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What is an Altcoin Exchange?

Altcoin exchanges allow users to buy and sell altcoins — any cryptocurrency other than Bitcoin. Some altcoin exchanges are aimed at long-term buyers who want to invest with fiat money. This means users can buy altcoins instantly with a debit/credit card or e-wallet. After that, the investor can withdraw their altcoins to a private wallet.

Alternatively, some altcoin exchanges are more suitable for active traders. These platforms offer advanced trading tools ideal for short-term strategies, such as comprehensive charts, drawing tools, and technical indicators. Some altcoin exchanges also support derivative products like futures and options.

This enables users to go long or short on altcoins with leverage. In all cases, altcoin exchanges make money from trading commissions. This averages 0.1% per slide, meaning a $1 commission is paid for every $1,000 traded. Ultimately, altcoin exchanges provide access to a wide range of cryptocurrencies, making them suitable for diversification strategies.

How to Choose The Best Altcoin Exchange

There are more than 760 altcoin exchanges listed on CoinMarketCap. This makes choosing the best altcoin exchange a time-consuming task. We’ll now explain the most important factors to consider when selecting a suitable platform.

Highest Number of Altcoins Listed

The first metric to explore is the number of altcoins listed. Some exchanges support thousands of altcoins, while others list several dozen. Choosing an exchange with a large number of markets enables investors to build a well-balanced altcoin portfolio. For example, MEXC and Gate.io list more than 2,500 and 1,700 altcoins, respectively.

This covers a huge range of new cryptocurrencies with small valuations, making them ideal for growth investors. However, PrimeXBT and Margex list just 35 altcoins. These are established, large-cap altcoins like Ethereum, Solana, and BNB. This means investors won’t have access to up-and-coming projects with a higher growth potential.

Lowest Altcoin Trading Fees

Trading fees will vary widely between altcoin exchanges. Investors should prioritize exchanges with the most competitive commissions. This is the fee paid whenever a buy or sell order is executed. As such, commissions eat away at your potential altcoin profits. Exchanges with the lowest commissions are MEXC, Gate.io, OKX, Bybit, and Binance.

These platforms charge just 0.1% per slide. Moreover, reduced trading commissions are available when 30-day volumes increase. Some altcoin exchanges offer discounts when holding their native token. For example, MEXC and Binance are backed by MK Token and BNB, respectively.

Those looking to trade leveraged products, such as perpetual futures, should also explore financing fees. Leverage is a loan taken from the altcoin exchange, so interest is applied to the position size. Some altcoin exchanges charge financing fees daily, while others implement them every few hours.

Highest Trading Pair Liquidity

Investors should also explore liquidity when choosing the best exchange for altcoins. Put simply, exchanges with high liquidity ensure smooth trading conditions. This means buy and sell orders are matched promptly without vastly impacting prices. All of the altcoin exchanges discussed today offer sufficient liquidity.

However, this isn’t always the case when using less-established platforms. For example, consider a recently launched altcoin exchange that has limited trading volumes. If there isn’t enough liquidity in a particular market, an altcoin trader won’t be able to sell their tokens at a suitable price.

This means the trader might need to accept a sub-par price to force their sell orders through. CoinMarketCap is a good option when analyzing liquidity levels. It gives a liquidity score from 0 to 100 for over 760 altcoin exchanges. Binance ranks the best with a score of 859. After that, Kraken and Coinbase have a liquidity score of 732 and 708, respectively.

What Happens if There Isn’t Enough Liquidity to Sell My Altcoins?

• If you’re using an altcoin exchange without sufficient liquidity, cashing out a profitable position can be problematic.
• Just remember — another market participant must accept your sell order.
• Reducing the sell order price is one option, as this can motivate buyers to enter the market.
• However, if there aren’t any buyers at all — your sell order will remain pending.
• In this instance, you could be forced to transfer the altcoins to an exchange with more liquidity.
• This will increase the chances of finding a suitable buyer.

Support for Preferred Deposit Method

One of the biggest barriers for new altcoin investors is getting funds into an exchange. This means that new market entrants need to deposit fiat money, such as dollars or euros. Fortunately, the best altcoin exchanges accept a wide range of convenient payment methods. Fees will vary widely depending on the payment type and currency.

For example, eToro is the best option for instant deposits with US dollars. No fees are charged when using Visa, MasterCard, PayPal, Skill, or any other supported method. However, eToro is expensive when using other currencies; FX fees start from 1.5% of the deposit amount.

Coinbase is an expensive option when using instant payment methods — fees cost almost 4%. However, Coinbase is ideal when depositing funds from a bank account. No fees are charged on local banking methods like ACH and Faster Payments. What’s more, bank payments typically arrive in under five minutes.

Trustworthiness and Security

Many altcoin exchanges have experienced hacks — sometimes resulting in hundreds of millions of dollars worth of stolen coins. In other cases, altcoin exchanges have collapsed because of internal fraud. FTX is the most notable example, with customers losing over $8 billion. With this in mind, trust and security should be prioritized when selecting the best altcoin exchange.

There are several aspects to consider. First, explore when the exchange was launched; more established platforms are preferred. Next, assess whether the altcoin exchange is regulated. eToro and Coinbase are the market leaders here; both are approved by FINRA and the SEC. eToro is also licensed by the FCA (UK) and CySEC (Europe).

