There are more than 1,600 cryptocurrencies in circulation at this very moment. One of them stands out above all others, and you already know its name, its reputation, and its immense market capital.
You’d have to have been living under a rock not to.
You’re here because you’re hungry to know more about how to invest, where to invest – and whether it’s possible to earn Bitcoin from the comfort of your couch.
Keep reading to learn how to choose a Bitcoin exchange.
The Four Ways To Choose a Bitcoin Exchange
How you decide on a Bitcoin exchange depends on a lot of factors, and many “gurus” will try and upsell certain platforms over others because they’re receiving a commission on everybody who signs up.
And let’s not beat around the bush. If you’re looking to invest in Bitcoin, you’re looking to do one thing.
You’re looking to make money.
There might be a lot of options for exchange platforms, but if you choose one that doesn’t offer you a return on investment then there’s no sense in digging yourself into a sunk cost fallacy. It’s time to jump ship and find a better alternative.
Analyze Your Earning Potential
Earning potential is at the heart of why you’re choosing one investment platform over another. It’s not the only reason – you have to think about security, networking opportunities, stability, and sustainable growth potential on top. But it is the biggest reason people choose to use a particular exchange.
Success draws people in and breeds more success in a positive feedback loop. There’s a very simple reason for that – when it comes to trading Bitcoins, the larger the community, the more people you have to trade with.
And the community network is simultaneously the best-kept secret and the biggest indicator of a viable exchange. Communities provide feedback and advice and they’re outspoken about the efficiency of a Bitcoin exchange platform.
The easiest way of gauging whether a Bitcoin exchange is worth it is to begin by reading reviews from independent sources. The more you read, the better your picture of a platform. Independent review sites like Trustpilot and Yelp are outside the influence of marketing and in-house staff, making them reliable and honest.
How else do you analyze the potential of an exchange?
That’s a little more complicated. You’ll need to look at aggregate factors around buying and selling Bitcoin, and we’ll cover those in a moment.
Evaluate Your Privacy Protection
Authenticity and privacy protection aren’t optional in the matter of your finances.
Protecting the privacy of users is paramount – an exchange that fails to do so is failing its customers on the most fundamental level. Bad exchange platform security is a red flag that signals deeper systematic flaws around the relationship between a platform and its users.
In other words: Platforms that don’t prioritize privacy don’t care about their users at all. Security and privacy are both indicators of legitimacy, and detecting them isn’t as hard as it seems.
The steps can be broken down simply:
- Ensure you’re on the correct website
- Investigate any dubious rumors
- Evaluate user-driven security features
- Look at the steps for user verification
The first step seems obvious – but phishing attacks increased by 33% in 2022 compared with 2021. As of 2020, Google registered more than 45,000 of them each week.
To gauge whether you’re on a “real” site, look first for the HTTPS tag. It’s displayed in green on most browsers and some, like Google Chrome, will warn you if it’s absent before you hit the landing page. For added security, you can manually type an exchange’s website address into the URL bar at the top of your browser.
The most important security features on the user end include two-factor authentication, SMS or email alerts, and encrypted communication. Legitimate websites will never ask for your personal information except during the signup phase, and any transaction or withdrawal should be accompanied by an email notification.
Two-factor authentication (2FA), while cumbersome, is a vital step in many financial transactions. PayPal, for instance, uses various forms of 2FA when operating in Europe as required by European law.
The track record of a company is also important, but we’ve covered that below.
Scrutinize the Track Record
Track records come in three flavors: Success stories, good communities, and dubious histories.
The success stories and testimonials are easy to find – many are front and center on an exchange’s website. And as we talked about before, you’ll find more on independent review websites via search engines.
It’s the history of an exchange you want to be cautious with. Finding out whether any past hacks have occurred, what their severity was, and how a company responded to both reassure their customers and fix security vulnerabilities is your end goal.
