BitCoin’s trip from $890 to $19,890 – a price increase of 2,134% which occurred in less than nine months is the perfect example of the possibility of rapid growth of the cryptocurrency market. For instance, Amazon needed almost 8 years to increase its value by the same percentage. The immense rise in the size of the market also offered great opportunities for other key elements of the market such as exchange platforms.
Similar to traditional financial exchange, the cryptocurrency exchange allows the buying and selling of these digital assets. Thus, an exchange works as a mediator between buyers and sellers of the crypto assets.
In order to further improve the exchange process, the blockchain technology allows the development of decentralized exchanges (DEX). As conventional exchanges use the services of the third party in order to execute trades, DEX allows users to directly trade cryptocurrencies through an automated process. As a result, they are seen as more secure platforms compared to the existing ones, as they ultimately allow users to retain control of their coins.
This article will be the first in the series of articles reviewing the most popular exchanges that offer trading of crypto assets. Our aim is to go over, not necessarily only the biggest exchanges by daily volume traded, but also those that offer unique products.
eToro – Leader of Social Trading
eToro is the leading social trading exchange. Founded in Israel by brothers Ronen and Yoni Assia back in 2007, the platform has gained worldwide popularity when it launched its own trading platform called the “Webtrader”. After gaining significant knowledge and experience on operating a trading exchange, the company was one of the first ones to make crypto assets available for trading.
The concept developed by eToro is based on social trading. In this regard, the company’s most popular product is “Copytrader” – a feature that allows users to automatically replicate each other’s trades. It allows everyone to see the portfolio of other users, including trades with an associated risk, history etc.
Based on a similar concept, “Copyfunds” teams users around one common theme. For example, the platform offers three basic themes: “Top trader”, a group consisting of the most consistent users, “Market” which gathers the same or similar assets and finally “Partner”, which gathers traders around a similar area of expertise. For instance, “Crypto Copyfund” is a diversified portfolio consisted of crypto coins with the market cap above $1 billion, as well as with the minimum average monthly volume of $20 million.
The minimum deposit of $200 is required for both the use of “Copytrader” and the trading of cryptocurrencies, while a minimum amount required to manually trade single cryptocurrency is $25. As far as social features are concerned, in order to use the “Copyfund” feature, the user must deposit at least $5,000.
The current offer includes coins such as BitCoin, Bitcoin Cash, Ethereum, Ripple, Litecoin, Dash, Stellar, EOS, NEO etc. Following a successful financing round in March 2018, the company announced plans to launch cryptocurrency exchange platforms and a mobile wallet at the end of the year.
The platform is one of the most “generous” exchanges when it comes to leverage as it allows users to choose from 1:1 to 1:400. eToro belongs to the “Market maker” category of exchanges in addition to offering numerous options for choosing the account type – Standard, Segregated, Premium, Islamic, Institutional or Managed.
The exchange has set no limits once it comes to deposits while the minimum amount available for withdrawal is $50. The “short” positions are executed by using CFDs (Contract for Difference), while the “long” positions are not presented as a regulated product. Therefore, users enjoy no protection there. The withdrawal fee is set at $25.
One of the biggest comparative advantages of eToro is availability. Currently, the exchange operates in more than 140 countries, while the plans to enter the US market are at an advanced stage. The US users are allowed to join the waiting list while the company awaits the trading license.
BitMEX – Secure Trading Comes First
BitMEX is a cryptocurrency exchange that offers margin trading. It is based on the derivatives market, which plainly stated means it actually doesn’t offer spot trading. BitMEX is an interesting platform that has many differences compared to other major exchanges. All these differences create a unique product that targets more experienced and knowledgeable traders.
BitMEX has a web-based platform that is based on the Tradingview charting model. Although it is written in kdb+, data platform which is used by numerous big financial institutions for the automated trading, it is regarded as quite effective for trading. BitMEX is based on a server hosted by the Amazon Web Service. All servers are protected with a two-factor authentication and hardware tokens.
The exchange offers two types of contracts: futures and perpetual. Both are based on the classic futures contract as the only difference is that the perpetual contract has no specific expiration date and time compared to the futures one.
Margin-based trading is available in two varieties: Isolated and Cross-margin. For the former, the user manually allocates money to a specific trade. As far as the latter is concerned, the platform automatically assumes that all funds are available for trading.
BitMEX’s biggest comparative advantage compared to the other exchanges is security. The platform is renowned as one of the most secure exchanges out there, as it had been operating without a major hack for the fourth consecutive year. For instance, the withdrawal procedure alone is quite complicated due to security checks.
