How to choose an exchange?

Let’s assume you want to exchange traditional currency for Bitcoins and choose to do so through and exchange.

What are the most important factors/features that you should keep into consideration for choosing an exchange?

There are many factors, and how you weight them will make a big difference. A few that come to mind:

  • Is the exchange accessible from your country?
    • You may need to use a VPN or intermediaries
  • Is it operating legally?
    • You may expose yourself to legal risks
  • Does it accept your traditional currency?
    • If you need to convert your currency to another just to buy crypto, the fees will add up
  • Are the fees reasonable?
    • Under-served areas are likely to have higher fees
    • Don’t forget to look at deposit/withdrawal fees as well as trading fees, especially if you are a small investor. A flat fee of $10 is a small percentage for a $100,000 withdrawal, but is a crushing percentage for a $20 withdrawal!
  • Are transaction times reasonable?
    • Exchange can have long deposit holds before funds are cleared, depending on how the deposit is made. They need to protect themselves from fraud.
  • Is the exchange trustable and reliable?
    • A traditional exchange is a custodian of your funds, and you must choose to trust it
    • If the exchange does a bad job protecting itself, and loses funds, and goes bankrupt - you may never get your funds back
    • It can help to ask and search for their reputation online. Every exchange has some detractors, but the “problem” exchanges will have many more, and the “reliable” exchanges will get more popular support.
  • Do they have good customer support?
    • Dealing with them in the event of a problem is sometimes inevitable, like any service industry
  • Do they have the liquidity you need?
    • For trades valued at a few dollars at a time, many exchanges are “liquid” - your order will flow through without affecting price levels. But if you’re trading thousands of times that value, your trades may move the market price if their order book doesn’t have sufficient liquidity
    • CoinMarketCap offers a Liquidity metric that can be used to compare markets. Volume is much easier to fake than Liquidity.

I’m sure there are others that I’m not thinking of, at the moment. What do you think?