The 9 best cryptocurrency exchanges, apps and platforms of May 2024

Common questions about cryptocurrency exchanges

What is a cryptocurrency exchange?

A cryptocurrency exchange is, essentially, a place where you can purchase a cryptocurrency using cash or another type of digital asset.

This roundup mainly discusses a type of cryptocurrency exchange known as a centralized exchange. A centralized exchange is a marketplace operated by a business entity that buys, sells, and facilitates cryptocurrency transactions.

If you are new to the world of cryptocurrencies or simply need to convert fiat currency to cryptocurrency, you will likely use a centralized exchange.

Another way to obtain cryptocurrencies is through what is known as a decentralized exchange. These are largely automated, blockchain-based programs that allow users to trade certain types of cryptocurrency with each other. While they may have lower transaction costs, they also require more technical expertise. And if you don’t already have cryptocurrency, your options are limited.

What services do cryptocurrency exchanges offer?

In addition to their primary role at the center of cryptocurrency sales and purchases, exchanges have added a handful of other offerings. Among these are services that pay rewards to people who lend their cryptocurrencies. Many cryptocurrency exchanges will hold your cryptocurrencies for you if you don’t want to set up a wallet that you control yourself.

It is important to note that some cryptocurrency exchanges have had issues with these secondary services. For example, some have had to freeze withdrawals from their rewards programs due to liquidity issues. And keeping cryptocurrencies in an exchange’s wallet can leave you vulnerable to losses if an exchange goes bankrupt or suffers a cyberattack.

How much money do I need to use a cryptocurrency exchange?

If you’re just thinking about dabbling in cryptocurrency, it’s worth remembering that you don’t have to put your life savings on the line to get a feel for how it works.

Cryptocurrency exchanges reviewed by NerdWallet generally have no account minimums, meaning you’re free to create an account and shop around without spending a dime. And if you decide to buy cryptocurrencies, you don’t have to buy a lot of them. Many exchanges have a minimum purchase of around a dollar.

How is investing in cryptocurrencies different from investing in stocks?

Cryptocurrency trading is different from traditional investing in several ways. Some examples:

• Compared to traditional investments, which have seen commissions constantly decrease in recent years, trading in cryptocurrencies costs much more. For example, depending on your payment method, you may pay 5% or more in fees when trading Bitcoin. Most online brokers no longer charge commissions for stock trading.

• Cryptocurrency is still a relatively new and thriving industry, and customer service has lagged behind that available at traditional brokers. Want to talk to someone about account questions or issues at the cryptocurrency exchange? Many pure cryptocurrency exchanges do not offer this service.

• You have more responsibility to protect your cryptocurrency from theft with cryptocurrency exchanges, especially if you use your own digital wallet. While exchanges protect you from losses due to site-wide hacker attacks, you will not be protected from individual attacks on your account, such as a phishing email attack where you unintentionally reveal your passwords to cybercriminals.

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