Cryptocurrency Exchange Methodology

How we picked the best cryptocurrency exchanges

Introduction

A cryptocurrency exchange is an online marketplace where you can buy, sell, and trade cryptocurrencies, like bitcoin, Ethereum, and other altcoins. In many cases, you can buy and sell crypto for fiat currency, but some exchanges only allow crypto-for-crypto trading. Some exchanges are centralized, some are decentralized; some have your favorite crypto coins, others don’t; some are more accessible to beginners, others cater to experienced traders.

To help you find the right crypto exchanges—exchanges that have good security, are affordable, and offer the cryptocurrencies and services you need—we’ve reviewed the top companies on the market. We analyzed each one based on the most important factors for users who want to trade crypto efficiently and safely.

See the results in our picks for the best cryptocurrency exchanges.

Investing in cryptocurrencies, Decentralized Finance (DeFi), and other Initial Coin Offerings (ICOs) is highly risky and speculative, and the markets can be extremely volatile. Consult with a qualified professional before making any financial decisions. This article is not a recommendation by The Balance or the writer to invest in cryptocurrencies nor can the accuracy or timeliness of the information be guaranteed.

Our Review Process

We looked at a total of 28 cryptocurrency exchanges. To judge exchanges fairly, we rated each one in the following categories with the following weights:

  • Security (37%)
  • Fees (20%)
  • Offerings (16%)
  • Availability (13%)
  • Features (14%)

We scored exchanges on various criteria within each category—whether or not they use cold storage to secure funds, how much they charge to trade and transfer crypto, which currencies are available, etc. Each criterion was weighted according to its importance for exchange users. We then gave every company an overall rating from zero to five. 

Data Collection

We collected over 1,000 publicly available data points from cryptocurrency exchange websites and news sites. We also reached out to company representatives for more information where necessary, for details such as geographical restrictions, advanced trading options, and crypto transfer speeds.

Security

Cryptocurrency trading is notorious not only for its volatility but also for its unreliability and exposure to hacking. Some crypto exchanges don’t take the security of user and company funds seriously enough. If you can’t trust an exchange to keep your assets safe, you shouldn’t use it to buy, sell, or trade crypto.

We evaluated each exchange based on the following security features, and weighted security as a whole more highly than other criteria (37% of total score).

  • Centralized/Decentralized (10%)
  • Cold Storage/Hot Storage (10%)
  • Know-Your-Customer (KYC) Standards (2%)
  • Multi-Factor Authentication (MFA) (10%)
  • FDIC Insurance (5%)

Centralized/Decentralized

Cryptocurrency exchanges are either centralized or decentralized. With a centralized cryptocurrency exchange, transactions between users (buying, selling, trading crypto) go through a trusted third party. Centralized exchanges allow you to buy crypto using fiat currency, and assets may be held in escrow to fulfill orders. The New York Stock Exchange is centralized, as are many popular crypto exchanges like Coinbase and Kraken.

With a decentralized exchange (DEX), transactions are peer-to-peer. Instead of going through a centralized intermediary, transactions are mediated by smart contracts and atomic swaps, from one user to another. DEXs typically give people more control over their funds and tend to have lower transaction costs, but they only allow you to swap crypto for crypto; you can’t purchase crypto with fiat. Although DEXs aren’t immune to hacking, they’re often seen as more secure than centralized exchanges. Crypto.com, Bitrue, and Bisq are decentralized exchanges.

We gave centralized exchanges a score of zero and decentralized exchanges a score of one. This factor accounted for 10% of the overall score.

Cold Storage/Hot Storage

If a cryptocurrency wallet is not connected to the internet, it’s referred to as “cold storage.” If it is connected to the internet, it’s referred to as “hot storage.”

Crypto in cold storage can’t be digitally hacked, making it more secure than crypto in hot storage. Crypto exchanges will often keep the majority of user and company funds in cold storage, with a smaller amount in hot storage for daily operations.

We gave exchanges that use cold storage a score of one, and exchanges that do not use cold storage a score of zero. Storage method accounted for 10% of the overall score.

Know-Your-Customer (KYC) Standards

When you register with a crypto exchange, you typically need to provide some amount of personal information. For the most basic access, you may only need to give your email address; for full access to buy, sell, deposit, withdraw, and trade crypto, you may need to provide your name and address, along with documented proof and a government-issued ID. Some exchanges require verification by facial recognition as well.

