depending on what cryptocurrency you are trying to obtain, you’ll need to use certain exchanges.
Based out of San Francisco, California, Coinbase is considered by many to be the most beginner-friendly exchange. It accomplishes this through its beautiful yet simple user interface.
Coinbase is a brokerage, meaning that instead of buying Bitcoin and other cryptocurrencies from other users, you are buying directly from Coinbase.
As far as fees go, Coinbase charges 1.49% on bank purchases and 3.99% on credit and debit purchases.
Due to the lower fees involved, it’s recommended to use your bank account when making large purchases.
Coinbase’s fees are on the lower end compared to other brokerages mentioned later in this guide.
You should use Coinbase if:
Coinmama is another beginner-friendly cryptocurrency brokerage that focuses on credit and debit card purchases.
Coinmama doesn’t provide its users with a wallet on the exchange. Instead, users are asked to provide a wallet address to send the purchased cryptocurrency to.
As long as you have your own wallet, this shouldn’t be an issue!
Coinmama’s fees are slightly higher than Coinbase at 5% when a credit or debit card is used.
Recently, Coinmama has made it possible to sell Bitcoin back to your bank account. This feature is only available in European countries, but it’s likely it will be available to more as time goes on.
You should use Coinmama if:
Just like Coinbase, Bitpanda has a very simple user interface, making it easy for beginners to successfully purchase in cryptocurrency.
The exchange has several payment methods such as bank transfers, credit cards, debit cards, Skrill, Neteller and more. Depending on which method is used, there may be differing deposit fees.
When it comes time to transact on the exchange, Bitpanda charges 1.49% for buys, and 1.29% on sells making them an extremely competitive option.
You should use Bitpanda if:
Headquartered in London, UK, CEX.io offers security, high liquidity, and cross-platform trading. It has somewhat high fees, margin trading, almost 100% uptime, and more.
The exchange was affected by a small hack long back but has had no issues for a while. It has over 2.8 million accounts and a wide variety of cryptocurrencies for sale.
CEX.io appears to have little no fees at first glance. They are able to do this by charging a premium on the Bitcoin price.
When a user buys cryptocurrency on their exchange, they are paying more for the actual currency compared to the other exchanges prices. This doesn’t matter too much as it is basically the same thing as a service fee.
Kraken is another popular exchange based in the United States that’s been around since 2011.
In terms of trading fees, Kraken’s are very fair and scale based on your 30-day trading volume. If you’re a maker, they range from .16% all the way to 0%. Taker fees on Kraken range from .26%-.1%.
For funding options, Kraken offers deposits in USD (FedWire), EUR (SEPA), and CAD(Wire & EFT). Like most other options, if you own cryptocurrency already, they allow for several cryptocurrency assets to be deposited on the exchange.
A unique feature of Kraken is that it allows for margin trading with up to 5x leverage. When margin trading on Kraken, eligible accounts can borrow up to $500,000 to go long or short on a cryptocurrency.
Last but certainly not least, the exchange features a powerful and intuitive API for those wanting to take their investing to the next level.
LocalBitcoins offers a highly trustworthy escrow service and peer-to-peer (P2P) exchange.
On the exchange, users to trade among themselves. Due to the nature of the transactions on the exchange, there is a resolution and feedback system.
It also allows users to post a quick buy or quick sell ad on the exchange platform. It is one of the best cryptocurrency exchanges for peer to peer trading.
LocalBitcoins is one of the better exchanges for users concerned with their privacy. Bitcoin can be purchased in person without linking an identity to an exchange.
Bitstamp is one of the oldest Bitcoin and cryptocurrency exchanges being founded in 2011. They have a wide variety of fiat vs crypto trading pairs.
As one of the oldest cryptocurrency exchanges out there, Bitstamp has proven to be one of the most reliable exchanges out there. They offer top of the line security, with highly encrypted personal information, and over 98% of assets locked in cold storage.
Although it’s based in Europe, Bitstamp users from the United States and other countries can send international transfers for a very low fee.
Want to trade on the go? Bitstamp also offers free mobile apps on Google Play and the App Store.
Gemini is an exchange based in New York, US that allows for the trading of USD against Bitcoin, Ethereum, Litecoin, Zcash, and more.