Another security check is ‘proof of reserves’, which became mainstream after the FTX collapse. Put simply, crypto exchanges should be audited by a reputable body and showcase their cryptocurrency reserves. Reserves should not only cover customer deposits but also be held in liquid coins, such as Bitcoin and Tether.

Account security features are also important. For example, eToro and Binance have made two-factor authentication mandatory. This means users must enter a unique code every time they log in. The code is sent via SMS or through the Google Authenticator app. Other security features to look for include IP/device whitelisting and anti-phishing safeguards.

Should I Keep my Altcoins in an Exchange?

• Regardless of whether the cryptocurrency exchange is regulated and what security features it offers, the best option is to withdraw your altcoins to a self-custody wallet.
• In doing so, you’re removing your altcoins from counterpart risks — such as hacks, scams, and fraud.
• The altcoins you buy can be kept in a private wallet until you’re ready to sell.
• You can then transfer the altcoins to the same exchange, sell them for fiat currency, and cash out to a bank account.

Understanding Fees on Altcoin Exchanges

Similar to online stock brokers, altcoin exchanges implement an assortment of charges. Understanding fees for the services you wish to use is crucial. Let’s take a much closer look at the fees charged when using an altcoin exchange.

Spot Trading Commissions

The most common fee is the spot trading commission. This is the fee you pay when buying and selling altcoins. It’s typically charged as a percentage of the overall trade size. As mentioned, the best altcoin exchanges charge commissions of just 0.1% per slide.

• So, suppose you purchase $500 worth of Ethereum.
• At 0.1%, you’ve paid a buy commission of $0.50.
• A few weeks later, your Ethereum position has increased to $900. You decide to sell, so again, pay a 0.1% commission.
• This means you’ve paid a sales commission of $0.90.

Many altcoin exchanges use a maker/taker model, which can be confusing for beginners.

• Market ‘makers’ get the lowest commissions, as they provide liquidity to the exchange
• Market ‘takers’ pay a slightly higher commission, as they use the liquidity that’s already available

What’s more, altcoin exchanges typically use staggered commission structures, which can benefit high volume traders. This means commissions decline as monthly trading volumes increase. For example, Binance reduces the commission from 0.1% to 0.06% when trading over $20 million within 30 days.

Derivative Trading Commissions

Derivative products attract different fees from the spot trading markets. You’ll notice that derivative commissions are usually lower. However, this is based on the total leveraged amount.

For example, suppose the altcoin exchange charges 0.01% when trading perpetual futures. You risk $1,000 with 20x leverage, amplifying the trade size to $20,000. At 0.01%, you pay a $2 commission (0.01% x $20,000).

Financing Fees

Derivative trading attracts an additional fee to the commission — financing. This is the interest charged on leveraged positions. Some altcoin exchanges charge a financing fee every few hours.

For example, at Kraken, it’s every four hours. Other exchanges charge financing fees once per day. Therefore, you’ll need to know the interest rate charged and how often it’s implemented.

Payment Fees

Altcoin exchanges can also charge payment fees when making a fiat deposit. This can vary depending on the currency and payment type.

Withdrawal Fees

Withdrawing altcoins from an exchange will also attract fees. We prefer exchanges that mirror the actual network charge in real time. For example, suppose the Ethereum network currently charges GAS fees of 0.0013 ETH (about $4). The exchange should also charge 0.0013 ETH, meaning it doesn’t add a markup.

However, many altcoin exchanges have flat withdrawal fees, regardless of the current network charge. This will almost always end up costing you more. Just make sure the exchange doesn’t charge a percentage fee on withdrawals; this can make large payments unviable.

Conclusion – What is the Best Altcoin Exchange?

We’ve revealed the best altcoin exchanges in the market. eToro is our top pick. It is a regulated platform that supports 110 altcoins and offers a user-friendly interface for both beginners and advanced traders.

Investors can deposit funds instantly with a variety of payment methods, including Visa, MasterCard, and PayPal. eToro also offers a secure altcoin wallet, not to mention copy trading tools and smart portfolios.

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FAQs

Which exchange is best for altcoins?

eToro is the best altcoin exchange for long-term investors, with the platform supporting fiat payments and a secure crypto wallet. MEXC is the better option for day traders seeking advanced charting tools and leveraged products.

Which exchange has the most altcoins?

MEXC has one of the largest altcoin collections; more than 2,500 cryptocurrencies are supported.  

Is it safe to hold coins on exchanges?

Holding coins on exchanges introduces counterparty risks, meaning you’re trusting a third party to keep your funds safe. The safest option is to withdraw the coins to a private, self-custody wallet.

References

1. Top cryptocurrency spot exchanges (CoinMarketCap)
2. Elon Musk continues to tweet about altcoins like baby dogecoin—but investors should tread very carefully (CNBC)
3. Phishing attacks: defending your organisation (NCSC)
4. Bankman-Fried sentenced to 25 years for multi-billion dollar FTX fraud (Reuters)

About the Author

Kane Pepi is a financial, gambling and cryptocurrency writer with over 2,000 published works, including on platforms like InsideBitcoins and Motley Fool. He specializes in cryptocurrency guides, exchange and wallet reviews, and covers new crypto projects for Cryptonews.com. His expertise includes asset valuation, portfolio management, and financial crime prevention. Pepi holds a Bachelor’s in Finance, a Master’s in Financial Crime, and is pursuing a Doctorate in money laundering in crypto and blockchain. Connect with Kane on LinkedIn.

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