A cryptocurrency exchange is a platform using which you can buy, sell, and trade different cryptocurrencies, like Bitcoin, Ethereum, Ripple, and other digital assets. The platform facilitates the process of trading by acting as an intermediary between the buyer and the seller. You will be charged transaction fees when dealing with a cryptocurrency exchange.
Registering with an international cryptocurrency exchange is the first step to start trading cryptocurrencies. Once your account has been verified, you can make a deposit transferred to your wallet with the exchange. Upon deposit clearance, you can start trading with the various cryptocurrencies offered by the exchange.
As such, in New Zealand, there is no specific legislation for cryptocurrencies. The activities related to this currency type will be subjected to the same legislation as other financial services.
Cryptocurrency Exchange Fees
As mentioned above, a cryptocurrency exchange charges transaction fees for every trading transaction you execute.
● Deposit and Withdrawal – Fiat
Fiat is a government-issued currency like USD or AUD, which is not backed by any hard commodity like gold. To begin with cryptocurrency trading you will have to deposit fiat money into your exchange wallet. Depending on the exchange, there will be a certain percentage or fixed fees associated with the deposit.
Similarly, if you want to withdraw fiat money, you will be charged a transaction fee. For example, you have BTC in your exchange wallet and want to cash them out in AUD to your bank account. In this case, the BTC will first have to be exchanged into AUD before you can make a withdrawal.
● Deposit and Withdrawal – Crypto
In the case of cryptocurrency, there are standard network mining fees involved. For example, Bitcoin, there are hardware systems that confirm and secure transactions on the network and are known as miners. A mining fee needs to be paid irrespective of the platform you use.
There are exchanges which levy a fee on your deposit and withdrawal cryptocurrency transactions on top of the mining fees.
This cost depends on the fee structure of the exchange you choose to work with. An international cryptocurrency exchange will charge a flat fee on the trade you make, depending on the amount, or it will charge a percentage to your overall volume of transactions for a particular period, say monthly.
No trading limits and high volume discounts are the features offered by most cryptocurrency exchanges.
When trading digital currencies, the difference between the buying and selling price is known as a spread. Typically in case of an intermediary like an exchange, it is the fees that you pay the exchange to cover the expenses incurred to place the trade on your behalf. This amount is automatically deducted from the buying price.
Your aim should be to find cryptocurrency exchanges with transparent and low spread rates for digital assets.
Factors to Consider Before Trading With Cryptocurrency Exchanges
Bitcoin is one of the most popular cryptocurrencies across the globe. But, it is not the only cryptocurrency out there. There are several digital assets available today for you to trade-in. When choosing a cryptocurrency exchange, look for the different digital currencies and coins they trade-in.
Some exchanges deal with 15 to 20 cryptocurrencies, whereas others deal with more than 180 digital assets. Diversification is the key when it comes to an investment portfolio.
When dealing with an international cryptocurrency exchange, security would be a prime concern for most. Check for the history, and stability of the exchange, user reviews and comments. Also, check for the security they offer their users. How secure is their online platform, do they offer 2-factor authentication, are they available to address any concerns?
As seen above, there are different types of fees involved when trading with a cryptocurrency exchange. Check for the individual types of fees applied by the exchange.
Understand how spreads are a part of your transaction. If you are paying greater spreads and closing short, you will be short-handed in the profit that reaches your wallet at the end of the day.
● Customer Support
Support is of prominence when it comes to internet platforms, and the need increases two-fold when dealing with high-value digital assets. Emails would be inconvenient as a quick resolution is a need with trading. Check if the exchange offers a customer care number or a live chat option.
A cryptocurrency exchange offers users with a layer of security and reliability when trading cryptocurrencies. The user-friendly platform makes trading a possibility for even novice users. Before signing up with an exchange, look for the fees they charge and the various features they offer.