9 Best Crypto Exchanges, Apps and Platforms of May 2024

Common Questions About Cryptocurrency Exchanges

What is a crypto exchange?

A crypto exchange is, basically, a place where you can buy cryptocurrency using cash or another type of digital asset.

This summary primarily discusses a type of crypto exchange called a centralized exchange. A centralized exchange is a marketplace operated by a commercial entity that buys, sells, and facilitates transactions in cryptocurrency.

If you are new to cryptocurrencies or simply need to convert fiat currency to cryptocurrency, you will likely use a centralized exchange.

Another way to obtain cryptocurrencies is through what is called a decentralized exchange. These are largely automated blockchain-based programs that allow users to trade certain types of cryptocurrencies with each other. Although these may have lower transaction costs, they also require greater technical expertise. And if you don’t already own cryptocurrency, your options are limited.

What services do crypto exchanges offer?

Besides their primary role at the center of cryptocurrency sales and purchases, exchanges have added a handful of other offerings. Among these are services that reward people for lending their crypto. Many crypto exchanges will hold your crypto for you if you don’t want to create a wallet that you control yourself.

It is important to note that some crypto exchanges have experienced issues with these secondary services. For example, some have had to freeze withdrawals from their rewards programs due to liquidity concerns. And storing cryptocurrencies in an exchange’s wallet can leave you vulnerable to losses if an exchange fails or suffers a cyberattack.

How much money do I need to use a crypto exchange?

If you’re just considering getting into crypto, it’s good to remember that you don’t need to put your savings on the line to get a feel for how it works.

The crypto exchanges reviewed by NerdWallet generally have no account minimum, meaning you are free to create an account and look around without spending a dime. And if you decide to buy cryptocurrencies, you don’t have to buy a lot of them. Many exchanges have a minimum purchase of around one dollar.

How is investing in crypto different from investing in stocks?

Cryptocurrency trading differs from traditional investing in several ways. Some examples :

• Compared to traditional investing, whose fees have steadily decreased in recent years, trading cryptocurrencies costs significantly more. For example, depending on the payment method, you could pay 5% or more in fees when trading Bitcoin. Most online brokers no longer charge commissions for trading stocks.

• Crypto is still a relatively new and growing industry, and customer service lags behind what is available at traditional brokerages. Want to speak to someone regarding account questions or issues at a crypto exchange? Many pure crypto exchanges do not offer this service.

• You have more responsibility in protecting your crypto from theft with cryptocurrency exchanges, especially if you use your own digital wallet. Even though exchanges protect you from losses due to site-wide hacks, you will not be protected against individual attacks on your account, for example a phishing email attack in which you unintentionally reveal your words password to cybercriminals.

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