When it comes to cryptocurrency exchanges, not all of them are created equal. In fact, some of them are downright shady. If you’re looking to invest in cryptocurrencies, it’s important that you do your research and only use exchanges that offer a legitimate service. So, how can you tell if an exchange is legitimate? There are some ways to check this!
Do Your Homework
You need to be well informed on the subject matter in order to be sure you found legit exchanges. Once you do this, it’s also going to be important to compare the best crypto brokers in 2022 in order to see which one fits you better. Research is the most important step in this process.
When researching exchanges, look for things like a physical address, contact information, and company registration. You can also check if the exchange is regulated by doing a search on the regulator’s website. If you can’t find any information about the exchange, it might be best to avoid using it.
Check Trading Volume And Liquidity
The trading volume represents the total number of coins that have been traded within the last 24 hours. Liquidity represents the ability to buy or sell those coins without affecting the overall market price.
If an exchange has a high trading volume and low liquidity, it means that there are a lot of people trading on that exchange but not enough to maintain a stable market price. This could be due to the exchange being new or having low reserves.
To check an exchange’s trading volume and liquidity, you can look at its order book. The order book shows all of the current buys and sells orders for a particular coin. If there are a lot of orders close to the current market price, then the exchange has good liquidity. If there are only a few orders or if they are far away from the current market price, then the exchange has low liquidity.
Learn The Red Flags
There are certain red flags you need to keep an eye out for. These are the following:
- The website uses an unprofessional email address (i.e. something@gmail.com)
- There is no physical address listed on the website
- The team members are anonymous
- There is no information about the founders
- The website has grammar and spelling errors
- There are unrealistic promises made about returns
- There are no testimonials or reviews from other users
- The website is new and has no traffic
If you see any of these red flags, it is best to avoid using that exchange. There are plenty of other exchanges out there that offer a legitimate service.
Talk To Experts
Blockchain experts can give you valuable insight into whether or not a cryptocurrency exchange is legitimate. talking to people who are knowledgeable about the industry can help you understand what to look for when choosing an exchange.
When talking to experts, pay attention to their level of experience and whether or not they have any personal investment in the exchanges they recommend. It’s also important to ask about the fees associated with using each exchange. Be sure to get all of your questions answered before making any decisions.
By talking to experts and doing your own research, you can make an informed decision about which cryptocurrency exchange is right for you.
Research Their Security Practices
You must keep your crypto safe at all times which is why it’s crucial that you only entrust your coins to exchanges with high-security standards. A good way to check if an exchange takes security seriously is by researching its practices.
Some things you can look into are their storage methods, insurance policies, and whether they have been hacked in the past. If an exchange doesn’t have any information on its website about these topics, that’s a red flag and you should avoid using them.
For example, legit exchanges will usually have offline storage, also known as “cold storage.” This means that the bulk of their crypto assets is stored in devices that are not connected to the internet.
Read Reviews
If a lot of people complain about being scammed by a certain exchange, then there is a high chance that it might be a scam. However, reading reviews can be tricky as some people might just be trying to spread FUD (fear, uncertainty, and doubt). Try to take everything you read with a grain of salt and do your own research before making any decisions.
For example, if you’re looking into getting started with Binance, reading reviews can help you determine whether or not it’s a legitimate exchange.
Crypto trading can make you a lot of money, but only when you’re doing everything right so make sure to research exchanges and compare them before settling. Check the trading volume and liquidity of the exchange and watch out for red flags. Make sure to consult experts and research the security features offered by the exchange. Finally, it’s also essential to read reviews to see what others say about the exchange and whether it’s legit or not!