What To Look for In A Bitcoin Exchange
Bitcoin has more than doubled its value since the beginning of the year, and we’re not even halfway through 2017. BTC opened the year at just under $1,000. At the start of business on May 25th, it opened at just under $2,500. Aside from a couple of noticeable dips, the value has steadily inclined in the past five months.vThis has led to a lot of speculation. Should I buy into the currency? How can I buy bitcoin? Should I sell my bitcoin now or wait to see if it continues to climb? What sort of exchange should I use? There are tons of questions being tossed around right now. But you should base what to look for in a bitcoin exchange on what you’re trying to do with the currency.
Right now, pretty much everyone believes the price will continue to climb, as more and more people begin to buy into the cryptocurrency. But some people are skeptical of its astronomical growth in such a short period of time. With the value trending in such a steep upward direction, one big question that keeps getting tossed around is if we’re in the middle of a really dangerous bubble.
“87% [growth] in a month is not a normal price movement,” says Matthew Lynn, a writer for MarketWatch. “No one really needs to spend time debating whether it’s a bubble or not. It’s just obvious. The interesting question is…how much damage it might do when it bursts.”
One of the scariest parts of a bubble is the lack of liquidity that it creates in an exchange. When the bubble bursts, everyone is going to want to get out as fast as possible, to maintain the largest profit margin. But no liquidity means no way for the exchange to pay out. That’s what causes an even steeper drop in value and bankrupts an investment. So a bubble can be extremely dangerous for those who are looking to make a profit on a short term investment. If you’re one of those people, finding a bitcoin exchange to sell at might be in your best interest.
But there is another way to look at the cryptocurrency. If you had invested $1,000 in BTC in 2010, you would be sitting on nearly $38 million today. But that required seven years of patience and going through several big price dips, most notably the sort of “bubble burst” of 2014. Thus, those investors who are in it for the long-haul have raised an equally important question to counter Mr. Lynn’s. Does the bubble even matter?
Martin Tiller puts it succinctly in his piece for Nasdaq.com. “When you consider recent price action, it is hard to argue that Bitcoin is not in a bubble of sorts. All the signs are there…but for those who believe that Bitcoin really is the future that doesn’t matter,” says Tiller. “If you buy into the basic premise that the global economy can handle a disinflationary currency like that…then the current rate of exchange for other currencies is not the point.”
Basically, if you bought into bitcoin as an investment for the future, and you’re not looking to make an immediate profit, it doesn’t matter if BTC peaks and goes down again. You’re looking at the long-term, and don’t really need to be looking into an exchange, unless you’re trying to buy BTC as an investment.
But, that choice is up to one person and one person only – you. So, if you are looking for an exchange, we recommend finding one that is safe to use and has some basic qualifications. There are tons of different bitcoin exchanges around the world, so it’s not really a lack of markets that you should be concerned about. Rather, it’s always better to know that you’re using the best one. Or at the very least, the best one for you.
Whether you’re new to using Bitcoin and want to buy yourself some BTC for the long haul, or you’re convinced this bubble is the end all be all of bitcoin, we’ve put together a little checklist of details you should always know and research before you start using a BTC exchange. At least in our opinion.
Technically speaking, liquidity is the amount of liquid assets that a market or company has. If a company has a high liquidity, it means that the price of the product, in this case, bitcoin, won’t be affected in any major way despite all of the transactions. You want that when it comes to a bitcoin exchange. So to tell if a market has an adequate liquidity, take a look at how many people are using it, and more importantly, how many bitcoins are being traded. A higher volume of product being traded at a market means that you don’t have to worry about the value of BTC falling or rising in any significant way just because a few transactions took place.
You want a book that’s going to be able to give it to you straight up. You want to trust the exchange, but don’t do so blindly. Find an exchange that publishes its order book. This gives you insight into how many buy and sell orders are placed at that exchange. It also shows the volume (aka the liquidity) that the exchange is trading at. Another thing that should be published by the site is their financial audit information. This allows you to see if they have enough bitcoin in storage in order to cover all current and future transactions. Knowing that the site doesn’t have anything to hide is just a good way to achieve peace of mind.
While bitcoin is a digital currency with no physical bank, it is important to find an exchange that is located near you. This is because financial laws and regulations vary greatly from place to place. The laws and regulations surrounding exchanges and how they are conducted is different based on the laws in each country. So it is important to choose an exchange that follows the financial regulations in your location.
As with literally anything in life, it costs money to conduct a trade at a bitcoin exchange. So the key to finding the right exchange for you is finding the one that doesn’t charge you some outrageous percentage. Usually, the fee percentage is based on how much BTC you’re trading per 30 days. As the volume goes up, so does the fee. There aren’t any exchanges with flat rates as of yet, so it’s really just about doing some research and finding the best one near you with the lowest percentages per volume.
When your bitcoin review comes to choosing a bitcoin exchange, it’s all about finding what makes you comfortable. But there are some key factors to keep in mind when you’re choosing one, like locations and fee pricing. Hopefully now, you’ll feel more confident when it comes to choosing the right bitcoin exchange for you.