Cryptocurrencies have been in the limelight for a decade now. The token gained massive attention in 2009 with the launch of Bitcoin. As evidence of its popularity books had been published about this popular cryptocurrency and you can find the article online that listed the best bitcoin books for newbies. The token also attracted huge investments.
Bitcoin allowed for the easy transfer of tokens from one digital account to another. Since then the investment model has enabled massive transactions on the web. Along with this advantage, the token also grew in popularity as an investment option. Today, more than 14k+ crypto tokens are being traded daily. The market volume of cryptos has increased from $3 trillion.
How can you buy cryptocurrencies?
Now, that you have gained an understanding of cryptos, let us also understand how to buy them.
Buying a cryptocurrency is not tough. You just need access to a crypto digital wallet. Once the digital wallet is created, you are one step closer to buying crypto tokens.
Understanding crypto exchanges
A crypto exchange is a digital platform that allows easier buying and selling of crypto tokens. The utility and working model is similar to that of a stock or gold exchange.
In most cases, crypto exchanges host all popular tokens including Bitcoin, Ethereum, etc.
A cryptocurrency exchange works as an intermediary to ease buying and trading. A crypto exchange gains profits through commissions on each transaction.
Let us understand the typical working model of a crypto exchange. Assume you have $100, and you can add the funds to your digital wallet. You can buy a crypto token (Bitcoin) in exchange for these funds. Alternatively, you can also exchange your available Bitcoin with other crypto tokens.
Types of crypto exchanges
With the increase in the utility of cryptocurrencies, there is also an increase in exchanges. There are two types of crypto exchanges namely centralized and decentralized exchanges.
Understanding centralized exchanges
The working model of centralized exchanges is the same as a stock exchange. The transactions are end-to-end and managed by a third-party company. Centralized exchanges provide users with more reliability and flexibility to operate. Most famous cryptos work on a centralized crypto working model. Famous centralized crypto exchanges include coin base, Kraken, and Gemini.
On the other hand, there is a second type of exchange also known as a decentralized exchange. In such cases, there are no third parties managing user transactions. Decentralized exchanges are preferred by major investors as it addresses various flaws. Some examples of decentralized exchanges include block net and air swap among others.
Benefits of using crypto exchanges
Every crypto exchange offers its users a user-friendly and easy-to-navigate platform. Both new and experienced investors find it easy to navigate the platform. Most crypto exchanges also provide inputs and dashboards including an investment summary.
A reliable source of investment analysis
Yes, crypto exchanges use an algorithm to provide a logical analysis of your investments. It provides a dashboard summary of how your investment can progress. Crypto exchanges allow you to help understand ways to optimize your investments.
Despite the growing benefits, the past few years have seen a decline in the number of crypto exchanges.
A recent report published by coin journal provides a clear insight into this. More than 42% of crypto exchanges have failed to sustain the market pressure. As per research, these crypto exchanges vanished from the market without any explanation. Neither the exchanges have been able to provide reimbursement to their investors. Yes, this is a huge risk that comes with crypto exchanges.
The research also throws light on the fact that only 22 out of 42% left the market due to business reasons. This includes their failure to attract investors or any other business reasons. More than 10% out of 42% are phishing sites that aimed to lure investors’ money.
More than 23 exchanges disappeared from the market in the year 2018. This count further increased by more than 17% in 2021. With the ongoing market crisis, it is estimated that 55% of exchanges will close business.
Also, there are several incidents reported on the crypto exchange functionality. Zipmex paused all their withdrawals in the previous week. All these efforts are undertaken to sustain the ongoing market pressure.
There are many crypto exchanges in the market. But you should choose an exchange that has the largest investors. It will provide security for your investments.