A couple of years back, everyone was raving about how profitable the crypto market was turning out to be!
Crypto investors were looking forward to quitting their day jobs and liquefying other assets to make the best of this opportunity. Some thought retirement was going to arrive early!
However, the dream soon crashed when crypto prices fell to an all-time low. Currently, analysts and investors don't know what to make of the downward spiral, thus causing more people to panic-sell.
Trading on emotion is a quick way to go broke. Removing emotions from your trading decision can be difficult. Even experienced investors find this difficult to deal with as well.
Amongst all this frenzy, another statement gaining significant momentum is ‘Buy the Dip.' Surely, the decreased prices present a good enough opportunity for beginners to dip their toes in the crypto pool and dollar cost average (DCA) prudently.
But the main question remains – How to choose a credible cryptocurrency exchange?
This article will list crucial factors every beginner investor should check before signing up at an exchange.
Here, you will read about:
⦁ What are Cryptocurrency Exchanges?
⦁ Criteria for Choosing Crypto Exchanges in 2022 Crypto Winter
⦁ Jurisdiction
⦁ Liquidity
⦁ Security
⦁ Insurance
⦁ Leverage
⦁ Red Flags to Watch Out for While Signing Up on a Crypto Platform
⦁ What to Keep in Mind Before Buying the Crypto Dip?
⦁ Final Takeaway
⦁ Frequently Asked Questions
What are Cryptocurrency Exchanges?
Think about it – where do you go when you need money from your account against collateral? Probably a bank or other financial organization.
Similarly, you can visit a jewelry store and liquefy your gold assets. Here, a bank or a store acts as an exchange platform, offering you cash against any other investment.
Similarly, a crypto brokerage is a platform that allows you to buy cryptocurrencies against other forms of digital or fiat currency. In short, these exchanges act as an intermediary between the buyer and seller, making a profit through commissions.
Criteria for Choosing Trustworthy Crypto Exchanges in 2022 Crypto Winter
Today, there are plenty of exchanges dominating the crypto industry. However, before signing up at a crypto trading platform, checking if it meets all your requirements is vital. Some factors you should consider are:
Jurisdiction
Different countries have varying cryptocurrency rules and regulations. As a result, not all exchanges operate worldwide. So, check if it is legal in the state and country you are currently residing in.
If yes, you can go ahead and check the exchange for other factors listed below in the article.
Additionally, you will find that multiple brokerage platforms have geography-based websites. For example, ‘xyz.com' will change to ‘xyz.us.' Visit your location-specific site and read the guidelines properly.
Liquidity
It is one of the most crucial factors in determining the legitimacy of a crypto trading house. For trading, it is essential you can shift your assets at any moment in time. Therefore, check if the platform offers you liquidity on digital assets at all times or not.
Withdraws should be easy!
Security
When you buy digital currencies using a third-party application, you trust them with your investments. In such cases, you should know if the exchange is secure or not.
There are always chances of a cybercriminal attacking the blockchain network or an employee stealing all the coins.
Insurance
Some exchanges have a robust insurance policy that shields user assets against cyber attacks. As a result, investors can sign up for the platform without worrying about potential losses.
However, you should undertake detailed research to review the insurance policy beforehand.
Leverage
There are different types of exchanges within this market. Some of them directly sell you the crypto coin.
On the other hand, some will sell you the products derived from crypto coins such as commodities, gold, silver, stocks, futures, etc. Such platforms are termed crypto derivatives exchanges.
Red Flags to Watch Out for While Signing Up on a Crypto Platform
As investor participation increases in the crypto world, plenty of fraudsters are waiting to dupe people out of their money. 
Nearly $2.8 billion was laundered via cryptocurrencies in 2019.
There is further regulation in the works to help combat money laundering and bad actors in this space. Compared to the traditional financial system, the crypto ecosystem is less regulated.
Here are some of the crypto project red flags you should maintain a safe distance from:
⦁ Unavailability of Information – Anonymity is no good when it comes to the crypto domain. If you cannot find information about the CEO/CTO/COO/CFO and the leading developers working on the project, drop the idea of signing up immediately!
⦁ Sudden Increase in Price – Static coins with no chart movement showing a sudden price increase can be a warning sign. One such example is Squid coin, which gained popularity after the Netflix show Squid Games and turned out to be a scam.
⦁ Ongoing Investigation – Needless to say, if a crypto platform is under investigation for criminal hacks, laundering, or any other reason, you should avoid it altogether.
What to Keep in Mind Before Buying the Crypto Dip?
For crypto trader beginners, a long-term game can yield significant profits. Even though it is impossible to predict the market charts, you can still buy the dip and wait till the crypto slump ends.
Here are some golden tips to remember:
⦁ Don't just focus on a single coin. Spread your assets across the blockchain industry, like crypto coins, layer one and layer two protocol projects, NFTs, etc.
⦁ Don't hope for quick returns. Plan for the long-haul, especially if retirement is further out.
⦁ Check if you can handle volatility. Over the years, Bitcoin has been known to lose 80% of its value before rebounding. Even though these crypto-assets might gain their price one day, you should be ready for a challenging ride ahead. Patience is the key!
To help counter the volatility of your crypto portfolio, consider diversifying your investments into sound options like precious metals (i.e., silver and gold).
Your wealth portfolio will be stronger. You will sleep better at night!
Final Takeaway
The Crypto Ecosystem has made significant strides in the past decade.
More people are picking on the benefits of digital investment and looking to enter the blockchain space. There are high hopes for what Web3.0 might bring.
Some say this will reinvent the internet business landscape to create new growth in ways we don't quite know. Those that missed out on the Dot-Com period could have a new opportunity to invest in a new movement.
However, with the increasing number of current crypto projects, there are certainly bad apples too you should stay away from!
Therefore, it is crucial to check whether the exchange you are signing up with is legitimate or not. To do that, you can check its insurance policy, security measures, list of products, jurisdiction, etc.
Even though you can't completely avoid the risk of losing money, you can always minimize the chances by staying safe! The best defense is to avoid crypto exchanges where transparency is lacking and management isn't professional.
Frequently Asked Questions
1. What is KYC compliance?
KYC stands for ‘Know Your Customer' and is used by exchanges to verify the identity of every user signing up for a crypto exchange account on the platform.
2. What is a decentralized exchange?
A decentralized exchange or DEX is a platform where you can trade cryptocurrencies without the interference of a custodial authority.
3. What are some of the popular trusted cryptocurrency exchanges?
Binance.US, Kraken, Gemini, Coinbase, and eToro are some of the most reliable.
Risk Disclosure: Any investments come with an inherent risk, where you could end up making less money than what you put in. Before investing your hard-earned cash, be sure to speak with licensed professional financial advisor first. Always remember that past performance is not an indication of future returns.
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