Investing in Bitcoin may sound exciting, but it’s not an endeavour one should take lightly. It’s essential to get familiar with the crypto basics, and what better way to start than learning about what to avoid. As the first step to buying Bitcoin is joining a crypto exchange, new users should be particularly careful.
Choosing a wallet can be tricky, so going with a secure online Bitamp Bitcoin wallet is one of the best solutions. However, there are countless exchanges online, and it’s imperative to keep an eye out for these red flags.
Lack of Transparency
When choosing a crypto exchange, it’s probably best to ask a more experienced investor or trader for advice. Of course, that’s not always an option, and you’re left to your own devices.
Your goal is to check whether the exchange you’re researching has real owners. The company should have a headquarter address and their management team listed on their website.
If a crypto exchange platform takes transparency seriously, they’ll also publish any audit information and a cold storage address to reassure their users.
Poor User Experience
An inefficient UX alone isn’t the most alarming red flag, but it’s enough to raise some eyebrows. A well-established crypto exchange will always have a user-friendly and responsive interface.
It’s also crucial to check whether the desktop and mobile versions of the platform are equally easy to use. But that’s not the only part of the overall user experience.
If you’re keen on maintaining your anonymity, you should probably avoid exchanges that ask for too much personal information.
Furthermore, if you’re uncertain about an exchange and whether you should register, check the crypto forums to find more information.
The most prominent Bitcoin exchanges have high trading volumes. This type of liquidity means that users complete their transactions faster and don’t worry too much about the price changes.
Platforms like Coinbase don’t have any issues with liquidity, but smaller exchanges might. The lack of liquidity isn’t the only problem.
A platform that doesn’t have “locked-in” pricing, which guarantees the price you had at the time of the transaction, might not be suitable for you either.
It’s also important to pay attention to liquidity pertaining to specific trading pairs. It might be incredibly low for BTC/GBP but relatively high for BTC/EUR.
No Compliance With Regulatory Changes
As a rule, it’s best to create an account at a crypto exchange platform registered in your country of origin. That means they are more likely to comply with any existing and future regulations.
Most reliable crypto exchanges have a worldwide presence and cater to all countries where cryptocurrency isn’t illegal.
Lack of Security
One of the biggest concerns when it comes to investing in Bitcoin is security. Is the place you’re buying and selling your tokens from safe?
If the crypto exchange platform isn’t secure, your funds may be stolen and lost forever. It’s vital to check the security measures the platform offers.
In some cases, an exchange may ensure their funds, so they will need to reimburse the user is anything is lost.
However, instead of keeping your digital assets in custodial wallets offered by the exchanges, you can choose to create a secure online Bitcoin wallet app instead and be in charge of your private keys.
Watch Out for Scams
The potential problems involving the crypto exchange platform aren’t the only red flags users need to be careful about. Whenever you see promotions about buying Bitcoin or any other cryptocurrency that provide “guaranteed profits”, be suspicious.
Phrases like “no risk” or “fast return on investment” mean that a Bitcoin business or exchange is guilty of false advertising. The truth is that there are risks involved in investing in Bitcoin, and there are certainly no guarantees.
Treading Bitcoin Waters Carefully
Learning about Bitcoin and investing in crypto can be an exciting and rewarding experience. You may purchase some coins and trade as a hobby, but some would love to create a crypto trading portfolio.
To do that successfully, one must avoid the common pitfalls first. When you decide to join a crypto exchange platform, be mindful of all the potential red flags discussed above.
No platform is perfect, and you might end up using more than one eventually. But avoiding scams, insisting on transparency and excellent security is absolutely vital.