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Beat the “Crypto Exchange Blues” by Answering These 5 Important Questions

Published November 20, 2020 | Updated November 20, 2020

Beat the “Crypto Exchange Blues” by Answering These 5 Important Questions

If you’re just starting out with cryptocurrency or getting in deeper, you are wading into an ecosystem that has some complexity to it. Most beginners know that there are different exchange options, but fewer of them understand how these exchanges compare to one another. Right now, some of the biggest questions that traders may have are around the legitimacy and credibility of exchanges and their operators. But there are other questions to be answered, too. Pay attention to these big common concerns that people have when they take the plunge into crypto. You’ll become more informed about what’s out there, and better able to manage your own asset portfolio.

Here are five of the questions traders often ask themselves, midway into a crypto buy:

1.    “Who’s Behind This?”

At the moment, cryptocurrency trading and investing is a little bit under the gun in some ways.

One of the most prominent examples is the BitMex exchange. Just months ago, this was a common place to do business in exchanging one crypto or fiat asset for another.

Now, the CEO Arthur Hayes is in custody, and other top leaders are being pursued by government investigators who claim that BitMex operators did not sufficiently crack down on money laundering, or require the right kinds of verifications and credentials for stakeholders. This does not tend to inspire confidence!

BitMex isn’t the only example, either. OKEx leader Star Xu was also arrested lately, and various other operators are now in the hot seat, as federal regulators in countries like the US and China get serious about cracking down on unregistered and unlicensed cryptocurrency activities.

With that in mind, one of the trader’s biggest initial questions is – who’s behind this platform? Are they operating according to the rules, or just winging it?

2.    “Is This Exchange Compliant?”

Following on the heels of that first question, you have traders wondering whether a particular exchange has violated any standards that regulators have set.

In general, many countries require an operator to have a particular license (or provide transparent regulatory reports) in order to make sure that the exchange is operated a certain way. Otherwise, the potential for various types of money laundering and fraud is pretty pervasive.

In many cases, it’s relatively easy to figure out your exchange’s bonafides as far as regulation. But before agencies started to get aggressive with exchanges, traders didn’t always do this research. Then they found themselves blindsided as their favorite exchanges toppled! Even popular exchanges like Binance that seemed to do everything right and should probably have another look at their KYC rules in light of current regulatory activity.

3.    “What If I Lose?”

Some cryptocurrency traders are fairly familiar with the terminology and how to trade fiat for crypto, or vice versa. They have some form of strategy in terms of acquiring assets, figuring out cost basis, and ultimately, profit taking when their coins have taken off.

Their concerns are more about the volatility of the cryptocurrency market. And it is volatile. There’s no denying that. All you have to do is look at Bitcoin values between its prior peak at $20,000, and its current value around $16,500. It takes hardly anything for Bitcoin to lose or gain half of its value or more, and so traders can be understandably concerned.

At exchanges like, traders can take advantage of real-time price alerts and lock in guaranteed stop-loss orders to help prevent problems with flash crashes or other spontaneous combustions of a particular crypto market. There are also tools for wallet storage, and a range of resources for beginners to make everything more transparent.

4.    “What The Heck Is Margin Trading?” also offers greater leverage than some other exchanges. In some cases, traders can utilize several hundred times the value of their initial investment to make plays on a cryptocurrency.

The key here, though, is to understand your risk. Trading on margin means that if you lose out, you’re on the hook for much larger paybacks than what you originally put into the market.

Another good tip is to take advantage of crypto derivatives like futures and options, where you may be able to leverage more without ending up owing mountains of money if your game plan doesn’t fully pan out. The unique strategy of options trading gives cryptocurrency fans more alternatives. They can chase reward without raising risk in the traditional way that you do if you buy an equity or asset on margin.

5.    “What Are My Choices?”

It’s also important for an exchange to have a lot of different asset classes in play. Finance journos often talk about cryptocurrency “on-ramps” where fiat currency holders can easily exchange into a digital asset. Traders also evaluate the cryptocurrency pairs that allow for a pivoting or diversification in a cryptocurrency strategy. With over 1500+ assets, and the ability to trade on asset tokenization opportunities, combines careful regulatory compliance and established trading legitimacy with a broad new menu of options for hedging, diversifying, and ultimately, innovating in crypto and defi investment. It is really a whole new world, and one that traders can be confident moving into if they know that the exchanges are playing ball with regulatory agencies.

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
About Author
I am an associate content producer for the news section of Coingape. I have previously worked as a freelancer for numerous sites and have covered a dynamic range of topics from sports, finance to economics and politics.
Casper Brown 371 Articles
I am an associate content producer for the news section of Coingape. I have previously worked as a freelancer for numerous sites and have covered a dynamic range of topics from sports, finance to economics and politics.
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