To do so, you’ll need to do some independent research. Social media hubs like Reddit as well as independently run forums and exchange review websites are all good places to look. Remember – if it’s been hacked, there’s probably a record of it somewhere.
Assess the Transaction Workflow
Buying and selling Bitcoin isn’t like going to a farmer’s market. When you assess the efficacy of an investment platform, you need to investigate every aspect of the transaction workflow.
How fast transactions happen, what kind of fees apply, and whether any transaction limits exist are all vital to your trading strategy. The aspects you need to scrutinize are:
- Transaction fees
- Sign-up fees
- Deposits and minimum spending amounts
- Processing fees
- Withdrawal fees
- Minimum withdrawal balances
- Transaction speeds
- Buying limits
Remember, some bad actor platforms exist. For instance, limiting the selling opportunity during a dip or saddling new users with hefty withdrawal fees are both strategies that malicious platforms might employ to squeeze their users.
How To Turn a Profit With Bitcoin
Is there a “winning” Bitcoin trading strategy?
No. Unless you remain patient and don’t follow trends simply because they appear on a social media feed.
Why People Lose Money
Bitcoin is a volatile currency. Yet, many of the people who lose money when investing in Bitcoin lose it because they fail to put in the legwork prior to putting investments down.
Make no mistake: Bitcoin investments are not without risk. It’s up to you to find ways to mitigate that risk before you invest. Losing money is part of the game when it comes to any sort of investment – the possibility is always on the table.
So, why do people lose money when trading Bitcoin?
They fail to do their research. Understanding any market is key to making safe investments. Bitcoin is a volatile currency, and many budding traders focus too heavily on short-term price movements. Achieving profitable ROI on Bitcoin isn’t a “get rich quick” scheme.
Instead, it requires planning and a long-term perspective. External, world events can also cause widespread selling panic, usually resulting in a temporary dip in market prices (during which inexperienced traders sell for fear of losing capital).
For instance, the crackdown on Bitcoin trading in China in 2021 cut the trading price in half. Even so, every dip in value has only ever been temporary, which is evident when looking at the trajectory of Bitcoin over a longer timeline.
The key takeaway is simple: People lose money because they hop on bandwagons and make rash decisions, often making investments they can’t afford to lose.
Understand the Blockchain
Blockchain technology has undergone several revisions since its inception.
In simple terms, it’s a distributed ledger that contains every transaction indefinitely. The blockchain can be thought of in those terms – as a “chain” of “blocks” that are linked to each other sequentially. Each block contains a unique hash serving as a digital signature, and each describes one transaction.
The management of a blockchain is decentralized. Instead of a single financial entity, blockchain transactions are validated by a network of computers, allowing them to remain secure.
Mining for Bitcoin
Like trading cryptocurrency, mining for Bitcoin can turn a profit.
But only if it’s done right.
For the uninitiated, mining is the process of verifying Bitcoin transactions and adding them to the blockchain. It’s the “payment” miners receive for acting as another cog in the distributed network backbone that makes the cryptocurrency so potent.
The best option for inexperienced Bitcoin miners is to join a mining collective, often referred to as a mining pool. Combining – or pooling – resources increases the chances of winning the bid to inscribe a transaction, which is when miners are paid.
However, electricity costs are a factor when operating at any kind of scale. Effective mining for profit requires state-of-the-art hardware (usually a powerful GPU) to perform the mining operations.
Start Trading Today
If there’s one fundamental truth to understanding cryptocurrency trading, it’s that rash, heat-of-the-moment decisions end in financial disaster. Making sound investment decisions begins when you choose a Bitcoin exchange, and in that regard, reckless choices simply will not do.
Whether you’re new to crypto or an old hat at the exchange, we have what you need. At Cointiply, we help our users earn Bitcoin, Dogecoin, and other currencies by doing a variety of digital tasks like playing games, completing surveys, and reviewing products. We have paid more than $12 million to our investors and we’re still counting. Click here to learn more.