Despite recent losses, cryptocurrencies continue to be an extremely popular new asset class among investors. Bitcoin was the most-searched term on Google in 2022, surpassing TikTok, Apple, and the NFL, and almost surpassing "restaurants near me."
According to Debthammer, there were more than 20,000 cryptocurrency projects globally at last count, and there are currently approximately 295 million crypto users in total, with 20% of them residing in the United States.
To purchase bitcoin, you must open an account with a cryptocurrency exchange. There are about 500 options available, and Forbes Advisor sifted through the top players to select the best crypto exchanges for both novice and seasoned investors.
How Does a Cryptocurrency Exchange Work?
A cryptocurrency exchange is a marketplace where cryptocurrencies such as Bitcoin, Ether, and Dogecoin may be bought and sold. Cryptocurrency exchanges function similarly to other trading platforms with which you may be familiar. They offer accounts via which you can establish various order types to buy, sell, and speculate on the cryptocurrency market.
Some cryptocurrency exchanges allow complex trading capabilities such as margin accounts and futures trading, however these options are less usually available to U.S.-based users. Others provide features such as crypto staking and crypto loans that enable you to earn income on your cryptocurrency holdings. The finest exchanges include instructional resources to keep you up-to-date on all aspects of cryptocurrency.
Diverse Types of Cryptocurrency Exchanges
Generally speaking, there are two types of cryptocurrency exchanges: centralized and decentralized. Every classification has its own perks and downsides.
Centralized cryptocurrency exchanges (CEX) are operated by a single entity. Centralized exchanges facilitate entry into cryptocurrency trading by enabling users to transfer fiat currencies, such as dollars, directly into cryptocurrencies. The majority of cryptocurrency trading occurs on controlled exchanges.
Some crypto aficionados oppose centralized exchanges because they contradict the cryptocurrency's decentralized spirit. Even worse, in the opinion of certain crypto users, the corporation or organization may force users to comply with Know Your Customer (KYC) regulations. In order to combat money laundering and fraud, these require each user to disclose their identify, much like opening a bank account.
Hacking is an additional concern with centralized exchanges. With a CEX, the exchange holds the cryptocurrencies transacted on its platform – at least temporarily, while trades are processed — increasing the danger of hackers stealing assets.
In recent years, centralized crypto exchanges have increased security in response to this issue. Among other measures, they now store the majority of customer assets offline and purchase insurance to cover crypto losses in the event of a hack.
If you like the convenience of a centralized exchange, you can lower your risk by transferring your cryptocurrency to a hot or cold wallet located off-exchange.
DEXs spread the task of facilitating and confirming crypto trades. Anyone who joins a DEX network can vouch for transactions, similar to how bitcoin blockchains function. This may promote accountability and transparency and ensure that an exchange can continue to operate regardless of the status of the organization that founded it.
The issue is that decentralized exchanges are significantly less user-friendly, both in terms of interface and currency conversion. For instance, decentralized exchanges do not always permit customers to deposit dollars and swap them for bitcoin. This implies you must either already possess cryptocurrency or use a centralized exchange to acquire cryptocurrency for use on a DEX.
You will also likely engage in peer-to-peer transactions. This implies it may take longer to locate a buyer, and if liquidity is low, you may have to make price concessions in order to purchase or sell a low-volume cryptocurrency swiftly.
Global Blockchain Exchanges
Globally, there are over 600 cryptocurrency exchanges where investors can trade bitcoin, ethereum, and other digital assets. However, pricing, quality, and security vary greatly. Forbes Digital Assets listed the top 60 cryptocurrency exchanges in the world based on regulatory compliance.
To choose the best cryptocurrency and bitcoin exchange we recommend to follow our article with the best options you can choose in the cryptomarket