Getting started with Cryptocurrencies: What are Crypto Exchanges? Comprehensively answered all important questions to easily get started with futures trading. When you’re just starting your crypto journey, you’ll ask many questions, one likely being, “What are crypto exchanges?” In this article, we answer this question. We’ll be explaining the different types of crypto exchanges, the best examples, and how to use them.
What Are Crypto Exchanges Platforms?
Cryptocurrency exchange platforms, simply crypto exchanges, are online marketplaces that enable you to buy and sell crypto assets like cryptocurrencies, futures, perpetual futures, and derivatives.
To understand what crypto exchanges are, it’s best to think of these platforms as digital middlemen. dThey enable the exchange of crypto assets, providing a secure and user-friendly environment for users to engage in cryptocurrency transactions.
In addition, crypto exchange platforms often come with a wide range of functionality. On the typical exchange platform, you can create an account, deposit funds, and execute different kinds of trades on these platforms.
The two kinds of crypto exchange platforms are centralized exchanges (CEX) and decentralized exchanges (DEX), each with its features, advantages, and cons, which we’ll discuss later in this article.
Popular examples of crypto exchange platforms include BingX, Binance, PancakeSwap, and Uniswap.
Types of Crypto Exchanges Platforms
There are two main types of crypto exchange platforms. These are centralized exchanges and decentralized exchanges:
- Centralized Exchanges (or short CEX or CEXes) like Binance, Bybit, BingX and so on.
- Decentralized Exchanges (or short DEX or DEXes) like Uniswap, Pancakeswap and so on.
Let’s cover them below and explain the differences between them.
Centralized exchanges (CEXes) are crypto exchange platforms governed by single entities. They are centralized because they are liable to regulatory bodies such as the US Securities and Exchanges Commission.
They allow you to buy or sell cryptocurrencies through order books. How order books work is that they match available buyers and sellers who want to trade crypto assets at a particular price.
Say you want to buy 1 BNB for $230, and someone is selling it at that exact price; the centralized exchange will match you both.
Furthermore, CEXes usually have higher liquidity due to a large user base, enabling faster and more efficient trades. They also support a wide range of cryptocurrencies and trading pairs.
In addition, CEXes are usually the best futures trading exchanges. And they’re better optimized for signal trading as well.
From our experience, most CEXes typically offer user-friendly interfaces, making them accessible regardless of whether you’re a beginner or an experienced trader.
However, once you deposit, the exchange holds custody of your funds, which is risky if the platform faces security breaches or mismanagement (for instance, the recent FTX debacle).
Also, if you value privacy, centralized exchanges may not be your thing because users need to undergo identity verification (KYC) on centralized exchanges.
Regardless, KYC regulations make using centralized exchanges much safer than decentralized exchanges. By verifying user identities, CEXes reduce the risk of fraud, money laundering, and illicit activities, making it more difficult for malicious actors to exploit them.
Unlike CEXes, Decentralized exchanges (DEXes) aren’t governed by companies and aren’t subjected to financial regulatory bodies. DEXes allow you to perform direct peer-to-peer trading without acting as an intermediary.
They also allow you to trade in a trustless and censorship-resistant manner, meaning you retain control of your private keys and funds throughout the trading process.
With decentralized P2P, you need to use smart contracts— self-executing agreements with coded terms that automatically execute when predefined conditions are met on a blockchain.
Decentralized exchanges are usually built on blockchain platforms like Ethereum, making them resistant to censorship. So, you can access and trade crypto assets without worrying about restrictions imposed by a central authority.
On top of that, DEXes require minimal personal information, so you may prefer them if you enjoy privacy.
However, most decentralized exchanges don’t have as much liquidity as CEXes because their trading volume is comparatively lower. This may result in higher slippage (the difference between expected and actual price during a trade) and less favorable prices if you trade large amounts of crypto assets.
Another con of DEXes is that they tend to be complicated, hence, anti-newbie. You’ll have to figure out how to integrate your wallet, understand smart contracts, and navigate a not-so-familiar user interface.
Regardless, once you find your feet, DEXes are a great alternative to CEXes. Uniswap, Camelot, PancakeSwap, Orca, ApexProtocol, and THORChain are some of the best decentralized exchanges.
How to Use Centralized Exchanges
Using CEXes to trade crypto, futures, perpetual futures, or derivatives is pretty simple. Here are the typical steps you’ll follow when trading with one.
- Create an Account: Sign up on the centralized exchange of your choice.
- Complete KYC: Verify your identity, inputing details like your name, address, and other personal information.
- Deposit Funds: Add funds to your exchange account.
- Choose Trading Pair: Select a cryptocurrency pair to trade (i.e., BTC/USDT)
- Place Market or Limit Order: Set buy/sell parameters and confirm the order.
- Monitor Trade: Keep an eye on real-time market data.
- Establish Stop-Loss/Take-Profit: Manage risk by setting proper stop-loss and take-profit levels that help you limit losses.
- Curate a HODL/Exit Strategy: Sometimes, sudden pumps can happen in the market. So, reduce your entry & exit risk to avoid missing out on them by leaving a small portion of your tokens exit points (a moon bag) for specific trades.
- Withdraw Profits: Once successful, withdraw funds to your wallet.
How to use Decentralized Exchanges
Using even the best decentralized exchanges requires you to follow the following steps.
- Select DEX: Choose a decentralized exchange supporting your preferred cryptocurrencies (e.g., Uniswap).
- Connect Your Crypto Wallet: Link a compatible wallet (e.g., MetaMask) to the DEX.
- Select Trading Pair: Choose the trading pair you wish to engage in or get the contract address of the specific token to trade.