Wallets are also accessible only after multiple layers of signatures and authentication are completed. If the platform cannot verify the deposit address or connect to the founder, the trading becomes halted. BitCoins are stored in an offline multi-signature wallet with a two-factor authentication.
BitMEX was one of the first platforms to offer futures trading through futures contracts. The minimum allowed deposit is 0.001 BTC as both the deposits and withdrawals are available only in BitCoins. Thus, the exchange only accepts deposits made in BitCoins, and it is only then that the user can trade it for another exchange.
No KYC documents are needed during the registration process. Overall, the process is quite straightforward and easy to complete.
The maximum allowed leverage is 1:100. However, that applies only to Bitcoin. For the altcoins, zCash can be traded up to 1:5, while Bitcoin Cash, Ripple and Cardano can be traded up to 1:20. For Monero it is 1:25, Litecoin 1:33 and finally we have Ethereum, which can be traded up to 1:50.
The fee system is quite complicated. There are two types of applied fees – maker and taker. The maker sits at -0.025%, while the taker is at 0.075%, which are then multiplied by the applied leverage. As a result, the leveraged trading comes at a certain price.
Bithumb – Easy and straightforward trading
Bithumb is one of the largest exchanges today, founded in 2013 in South Korea. In addition to BitCoin, the platform offers a wide range of altcoins available for trading. The platform has been operating under the license obtained from the South Korean Financial Services Commission.
Bithumb offers a highly basic trading platform. While certainly not the most sophisticated one, the platform offers an easy and straightforward trading experience. As such, the platform is perfect for beginners. Just as the website, the platform support English, Chinese, Japanese, Spanish and Hindi languages.
Bithumb offers three types of trading: general, reserved and easy trading. The general option is the standard trading option offered elsewhere where the user allocates the desired amount to each trade. The reserved trading places an order at the current market price in accordance with the reserved base price set by the trader. Finally, easy trading enables automatic trading with preset amounts.
Currently, the platform offers leveraged trading only in the form of spot trading, but not in the tokens. As of October 2018, the exchange will offer 53 coins – all available for trading.
Unlike BitMEX, Bithumb allows deposits to be made in fiat currencies, however, only for the Korean residents via bank transfer. Depositing fees vary from coin to coin, so for instance, Ethereum and Ripple are free but the BitCoin deposit will cost you 0.001 BTC, while Litecoin deposit costs 0.01.
For withdrawals, the exchange charges 0.001 BTC again for Bitcoin withdrawals, 0.01 for Ethereum, as well as Dash, Litecoin etc. The full list of fees for both deposits and withdrawals is available here.
In general, Bithumb offers one of the most competitive fee structures out there. The exchange charges a basic commission of 0.15%, while it also issues coupons/vouchers, with which users can lower or completely remove the trading fee. Although Binance charges a 0.10% commission, currently the lowest standard of all exchanges. By using vouchers issued by Bithumb, users can get charged as low as 0.01% to 0.075%.
In June 2017, Bithumb suffered a major security shock as the hackers managed to collect personal information of 31,800 Bithumb users, including their names, mobile phone numbers and email addresses. Ultimately, the hackers stole a little over $1 million in altcoins and fiat currencies.
Recently, the platform was the subject of an in-depth investigation by Korean authorities with the focus on their compliance with the respective tax laws and financial regulations. In June 2018, the company was cleared of any wrong-doings.
Verdict – Who wins?
For many investors, the first steps into the new world of crypto and digital assets are through an interaction with the exchange. Currently, there are 219 registered exchanges around the globe, with new ones popping up every day. In this article, we reviewed three popular choices available today.
eToro is a champion of social trading, available in most of the counties and offers a wide range of products. On the other side, the fees are quite high while you often wonder whether the focus is more on socializing than improving the trading process.
BitMEX is the complete opposite of eToro. It places emphasis security and has very competitive fees, thus, its targets are more serious and experienced traders. However, it does not accept fiat deposits and it is not very suitable for beginners.
BitHumb’s biggest comparative advantages are competitive fees and 53 coins available for trading, but the major security hack they suffered in 2017 shows there is more to be done in the field of security.
All three exchanges are somehow different and cannot be described with the “one size fits all” due to the fact that each of them is consciously targeting specific user base. Thus, depending on your level of knowledge and experience, as well as your preferences, one should choose what fits the bill.