The need for a secure cryptocurrency trading exchange has been prevalent since the Mt. Gox hack of 2014. During this infamous event, a professional trading platform that had been responsible for over 70% of the world’s Bitcoin transactions and was back then by far the biggest Bitcoin exchange, had to declare bankruptcy due to the massive theft of its Bitcoin and other digital assets due to hackers.
Fiat currency, despite its drawbacks, has Federal Deposit Insurance Corporation (FDIC) protection when held within a United States bank account. Bitcoin and other cryptos do not have FDIC insurance and many investors have lost their Bitcoins and other digital assets. This has created the need for the stricter regulation of all cryptocurrency exchanges within the United States, especially within New York State, where a BitLicense is now required to operate. This event drew the attention of regulators, changed the parameters and created the need for hardware wallets, private keys and other security measures.
For the new user, choosing a secure but professional trading platform can prove a daunting task. For lower fees and ease of use, Kraken and Binance might be good choices, but not necessarily for security. Kraken suffered a flash-crash in 2021 and Binance has been hacked many times. New users might feel a personal connection to the founders of Gemini, the Winklevoss twins and their flat fee of flat 0.5% per trade with an additional $1.99-$2.99 per transaction. There is not much evidence, however, to show that Gemini is as secure as the top three, detailed below.
Any Coinbase review will tell you that Coinbase has excellent security and authentication methods because they require to 2FA (2-step verification) for Coinbase users and keep 98% of customer funds in offline cold storage. Furthermore, Coinbase has never been hacked. Coinbase also has its own stable coin, USDC, and provides Coinbase users and Coinbase account holders with access to its Coinbase app.
Payment methods include credit card, debit card and ACH transfer from a bank account. Coinbase users are provided with their own Coinbase wallet for their Coinbase account. Coinbase users have direct access to the withdrawal of fiat currency from their Coinbase account using ACH transfer to a bank account and are also allowed the withdrawal of cryptocurrencies. Coinbase Pro and Global Digital Asset Exchange (GDAX) are also owned by Coinbase, which is based in San Francisco and was founded by Brian Armstrong.
Coinbase Exchange has many new features for the benefit of their users, but the Coinbase Platform did experience an outage according to the Wall Street Journal.
Robinhood has one distinct advantage over Coinbase, in the form of a 0% commission. The downside, however, is that Robinhood users cannot withdraw their cryptos directly from the crypto exchange, but instead are required to first sell cryptocurrencies and convert them to fiat currencies before withdrawal from the cryptocurrency exchange. Unlike Coinbase, Robinhood users are not limited to cryptocurrencies but can also trade other securities, like stocks and gold. Because Robinhood is more established with assets more tangible than cryptos, new users might feel more secure with Robinhood.
On PayPal, you can now buy and sell cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH). After you sell your cryptocurrencies, you can transfer the fiat currency into your bank account as you would with any other PayPal transaction, but experienced users might not like the high fees (2.5% per trade). Beginner traders in the crypto market, however, might feel more comfortable with PayPal’s ease of use and feel more secure, since they are established as an online payment method for fiat and secure, third party transactions.
Regardless of which cryptocurrency exchange you select as your preference, you should understand that even the best crypto online exchange is not a bank. If you sell cryptocurrencies, you should move your fiat currency into some type of bank account before increasing the size of your trading account. That way, if there is a problem exporting your fiat currency from the online exchange platform, you will know before committing large amounts of your investment capital.
Likewise, if you choose not to sell your cryptocurrencies and other digital assets, like non-fungible tokens (NFTs), any time in the near future, the trading platform is not the place for you to hold cryptocurrencies and other crypto assets. The best place to store your cryptocurrency gains is in some kind of cold storage, like a crypto wallet, hardware wallet, or some other type of private key.
As with any online transaction, when you trade crypto you should take the usual precautions with malware protection and an anti-virus scan. Each one of the above-mentioned is a great tool for protecting one’s digital currency and other web property.