What to look at when choosing an exchange

What holding at an exchange means

A balance in an exchange account is not an asset recorded as yours on a blockchain; it is a number in the exchange's internal ledger. If the exchange becomes unable to pay, the figure on screen does not help. This has happened repeatedly. It is why where you hold matters more than a fraction of a percent in fees.

Whether local currency deposits work

Depositing and withdrawing local currency directly requires the exchange to provide a bank-linked verified account. Exchanges without that arrangement cannot take local currency, so assets must be moved by another route. That adds fees and time, and choosing the wrong network loses the funds.

Fees are not a single number

Looking only at the advertised trading fee misses the real cost, which comes in layers.

• Trading fee, differing by order type such as maker and taker
• Withdrawal fee, differing by asset and network and often a fixed amount
• Spread, the gap between buying and selling prices
• Conversion cost, when trading in a currency other than your own

Operating conditions to check

Exchanges with thin volume fill away from your intended price or show wide spreads. Supported networks differ by asset, and deposits or withdrawals are sometimes suspended without notice. When a delisting is announced you usually have a fixed window to sell or move, so keeping a channel open to receive notices is worthwhile.

Account security

An exchange account is hard to protect with a password alone. Enable two-factor authentication and, where possible, use an authenticator application or a hardware key rather than text messages. If the exchange offers a whitelist that restricts withdrawals to pre-registered addresses, turning it on helps. Losing your recovery method makes identity verification a long process.