Avoid these common pitfalls to save money, keep your investment safe, and pick the right platform the first time
Selecting your first crypto exchange can feel overwhelming, especially with so many choices on the market and new ones emerging all the time.
Crypto assets aren’t always insured and protected the same way most financial products are. Pick the wrong platform, and your investment could be at risk.
Learn the top pitfalls when choosing an exchange so you can begin your crypto journey safely and with confidence.
1. Not comparing fees
Beginners often sign up for an exchange without realizing how much fees can eat into their profits. Exchanges charge different types of fees, including trading fees, spreads, and deposit and withdrawal fees. These fees can add up fast, especially on smaller trades.
For example, a $50 trade on a high-fee exchange can cost 3% to 5% instantly, and that’s just one fee on one trade. Many of the the best exchanges trade fees of 1% or less and no fees on deposits or withdrawals.
Before signing up for an exchange, compare fees to know what you’ll pay for every buy, sell, and transfer.
2. Relying too much on marketing hype
Celebrity endorsements, flashy ads, and impressive sponsorships don’t always equal a quality platform. Some exchanges will spend millions to look trustworthy, even when customer support, security, and transparency aren’t up to par.
In fact, some of the most heavily marketed exchanges in the past have collapsed, taking customer funds with them.
Instead of listening to celebrities or ads, dig into the mobile app and platform reviews. Pay close attention to how actual customers describe navigating the platform, withdrawing funds and understanding the costs.
3. Assuming all exchange wallets are the same
Most exchanges provide you with a crypto wallet — a place to store your coins after you purchase them. However, not all exchange wallets are created equal.
Look for platforms that:
- Keep most funds in cold storage (offline) to reduce hacking risk.
- Offer multi-sig protection, so no single party can move funds alone.
- Provide clear withdrawal policies, so you can move your crypto out at any time.
It’s always safest to move your coins over to a hardware wallet, but until then, look for an exchange with a strong built-in wallet.
4. Not checking supported coins
Nearly every exchange offers the top coins like Bitcoin and Ether, but what about other kinds of cryptocurrency?
Stablecoins, for example, have their value pegged to a real-world asset. Tether (UDST) and USD Coin (USDC) are tied to the US dollar. When the market is unfavorable, you can store your extra cash as a stablecoin to ride out the instability. While most exchanges offer at least one stablecoin, make sure it’s the one you want.
Memecoins are another favorite among crypto traders, often seeing the biggest trends and returns, but also the biggest crashes. If you have a high risk tolerance and want to jump on a coin’s hype, make sure the exchange offers a wide range of cryptocurrencies. Some, like Uphold, offer hundreds of coins, while others only offer a dozen choices (or even fewer).
5. Overlooking critical security features
It might be easy to assume that all exchanges take security seriously, but some go a step beyond the others. While nearly all employ basic security features, like two-factor authentication, the best exchanges add extra layers of security.
Some top features to look out for include:
- Crime Insurance. This specific type of insurance protects the digital assets held in cold storage by the platform in the event of a hack or breach.
- Proof of Reserves. This public audit shows that the exchange holds enough crypto to cover its customer balances. It helps reassure users that the exchange isn’t lending out deposits or running short on funds.
- Real-Time Monitoring & Alerts. Some exchanges offer suspicious-activity alerts and 24/7 monitoring, which can help stop fraud before funds are withdrawn.
Exchanges that offer these features can give you extra peace of mind, which is crucial when your investment is on the line.
6. Forgetting about customer support…until it’s too late
Many people don’t think about customer support until they have to contact it, and crypto exchanges vary widely in the amount of support they offer.
Some top crypto exchanges, like Kraken, provide 24/7 phone support and live chat. Others only offer customer service via submitted tickets, meaning you have to fill out a form and wait to hear back, which could take days or even weeks. This lack of support can be especially frustrating if your account is frozen or you can’t transfer funds.
While researching, be sure to check the contact section of the provider’s website to see what methods of contact it offers its customers.
Bottom line
Choosing a crypto exchange is one of the most important decisions you’ll make when starting out. Aspects like fees, supported coins, and platform security all affect how safe and smooth your experience will be.
Taking time to compare exchanges before signing up can save money, protect your assets, and help you avoid the headaches that catch many beginners off guard.