These practices are referred to as Know-Your-Customer (KYC) standards, and they’re often required to meet the compliance requirements of governments around the world.

We gave crypto exchanges a score of zero if they do not use KYC, and a score of one if they do use KYC. This criterion accounted for 2% of the overall score.

Multi-Factor Authentication (MFA)

Multi-factor authentication (MFA) is a security measure that requires you to authenticate an action by two or more verification factors. To log in to a crypto exchange, for example, you may need to provide both a password and a code from an authenticator app, like Google Authenticator. Crypto exchanges may allow you to set up MFA for other important actions like crypto buying, selling, trading, and withdrawing.

MFA is a fairly common practice among major crypto exchanges; we gave exchanges a score of zero if they don’t use MFA, and a score of one if they do use MFA. This criterion accounted for 10% of the overall score.

FDIC Insurance

FDIC insurance provides up to $250,000 in coverage for eligible bank customers if the bank goes belly-up. Although most U.S. banks have FDIC insurance, not all crypto exchanges do. Only U.S.-based crypto exchanges can have FDIC insurance, and only if they partner with an eligible bank.

It’s important to know that cryptocurrency assets are not covered by FDIC insurance. Only certain deposits at covered banks are eligible. If a crypto exchange says it's FDIC-insured, this means it keeps a portion of its assets as eligible deposits at an FDIC-insured bank.

We gave exchanges a score of one if they are FDIC-insured, or a score of zero if they are not. FDIC insurance accounted for 5% of the total score.

Fees

Cryptocurrency exchanges use several different fee structures. Many use a maker-taker model (one fee for “market makers,” who add liquidity, and another for “takers” who remove liquidity), but not all. Some have only a few features, while others provide more services that come with more fees.

To rate crypto exchanges with different fee structures fairly, we looked at fees for the most important activities. 

  • Trading Fees (10%)
  • Deposit Fees (5%)
  • Withdrawal Fees (5%)

Companies that charge less, on average, scored higher. Altogether, fee ratings accounted for 20% of the total score.

Trading Fees

Many exchanges have a tiered fee structure—the higher your trading volume, the lower your fees. Some exchanges also offer discounts if you hold their own branded coins.

We took into account maker-taker fees, spread fees, and derivative trading fees to score exchanges in this category, using a range from zero to one. Trading fees accounted for 10% of the total score.

Deposit Fees

Most exchanges charge no fee for crypto deposits, but some do charge for fiat deposits.

We calculated average fiat and crypto deposit fees to score exchanges in this category, using a range from zero to one. Deposit fees accounted for 5% of the total score.

Withdrawal Fees

Once again, exchanges often have different fees for fiat and crypto withdrawals.

We calculated average fiat and crypto withdrawal fees to score exchanges in this category, using a range from zero to one. Withdrawal fees accounted for 5% of the total score. 

Offerings

Crypto traders need access to specific coins, order types, and trading options to execute their strategies.

For this category, we looked at crypto availability and several other offerings that crypto exchanges may provide. Altogether, these offerings amounted to 16% of the total score:

  • Crypto Assets (5%)
  • Derivatives (4%)
  • Order Types (4%)
  • Over-the-Counter (OTC) Trading (2%)
  • Third-Party Trading Bot (1%)

Crypto Assets

Cryptocurrency exchanges only support certain cryptocurrencies, and the selection changes over time. In general, the more cryptocurrencies you have access to for buying, selling, and trading, the better.

We scored crypto exchanges for this factor using a range from zero to one; exchanges with more supported cryptocurrencies scored higher. This criterion accounted for 5% of the total score.

Derivatives

We examined whether or not our chosen cryptocurrency exchanges offer derivatives, like futures, options, swaps, and perpetuals. Derivatives are valuable because of their relationship to an underlying asset; when it comes to crypto derivatives, the asset is a specified coin or token. Crypto futures, for example, are agreements to buy or sell a coin at a certain price at a certain date. Derivatives allow users to mitigate risk, although they carry risks of their own. 

We scored each crypto exchange on a scale from zero to one. Exchanges with more derivatives options scored higher. This factor accounted for 4% of the total score.

