Exchanging cryptocurrency – what you need to know
Most people who buy cryptocurrencies do so using a fiat currency. However, it is also possible to “buy” different cryptocurrencies by exchanging one for another. Doing so has become easier over the years and if you want to do so, there are a few things you need to know first.
If you want to trade or exchange cryptocurrency, the first thing you need is an exchange.
A crypto exchange works similarly to a stockbroker and an stock market exchange in that it makes it possible to buy, sell, trade, and exchange cryptocurrency.
The trades and exchanges are done at fair market values dictated by the market as well as what people are willing to pay for a specific cryptocurrency. The latter typically applies to peer-to-peer exchanges where a seller puts up their cryptocurrency for sale at a specific price and a buyer decides to buy it at that price.
Exchanges also happen similarly where one person says what they have and what they are willing to exchange it for. If another person meets those conditions, the exchange facilitates that transaction, and everyone gets what they want.
To get started, the first thing you need to do is find a suitable exchange. There are lots of things to look for and consider when choosing one, but the most important ones are:
- Security: The exchange must have a history of secure transactions, asset storage and user account storage.
- Accessibility: You might not be able to trade or exchange on certain platforms due to regulatory constraints. Many countries have their own regulations regarding cryptocurrencies due to their uncertainty and this is something you need to be cognizant of.
- Fees: Some cryptocurrencies have fixed fees while others have variable fees dictated by market volatility. Also, be aware that some exchanges have different fees and fee structures depending on whether you are selling or buying.
Making the trades and exchanges.
To buy, sell or exchange crypto, you will need an account. This account helps protect both your fiat currency and crypto assets. A secure account is also crucial if the exchange provides a wallet to store your assets.
Next, you need to deposit some money. Exchanges provide different ways of doing this including using a debit or credit card, or your bank. Some will also ask to verify your identity before depositing, but many ask for it before withdrawing cash after completing a transaction.
Once you have deposited the funds, you can start trading or exchanging cryptocurrency.
Identifying the cryptocurrency.
But how do you pick a cryptocurrency to buy? Important criteria to consider include its utility which gives it longevity, positive market sentiment, and cost. While the exchange will give you the price of different cryptocurrencies, you can also do a quick check using a crypto conversion calculator. This calculator will show you the exchange rate of cryptocurrencies against different fiat currencies as well as other cryptocurrencies. Such a conversion calculator is also important when doing exchanges as you can directly compare the exchange rate of two cryptocurrencies.
Trading or exchanging cryptocurrencies is easy on an exchange. However, you need to find a suitable exchange, deposit some funds and find the right crypto assets to buy and then exchange if you wish.