The exchange also offers high security and compliance, top of the line cold storage system that stores information offline, access controls, and multi-factor authentication.
For fees on Gemini’s brokerage service, expect 1.49% fees on buys and sells for orders over $200. Gemini’s brokerage service is an intuitive way for beginners to purchase cryptocurrency.
If you feel comfortable using their exchange feature, have your account switched to ActiveTrader mode. On this mode, fees scale base off your trading volume and are between .35% and 0% depending on if you are a maker or taker.
Here’s some information on some of the most popular crypto to crypto exchanges.
Binance is one of the newer exchanges but has impressed its customers on several occasions. They have some of the highest trading volumes on several of their trading pairs, and an enormous amount of coins available for purchase.
It is based in Hong Kong, with offices located in several other countries such as Japan and China. It is available to all countries and US states.
Binance introduced SAFU (Secure Asset Fund for Users), which takes 10% of all trading fees the exchanges earns, to give back to the users in the event of a hack. The exchange did have a hack in May 2019 but covered all user funds using the SAFU fund.
The Binance exchange features their own coin, Binance Coin, that allows users to save big on trading fees.
In June of 2019, the exchange announced that there would be a new exchange for US users to trade on that is separate from the Binance DEX. This is likely due to the regulatory status of cryptocurrency in the United States.
Changelly takes a different approach to the exchanging process. Instead of letting users store their cryptocurrency on their exchange, they set up conversion transactions. Users select an input and output currency and an amount.
In the above example, I selected .1 BTC and an opposing amount of ETH is automatically determined at the going rate. Then, Changelly provides an address to send the Bitcoin to and asks for an address to send their Ethereum to.
This effectively cuts out one step and swaps currencies in real-time. In exchange for their services, Changelly charges .5% on transactions. Fiat currencies such as the US Dollar and Euro can be used, but have slightly higher fees. Pretty cool!
Bitfinex is one of the larger cryptocurrency in terms of volume and users. It is based in Hong Kong and has trading fees of .1% for makers, and .2% for takers. It is important to note that BitFinex does not allow US users to sign up for their exchange.
Please note that Bitfinex is limited in the countries they serve and do not accept US signups.
So to sum it all up… each exchange has different pros and cons, so the best exchange for one person, might not be the best for another.
You should consider a number of things when determining the
best Bitcoin/cryptocurrency exchange for you:
Most cryptocurrency exchanges will serve their intended purpose in letting users buy cryptocurrency listed on the exchange.
The main differences are the exchanges fees, customer support, the number of supported coins, and supported countries. To ensure you have access to as many cryptocurrencies as possible, it may be wise to sign up for each exchange.
The important things to take away from this page is the difference between the two main types of exchanges.
The first set is commonly referred to as fiat exchanges, and allow users to use credit cards, debit cards, and bank transfers to purchase cryptocurrency. The most popular fiat exchange is Coinbase.
The other type of exchange is known as a crypto to crypto exchange and only allows cryptocurrencies to be exchanged with each other. No fiat currencies or debit/credit or bank transfers are used on these exchanges.
Depending on what type of exchange you are trying to deposit into, this will differ. If the exchange is a fiat exchange, you must link a payment method such as a bank account, credit card, or debit card.
If it’s a crypto to crypto exchange, you will find a tab or page on the exchange titled wallets, deposits or something of the sort. Click that, and from there you will see a deposit address for every cryptocurrency available on the exchange.
Similarly to deposits, this will vary depending on the type of exchange. Most fiat exchanges allow users to withdraw sold cryptocurrency back into their bank accounts. It is somewhat rare to find an exchange that allows withdrawals to a credit or debit card.
For crypto to crypto exchanges, you can most likely withdrawal from the wallet tab mentioned earlier. You will need to provide another wallets deposit address in order to send the transaction.
Lastly, some exchanges will have limits on withdrawals, that can be improved by verifying your identity.
As of right now, it’s unsure just what will happen with Facebook Coin. We know it will be a stablecoin used to send payments on the social network.
Its regulatory status in the United States is still very unclear, but as time goes on we will know more.
Absolutely! While the IRS hasn’t been very clear on their guidelines for cryptocurrency tax law, they are treating them like normal cryptocurrency at the moment.
Here’s an informative slideshow created by the IRS handling cryptocurrency.