When searching for the best cryptocurrency exchange, there are many factors to consider: low vs high fees, security, customer support, variety of cryptocurrencies available, ease of use and ease of exporting assets. However, the beginner investor should understand that where you do your investing, geographically speaking, is as important as how you do your investing and what digital currency you invest in.
New York BitLicense
To operate a cryptocurrency exchange within New York State a BitLicense is required, which greatly limits the options for New York State residents. Coinbase is one of the most established BitLicense-holding cryptocurrency exchanges according to a recent coin base review, with their strongest competitors being Gemini and Robinhood. Their 28+ cryptocurrencies include but are not limited to: Bitcoin, Ethereum, Litecoin, Bitcoin Cash, Ripple, Stellar, EOS, Ethereum Classic, Tezos, Chainlink, BAT, Binance Coin, Cosmos and DAI. Coinbase fees range from 1.49%-3.99%. Coinbase Pro fees tend to be lower, but Coinbase Pro, which used to be GDAX, is owned by Coinbase.
Forbes claims that Coinbase has excellent security because the platform requires 2FA (2-step verification) for Coinbase users and keeps 98% of customer funds in offline cold storage. Furthermore, Coinbase has never been hacked. Coinbase also has its own stable coin, USDC, and provides Coinbase users and Coinbase account holders with access to its Coinbase app.
Payment methods include credit card, debit card and ACH transfer from a bank account. Coinbase users are provided with their own Coinbase wallet for their Coinbase account. Withdrawal of fiat currency can be accomplished using ACH transfer to a bank account or by using PayPal. Withdrawal of crypto assets in crypto form is also possible.
Robinhood has one distinct advantage—a 0 percent commission. Unlike Coinbase, Robinhood users are not limited to cryptocurrencies but can also trade other securities, like stocks and gold. However, Robinhood users cannot withdraw their cryptos directly from the crypto exchange, but instead are required to first sell cryptocurrencies and convert them to fiat currencies before withdrawal from the cryptocurrency exchange. Robinhood also has a more limited variety of cryptocurrencies but does have Dogecoin, which has benefitted from Elon Musk’s personal connection.
Gemini fees are a flat 0.5 percent per trade with an additional $1.99-$2.99 per transaction. These may seem like high fees to beginner traders who only want to trade in low volume, but to advanced traders who want to buy and sell cryptocurrencies in high volume, it is Coinbase that has the high fees by comparison. Beginner investors might also feel a more personal connection to Gemini because it was founded by the Winklevoss twins, made famous by films like The Social Network and Banking on Bitcoin. They actually own a 1 percent stake in all of the world’s Bitcoin, because they got in early.
For beginner investors, PayPal should also not be overlooked. On PayPal, you can now buy and sell cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH). After you sell your cryptocurrencies, you can transfer the fiat currency into your bank account as you would with any other PayPal transaction. The fee is 2.5 percent every time you buy and sell cryptocurrency, which might be considered high fees in comparison to Robinhood ,Gemini, and Coinbase Pro, but are not high fees in comparison to Coinbase. Currently, PayPal only allows for market orders, no limit orders.
United States and International Trading
For those living in the United States but not within the State of New York, some great options include Kraken, Huobi Global and Gate.Io. Based in San Francisco, Kraken is considered by some to be the best exchange for margin trading but using leverage in that way is especially dangerous for beginner traders and might best be left to advanced traders.
If you do not live in the United States, Binance might be the best cryptocurrency exchange. The transaction fees are low, the lowest of any major exchange, and the ease of use is high. Binance allows you to trade over 175 cryptocurrencies and digital assets, including derivatives. Moreover, Binance has a great trust record in that when their crypto exchange was hacked, they refunded their users via cryptos that had been set aside just for that purpose.
Unfortunately, United States citizens do not have access to possibly the best crypto exchange. Americans also do not have access derivatives trading platforms like Bitfinex and BitMex.
Final thoughts would suggest that finding the best cryptocurrency exchange is a highly individual process, dictated by geography first, and then other factors. Experienced traders might prioritize lower fees and margin trading, while less experienced investors might prefer ease of use and security. With the right knowledge of all the pros and cons of the different cryptocurrency exchanges, you as the investor can make an informed decision.