Cryptocurrencies are being hailed as the asset of the future. Whether they will replace fiat currencies or not remains to be seen, and is the subject of much debate, but one thing is for sure – they are not going anywhere, anytime soon.
With quite literally, hundreds of different cryptocurrencies and ICOs on the market, and the values of the leading currencies reaching stratospheric levels, investing in them is something that is well worth considering.
If you are considering dabbling in the world of crypto, then you are going to need an exchange, but with lots of different service providers all vying for your custom, it can be a little overwhelming knowing which one to choose.
As everyone’s requirements are different, it is a bit tough to tell you which one you should use, which is why we have decided to give you the lowdown on the five cryptocurrency exchanges to avoid.
What Is a Cryptocurrency Exchange?
First, let us start with the basics. For those of you that aren’t familiar with the world of cryptocurrency then some of the lingo may be a little bit confusing.
If you are going to get involved with a cryptocurrency- be in Bitcoin, Ethereum or Ripple – you are going to have to think about choosing a cryptocurrency exchange to work with.
At its most basic level, a cryptocurrency exchange is a website where you can buy, sell, or exchange a cryptocurrency for another cryptocurrency, or even for a fiat currency such as dollars or euros.
Of course, it stands to reason that if you are putting assets with a genuine value into an online platform, you need to be assured that the service provider is who they say they are and will deliver what they say they will.
Of course, there is no guarantee that you will make your money back, as the very nature of currency trading is unpredictable, but by choosing your provider carefully, you can limit the chances of you ending up the victim of a scam or hack.
What Are The Warning Signs Of an Unsafe Crypto Exchange?
There are several things that you should take into account before you choose a cryptocurrency exchange- taking note of these will tell you whether you are onto a winner, or whether the exchange you are looking at is best avoided.
There are a vast number of risks that can occur the unsuspecting cryptocurrency trader – exit scams, hacking, and excessive fees are just a few, but there are some other factors you should keep your eyes open for as well.
While many risks cannot be avoided, there are some that you can educate yourself about beforehand, to save yourself an awkward situation at a later date.
Commission and Fees
No one likes to be overcharged and especially if you will be making a lot of transactions, paying the lowest possible fees is very important.
Some exchanges are more transparent than others as to how much you will pay when it comes to depositing, buying, selling, and storing your currency, whereas some are a little more elusive about how they charge you for using their services.
Make sure that the provider you choose lists all of their fees clearly and openly, if you cannot find how much they charge for XYZ service, do not assume that they don’t do it – the probably do, but they are hiding them because they are high.
Security
Remember, a cryptocurrency is still cold hard cash and is just as valuable as fiat currencies.
As such, you should look for an exchange that offers the best security – as you would with a traditional bank.
You need to make sure that your exchange of choice is following safety best practices such as providing proof of coins in cold storage, adequate client verification procedures, and two-factor authentication.
Warning signs to look out for include a long and persistent backlog of withdrawals, a significant difference in prices of currencies between your exchange and other exchanges, media allegations of theft or the failure of a provider to respond to questions or complaints.
Customer Service
A reputable exchange will take customer service seriously. Their reputation and public perception of them will be one of their most prized possessions, and they will take every possible step to preserve their right standing.
You can quickly research an exchanges customer service reviews, as well as check out the various methods and waiting times when it comes to communicating directly with their agents – this will give you a clear understanding of their dedication to ensuring that your questions and queries are settled efficiently.
Ease of Use
All exchanges should be accessible for all and should provide information that is readily accessible for those who are just starting out while being succinct and user-friendly for the professionals.
You should also check out how much downtime the site experiences as there is no point signing up for an exchange if you cannot access it.
Remember that time is money and if you are spending a lot of time dealing with non-intuitive user-interfaces then that is valuable time wasted where you could be doing other things – like earning money!
Exchanges That Should Be Avoided
Not all exchanges are created equal, and while the majority of the big names are who they say they are, there are some that should be avoided.
You will find that most of these exchanges have both good and bad reviews online, but to get a proper idea, you should look for recurring complaints to see which are valid concerns, and which are just disgruntled customers complaining about the sake of doing so.
Poloniex
While this exchange has a lot of positive reviews, it is worth taking note of a large number of criticisms as well.
Some common complaints include the amount of time it takes for your account to be approved and the fact that during this time, you cannot make any trades or even withdraw your money.
They have also received criticism for their support services, in particular, response time and the way in which they speak to clients.
Another point worth noting is the fact that it takes an unusually extended period for withdrawals to be enacted and for funds to be deposited back into your account.
Coinbase
Coinbase is one of the biggest in the world and also has some incredible, glowing reviews, it is also quite a controversial choice.
Famous for its easy to use interface and its wide range of deposit and withdrawal options it does have many good points.
That said, it has come under a lot of criticism particularly on forums such as Reddit.
Some of the reasons it has come under fire include the freezing and closing of accounts, frustration over GDAX bugs and outages, and its close ties to traditional banking establishments mean that it is viewed with suspicion by a lot of online users.
Read our Coinbase review for more details.
CoinGather
This lesser-known platform has been in the news recently for all of the wrong reasons.
The small setup has been offline for the last few days leaving many customers fearing that their money has disappeared.
Their customer support is silent, as is their Twitter feed and concerns are mounting that the owners have done a runner with people’s assets.
While it was a small exchange, it was still listed on CoinMarketCap with 92 trading pairs including BTC, LTC, and DOGE.
What is also concerning is that the site’s admin has also been offline for over a week on the much used Bitcointalk forum. Should they ever come back online, it is perhaps wise to give these guys a wide berth.
Changelly
One of the biggest competitors for market leader ShapeShift, Changelly has garnered some unwanted attention in recent months due to a series of common complaints that do not appear to be being addressed by its customer service team.
The majority of the complaints refer to transactions that have either failed, gone missing, or not been completed – something that is never good for an instant exchange service.
It is interesting to note that these failures relate to funds being sent to the client, as opposed to towards the company – which again raises a few red flags.
These issues are not related to just one kind of cryptocurrency either and seem to be affecting transactions across the board.
In the fast-paced world of cryptocurrencies, clients want everything instantly and don’t want to be waiting around and possibly losing money because the site is too sluggish to keep up.
Interestingly, the company has remained active on social media but yet has failed to address any of the issues mentioned in various online forums – this wall of silence on what could be a very serious issue does not bode well for customers looking to regain their confidence in the platform.
So, How to Choose a Reliable Crypto Exchange?
When it comes to knowing which is a good exchange and which is not, it can be a very complicated fact-finding mission.
A lot comes down to an individual’s opinion and personal preferences and depending on your needs, requirements, or expectations are, what may be right for you, may not be suitable for someone else.
Due to the nature of the beast, there is always the risk of hacking and security breaches, although as we have discussed above, some exchanges take more precautions than others.
The best way to protect yourself against dodgy, nefarious or cowboy operations is to do your research. There is an enormous selection of peer reviews available online and by reading enough of them, you can identify real issues that could cause you problems.
It is wise to stick to the companies that are the most well known and reputable, as these are less likely to do a runner with your money.
However, regardless of the exchange’s stellar reputation, you should never keep your funds on an exchange. If you are seriously thinking of investing in cryptocurrency, your first expense should be a hardware wallet, such us TREZOR or Ledger Nano S.
Last but not least, don’t keep all of your eggs in one basket. Only save the money you need to trade in exchange, and keep the rest in cold storage – offline and protected away from hackers and unauthorised access.
Knowing which cryptocurrency exchanges to avoid is crucial, but if you really want to start investing, you should check our guide to the best cryptocurrency exchanges and choose the one that is the most suitable.
