If you’re looking to invest in cryptocurrency, you’ll generally need to buy it from an exchange. It’s similar to how stock exchanges work, although there are a few more factors to consider.
In our analysis, we found several great options for people looking to get into cryptocurrency depending on your goals and how comfortable you feel with investing in crypto in general.
Most Important Factors for Cryptocurrency Exchanges
There are a lot of cryptocurrency exchanges out there, and at first glance, they all seem the same. However, there are differences between them, and the most important features to consider:
- Security. Some exchanges are more vulnerable to hacking and fraud than others. Make sure you investigate the history of any crypto exchanges to see if it has a squeaky-clean record or if it’s run into any problems in the past.
- Liquidity. It may be harder to find buyers on smaller exchanges. The bigger the exchange, the more easily you’ll be able to buy and sell crypto.
- Trading costs. Most cryptocurrency exchanges charge trading fees, so price out your options.
- Insurance. Unlike your bank’s FDIC insurance, cryptocurrency exchanges don’t have formal insurance programs, making them risky. Some do offer insurance in limited cases, however.
- Ease of use. Some cryptocurrency exchanges are easier to use than others. This is an especially important factor to consider if you’re just getting started.
The 5 Best Cryptocurrency Exchanges
Here’s a quick summary of the best exchanges according to what you’re looking for:
- BlockFi: Best for buy-and-hold investors
- eToro: Best for nervous investors
- Gemini: Best for safety
- Coinbase: Best for liquidity
- Kraken: Best for cross-exchange trades
Cryptocurrency Exchange Reviews
It’s a good idea to do in-depth research about how each cryptocurrency exchange works before choosing one. Read several reviews written by different people, and search for any regulatory actions, hacking events, or other red flags. Here’s a quick review of each exchange to help you narrow down your list.
BlockFi is relatively new in the crypto exchange world, having been around since 2017. You can buy and sell crypto on this exchange just like any other platform, but BlockFi offers one big advantage that many others don’t have: you’ll earn interest on your crypto, and a lot of it.
Interest rates as of this writing are up to 8.6% APY for certain types of crypto. BlockFi offers other ways to use your investment, too. You can take out a loan using your crypto as collateral, with same-day funding and interest rates as low as 4.5% APR.
eToro doesn’t have as many cryptocurrency options — just 17 choices — but what it lacks in selection, it more than makes up for with ease of use. That’s because it’s one of the only cryptocurrency exchanges that actually offers a practice account with a virtual $100,000 portfolio.
If you’re really nervous about investing in cryptocurrency and you’d like some practice before you put real money on the line, eToro is a great choice. It even offers a “CopyTrader” option where you can copy the same crypto trading strategies as top traders if you’re not comfortable devising your own investing plan.
Founded by the Winklevoss twins of Facebook fame, Gemini is one of the largest cryptocurrency exchanges available today. It has many safety features: deposits in dollars (as opposed to cryptocurrency) are backed by FDIC insurance, and it also features insurance against system-wide hacks and other threats that aren’t your fault.
Gemini supports a mobile and web-friendly interface, as well as an ActiveTrader option for more advanced investors. Gemini even offers interest of up to 7.4% APY on certain types of crypto if you’re a buy-and-hold investor, and as of writing, you can trade 60 different types of currency on the platform.
Coinbase was one of the first cryptocurrency exchanges launched. It went online in 2012 as a way to buy and sell Bitcoin, the world’s first cryptocurrency. Bitcoin is still the leading star of Coinbase today, but you can buy 60 other cryptocurrencies as well.
Coinbase’s strength is that it offers plenty of user-friendly education on how cryptocurrency works. There are a ton of articles on cryptocurrency in general, and on the intricacies of each individual option. There are even courses you can take for some of the more unique altcoins, and Coinbase even gives you a small amount of these currencies to play around with.
Kraken is another long-established cryptocurrency exchange. It’s been around since 2011 — an entire decade, which is ancient in cryptocurrency terms. It currently features 57 different currencies to choose from, as well as plenty of educational articles and videos.
Beginners will find Kraken easy to use, but it offers far more advanced features, too, even margin trading if you’re comfortable living on the edge. It also has a robust “cryptowatch” feature to notify you when prices change, as they frequently do in the volatile crypto market. You can even trade on other, non-Kraken cryptocurrency exchanges through Kraken if another one is offering a better price.
What to Know About Cryptocurrency Exchanges
Since cryptocurrency is entirely digital and operates mostly outside of government consumer protections, it’s especially important to know how to invest mindfully. If you’re not careful, you could lose your entire cryptocurrency balance. That would be especially damaging if you keep a large portion of your portfolio in cryptocurrency; it could all vanish overnight if you’re hacked.
Most security experts recommend keeping your cryptocurrency in a cold wallet when you’re not directly trading it. This is something like a USB stick that literally allows you to securely store your crypto offline so that no one can access it without the physical hardware. When you’re done trading, simply offload it to the cold wallet, and keep that in a safe and secure place.
Of course, that’s a bit more challenging if you’re keeping your crypto in an interest-bearing account. In that case, you’ll need to physically leave it there. You’ll need to weigh the risks and whether you’re comfortable doing this, and that’s why it’s especially important to vet these services accordingly.
A Better Understanding of Cryptocurrency Exchanges
There are two main types of cryptocurrency exchanges: centralized (i.e., located in one place), and decentralized (i.e., spread across multiple locations, with no one single server reigning supreme). We’ve included centralized exchanges in our review since they’re the largest, most liquid, and most beginner-friendly.
However, if you become more concerned about security and safety as you go down the crypto road, it’s important to be aware of the decentralized exchanges, too. They have an advantage in that a single hacking attempt can’t wipe them out. A centralized exchange, like Coinbase, could theoretically be levelled in one attack. It’s unlikely to happen, but it’s possible.
Decentralized exchanges are also anonymous, which can be good or bad depending on your motives. They also tend to be smaller and less liquid, so you may not have as easy of a time completing your orders.