Knowing how to buy Bitcoin is an essential first step in getting started with the digital currency. However, knowing which bitcoin exchange to choose can be one of the most important first steps. Since you will be investing your funds into Bitcoin and the exchange from where you buy them, making sure you are choosing the right one becomes critical.
In this guide we will take you through the top items in our checklist we recommend reviewing before making the decision to select a Bitcoin exchange. Remember, these are just suggestions to help you make the right decision. In the end, things can always change based on the exchange and the market. But doing your homework first is highly encouraged.
What country is the exchange located in?
Knowing your country and where the exchange is based out of is important, as laws and regulations can vary country to country. Buying bitcoin in your home country is typically recommended.
Despite the exchange being based in your home country or not, the exchange may accept multiple currencies. Make sure to check the fine print; usually exchanges post in their terms of service what currencies they do and do not accept.
How can bitcoins be purchased?
Can you pay with wire transfer, cash, credit cards, PayPal, and so on. Use what works best for you at your convenience. Please make sure to consider your privacy levels, for example credit cards may be the least private way versus a cash transaction.
You will want to make sure that the exchange fees are within reason and aren’t exorbitant compared to the rest of the market. Fees can change overtime and can vary from exchange to exchange. Some exchanges charge additional fees on top of bitcoin transaction fees.
Order book volume
Most exchanges with a decent customer base will publish their order book. An order book is simply a list of buy and sell orders on the exchange that are being offered. A higher volume order book is an indicator that people are using the exchange and the exchange has liquidity. Although this is an important indicator, an exchange that doesn’t publish an order book doesn’t mean it’s not legit, it just might not have that function yet and/or has a smaller volume than other bigger exchanges.
Is the exchange transparent?
Exchanges that are fully transparent will publish cold storage addresses or audit information on how to verify their bitcoin reserves. Bitcoin audits are a good way for an exchange to prove to customers that they have liquidity and can cover all bitcoin exchange sales, and aren’t running a fractional exchange.
How quickly will you get the bitcoins after purchasing them?
This may vary person-to-person, but it’s good to know how long before the bitcoin will be sent to you after purchase. Make sure to also check if the exchange offers ‘locked in’ pricing; meaning that the price you buy at, is the price you will be charged for even if the bitcoins take a few days to arrive.
Is anonymity important to you?
Staying completely anonymous is difficult, unless you buy locally from someone in cash through a person-to-person marketplace. Make sure to check if the exchange follows Know Your Customer (KYC) and Anti-Money Laundering (AML) laws in your country. If they do, then some identity information will have to be sent to them before buying.
Security is paramount
Knowing the exchange is secure is very important and shouldn’t be overlooked. Is the exchange site HTTPS or HTTP? For it to have a secure protocol it must be HTTPS. Does the exchange offer secure logins along with two-factor authentication (2FA)? These are just a couple things to think about before selecting an exchange.
Is the exchange reputable?
This is an important question that can only be answered by discussing it with your peers. If you want to make sure the exchange has good customer reviews, search for feedback about the exchange on internet forums such as the Bitcoin Reddit or the Bitcoin Forum. If you can’t find any feedback about it, ask in those forums if your peers have used it and what their experience was.
Not becoming a victim should be a high priority. This means avoiding any scam exchanges that are designed to steal from you. Please read our guide to avoiding Bitcoin fraud for more details.