A cryptocurrency trading platform is an online portal (exchange) that facilitates crypto-to-crypto transactions. They support the trading of digital assets, coins, and tokens issued on a blockchain.
In this definition...
What does a cryptocurrency trading platform do?
Crypto trading platforms, sometimes referred to as crypto exchange, convert fiat currency (government-issued money that is not backed by any commodity, such as gold or silver and is recognized as legal tender) or other digital assets into cryptocurrencies like Bitcoin, Ethereum, or Ripple and vice versa. These portals also offer direct conversion between two different types of cryptocurrencies at predetermined prices based on market dynamics and demand.
A cryptocurrency trading platform allows users to buy, sell, and exchange cryptocurrencies for other digital currencies or fiat currency (e.g., USD).
Many different exchanges are available online, each offering unique services and payment methods. For example, some have an electronic system that matches buyers and sellers automatically, some have an order book where buyers post bids and sellers post asks at specific prices, and some offer a direct peer-to-peer exchange.
Each exchange has the rules of its own operation, but most allow users to deposit funds using bank transfers or credit cards. Therefore, it’s important to know how each platform works before choosing an exchange.
In addition, each cryptocurrency trading platform has unique features that differentiate it from competitors. These features may include a demo account, forums, historical data, chat rooms, built-in order books, price charts, market depth data, candlestick charts, and more.
How does a cryptocurrency trading platform work?
A cryptocurrency trading platform works like a stock market: Users can place bids and asks, also known as limit orders, for specific amounts of coins at specific prices. The highest bid at any given time becomes that day’s best ask price; meanwhile, if someone places an order lower than a user’s bid, it becomes their new best bid price.
The only difference is that instead of dealing with stocks, they deal with digital currencies. These exchanges operate similarly by matching buyers and sellers who then transact directly with each other through their accounts.
As such, crypto exchanges are an easy way to get started with cryptocurrencies, especially for users with no prior experience buying or selling digital assets.
Like most trading platforms, cryptocurrency trading platforms require that users register before using them. After they’ve successfully created an account, users can easily purchase and sell cryptocurrencies at their leisure.
They will also have access to charts and technical analysis tools that may help them decide when to buy or sell as well as additional services, such as cryptocurrency wallets, price alerts, margin trading and more.
Are cryptocurrency trading platforms safe/secure?
Although cryptocurrency trading platforms are regulated, cryptocurrencies are decentralized, meaning a single authority can’t regulate them.
Regardless, investors and traders can still enjoy relatively good security. For example, most cryptocurrency exchanges store their assets in cold storage, which means they are held offline on computers that are never connected to any network.
If one of these devices gets hacked, there will be no way for cyber criminals to access users’ money, as it will be stored offline and out of reach.
However, users should always do thorough research before choosing an exchange or trading platform. Most importantly, check if they have a solid reputation and history regarding keeping customer funds safe and secure.
Furthermore, while trading platforms themselves are secure, user accounts on one may not be. It’s important to note that neither the bank nor the government insure cryptocurrency accounts, so if a user’s wallet is hacked or stolen, there’s no way to recover the funds.
Crypto trading platforms users looking to secure their account should use two-factor authentication (2FA) and store most of their funds in cold storage.
How to choose the best cryptocurrency trading platform
When it comes to cryptocurrency trading, there are many different options. Therefore, users looking for a solid crypto trading platform should consider these important factors before making their choice.
- Safety and Security: Most importantly, users must conduct research and choose a cryptocurrency trading platform that will keep their assets safe and secure.
- Liquidity: Users should consider how easily they can buy and sell coins on their exchange without affecting prices too much. If a crypto trading platform has low liquidity, users might have trouble selling their coins when needed.
- Fees: If an exchange charges high fees for trades or withdrawing money, users could face getting less value out of every transaction they make.
- Customer Support: If something goes wrong with users’ accounts, they will need help from customer service as soon as possible.
- Ease of Use: If an exchange’s interface is confusing or difficult to navigate, users might miss out on opportunities for profit by not being able to execute quickly enough.
What are the top 5 cryptocurrency trading platforms?
There are various cryptocurrency trading platforms, but not all platforms are created equally in terms of features, ease of use, security, and customer support. Here are the top five cryptocurrency trading platforms.
Coinbase
Coinbase is a crypto trading platform founded in San Francisco, California, in 2012 by Brian Armstrong and Fred Ehrsam. Currently, it has more than 89 million verified users from over 100 countries. In addition to allowing users to buy and sell cryptocurrencies, it also allows them to convert their cryptocurrency into fiat currency through its Coinbase Exchange feature.
Key Features
- The platform provides real-time and historical cryptocurrency market data.
- Coinbase security features include two-step verification, biometric fingerprint logins, FDIC insurance, and AES-256 encryption for digital wallets.
- The platform offers users educational resources.
Binance
Founded in 2017, Binance is one of the fastest-growing exchange platforms that supports multiple cryptocurrencies, including its own BNB (Binance Coin) coin. Users can buy cryptos with fiat currency or trade cryptos for other cryptos, and the platform allows users to participate in ICOs on their platform. A user-friendly interface makes it easy to use, even for beginners.
Key Features
- Security features include 2FA verification, Federal Deposit Insurance Corporation (FDIC)-insured United States dollars (USD) balances for Binance, U.S., device management, IP address whitelisting, and cold storage.
- The platform supports various types of transactions, including limit order, market order, stop-limit order, peer-to-peer trading, margin trading, and more.
- Binance provides real-time and historical cryptocurrency market analytics.
Uphold
Uphold is a multi-asset exchange platform where users can buy and sell cryptocurrencies, national currencies, equities, and precious metals. Launched in 2015, Uphold is present in more than 184 countries.
Key Features
- Uphold supports the trading of multiple assets, including precious metals, U.S. stock, national currencies, and more.
- Uphold users can set up automatic trade on the platform.
- Uphold security features include 2FA, bug bounty programs, platform insurance against theft, and cold storage.
- The platform supports transaction types such as buy, sell, trade, hold, and limit.
Gemini
Gemini Exchange, founded by Cameron and Tyler Winklevoss in 2015, is a cryptocurrency trading platform that provides individuals and institutions with a secure way to buy and sell digital assets.
Key Features
- Gemini security features include two-step verification, FDIC insurance, Gemini wallet digital insurance, U2F security with a hardware key, and cold storage.
- Supported transactions types include buy, sell, trade, deposit, and withdraw.
- The platform offers over-the-counter (OTC), peer-to-peer crypto trading.
Crypto.com
Crypto.com is a cryptocurrency trading platform founded in 2016 that allows users to buy, sell, store, send, and track their crypto assets from over 250 cryptocurrencies. The platform has been designed for simplicity and ease of use, meaning it’s suitable for both beginners and experienced traders.
Key Features
- Crypto.com security features include two-step verification, FDIC insurance, platform insurance against theft, cold storage, and uses a bug bounty program.
- Crypto.com wallet includes security features such as multi-factor authentication, biometrics, and private keys locally encrypted.
- The platform allows users to invest in NFT products.