- Place Decentralized Order: Set trade parameters, approve the transaction, and confirm the swap signature sent by the smart contract prompt in your wallet.
- Confirm Transactions: Authorize any other necessary transactions or approvals through your wallet. New tokens often require two signatures: approval and swap.
- Monitor Trades: Keep track of your trades using DEX Screener and price indicators.
- Withdraw: After a successful trade, convert your profit to stablecoins and decide to hold in a non-custodial wallet or move profits to a CEX like Binance for fiat conversion.
Tip: Be careful with DEXes as you will directly connect your wallet (like the MetaMask Wallet) to them. Hence, always check if you are on the correct website and never connect your wallet to websites you don’t trust!
Spot Trading vs. Futures Trading
Spot Trading in crypto is a type of day trading that involves buying or selling crypto assets at the current market price. This kind of trading is instant, and usually happens when you just want to own or convert some crypto rather than make a profit.
On the other hand, Futures Trading is more profit-oriented. It involves making an agreement to buy or sell a particular cryptocurrency or derivative when it reaches a particular price point. Futures are usually leveraged, meaning that as a trader, you can control a much larger position than their capital by multiplying it by a certain percentage.
As expected, this comes with a lot more risk than normal. However, if the trade goes successfully, you are guaranteed a lot of profit.
Top 5 Best Crypto Futures Trading Exchanges
Having tried out several crypto exchange platforms, we highly recommend these as the best futures trading exchanges you should use. Here is our list of the top 5 best crypto exchanges for futures trading:
- MEXC Global
Let’s dive into an in-depth analysis of those exchanges.
1. Binance Crypto Exchange
We believe that Binance walked so that ByBit could fly. Binance is one of the top futures trading platforms today. With an average of $55 billion in daily transaction volumes, it is the most popular centralized exchange in the world.
Binance has a vast range of trading pairs, over 300 cryptocurrencies, low fees, and advanced trading features.
However, its leverage caps out at 20x, a tad lower than ByBit’s. Furthermore, you may find its user interface a little overwhelming, and the platform is quickly losing trust over prolonged SEC scrutiny.
2. BingX Exchange
BingX is also one of our favorite futures trading platforms launched in 2018. Unlike Binance, BingX doesn’t require KYC verification for you to trade with it. Although your account will be limited until you verify it, you can still withdraw up to $100,000 USDT.
In addition, BingX supports over 350 cryptocurrencies and allows for up to 150x leverage on futures and perpetual futures trading. For futures trading, BingX’s trading fees is as little as 0.075% for takers, and 0.045% for makers.
We highly recommend BingX for futures trading as it allows you to trade futures seamlessly and for very low fees even without KYC verification.
3. ByBit Exchange
At the very top of our list is ByBit. With a daily transaction volume of $4 billion, ByBit is one of the most popular crypto futures trading exchanges. It has an excellent user interface and widespread liquidity.
Bybit is available globally, allowing for a range of fiat deposits through bank transfers and PayPal. You can also use stablecoins like USDT and USDC.
One significant advantage of ByBit is its diverse crypto offering, with over 930 cryptocurrencies for spot trading and 200+ for futures with up to 25x leverage.
ByBit also has a reasonable fee structure, with rates as low as 0.01% for market makers and 0.06% for market takers. These features make it highly preferred for futures trading.
4. Bitget Cryptocurrency Exchange
Launched in 2018, Bitget comes fifth on our list, boasting a user-friendly interface, $5 billion daily transaction volume, up to 70+ trading pairs, and innovative features. It is definitely one of the best centralized exchanges today.
Some of its pros include 24/7 support, low trading fees, and robust security. However, it might have a steeper learning curve for beginners, and liquidity can vary across different trading pairs.
Still, we believe it’s a great option for profitable futures trading.
5. MEXC Global Trading Platform
MEXC is another crypto futures trading platform that we highly recommend. It supports over 2000 trading pairs and a ton of trading types.
For futures and perpetual futures trading, you can access up to 200× leverage on select perpetual futures. And with fees as low as 0% for makers and 0.03% for takers, that sounds like a steal.
However, unlike BingX KYC verification is compulsory for trading. Still, if verifying your identity is not an issue for you, MEXC is a great crypto exchange you should consider. Little notice from our side, we recently saw that MEXC blocks accounts, hence you should be cautious with them.
Crypto exchanges are the heart and soul of web3 as they enable the flow of crypto assets. While Centralized and Decentralized Exchanges have individual peculiarities, the former has much more adoption than DEXEs.
In this article, we’ve told you what crypto exchanges are and shown you the top exchanges best optimized for day, margin, and leverage trading. If you follow our guide, you’re one step closer to blowing up your trading portfolio.
Not financial advice. Make sure only to trade crypto assets you’re comfortable with losing, as crypto market conditions can be unpredictable sometimes. Always consider setting relatively safe stop loss levels before engaging a set-up. Crypticorn is not liable for any financial losses you incur when trading.
What is the best platform for crypto trading?
Currently, Binance is the best crypto trading platform for spot, margin, and day trading, among others. It outranks other trading platforms with enormous liquidity and daily trading volumes.
Best Binance alternatives
Some of the best Binance alternatives include ByBit, Bitget, OKX, Kucoin, and Kraken. They have newbie-friendly interfaces packed with robust features that make them optimal trading platforms.
Are centralized exchanges better than decentralized exchanges?
Certain areas, such as security, easy UI, and available liquidity, make centralized exchanges outshine decentralized exchanges. However, that doesn’t make them better, as decentralized exchanges embody the goal of decentralization proposed when cryptocurrencies first arrived.