Order Types

Simple crypto exchanges may only offer a few basic order types, like market, limit, and stop limit. But more experienced traders often want more advanced order types, which can be used to help manage risk and secure profits. To that end, some exchanges offer order types like trailing stop, good ‘til canceled (GTC), and best bid offer (BBO).

We scored exchanges using a range from zero to one, with higher scores going to exchanges with more order types. The number of order types accounted for 4% of the total score.

Over-the-Counter (OTC) Trading

Over-the-counter (OTC) trading refers to trading conducted directly between two parties, with no central intermediary. Crypto OTC trading means trading crypto from one user to another, without using the exchange as an intermediary. This can be valuable for high-volume traders because it can mean better prices and lower fees.

Some exchanges have OTC trading options—in some cases, they’re only available if your trading volume reaches a certain threshold. We gave each exchange a score of one if it allows OTC trading, or a score of zero if it doesn’t. This criterion accounted for 2% of the overall score.

Third-Party Trading Bot

Trading bots are software that will automatically execute preprogrammed trades. They can be customized to various degrees, depending on the type of bot and the exchange on which it’s being used. You can set up a bot to spot trade two cryptocurrencies back and forth, for example, and profit through arbitrage. Once set up, tradings bots can be active all the time, and can help you implement advanced trading strategies.

We gave each crypto exchange a score of one if it allows third-party trading bots, and a score of zero if it doesn’t. Access to trading bots accounted for 1% of the total score.

Availability

Availability is important for cryptocurrency exchanges because trading markets benefit by having more active users. More users, and higher trading volume, can lead to higher liquidity and less volatility. In general, the higher the trading volume, the more efficient the exchange will be at executing trades. 

Exchanges that operate in more countries and allow more funding methods have the potential for more users and higher trading volume. We rated exchanges in the following aspects:

  • Countries Available (5%)
  • Funding: Online Service (3%)
  • Funding: ACH Bank Transfer (3%)
  • Funding: Wire Transfer (2%)

Country availability and presence of funding methods amounted to 13% of the total score.

Countries Available

It’s common for crypto exchanges to have limited regional access. Some exchanges use different websites for different regions, with different available cryptocurrencies, fees, and services. When researching a new exchange, be sure to select the correct website for your country.

We scored exchanges using a range of zero to one based on how many countries they operate in; the more countries, the higher the score. This criterion accounted for 5% of the total score.

Funding: Online Service

Funding methods vary quite a bit depending on the exchange you’re using and the level of KYC verification you’ve met. Simply funding your account with an online payment (credit/debit card, PayPal, Google Pay, Apple Pay, etc.) is usually the fastest and easiest method, but not all exchanges offer this feature.

We gave exchanges a score of one if they allow funding via online service, or a score of zero if they do not. This factor amounted to 3% of the total score.

Funding: ACH Bank Transfer

Payments made through the Automated Clearing House (ACH) network are an easy and inexpensive way to fund your exchange wallet with fiat, although the processing time (typically a few business days) may be too slow for some traders. Most of the exchanges we looked at offer this feature.

We gave exchanges that allow ACH bank transfers a score of one, and exchanges that do not a score of zero. This factor accounted for 3% of the total score.

Funding: Wire Transfer

Wire transfers are faster than ACH payments, but they typically cost more. Like ACH funding, this ability is common—most exchanges we reviewed allow you to fund your account with fiat through a wire transfer.

Exchanges that allow funding by wire transfer received a score of one and exchanges that do not received a score of zero. Wire transfer funding accounted for 2% of the overall score.

Features

Cryptocurrency exchanges are more than just places to buy and sell crypto. You should expect reasonably good customer support, of course, but exchanges sometimes have extra services that set them apart from the competition.

We examined the following features to determine how much-added value an exchange offers on top of the usual trading services:

  • Customer Support (5%)
  • Rewards Program (3%)
  • Earn Interest on Crypto (2%)
  • Credit Card Availability (2%)
  • Loan Options (2%)

In total, this category amounted to 14% of the overall score.

Customer Support

Every exchange we reviewed had at least a help page, and most provided some way to get in touch with customer support.

We found other customer support options such as:

  • Support forums
  • Email (direct or via ticketing system)
  • Live chat or bot chat
  • Chat groups (Telegram, etc.)
  • Phone

We scored exchanges using a range from zero to one based on the number of customer support options available; the more options, the better the score. This factor accounted for 5% of the total score.

Rewards Program

Crypto exchanges may offer rewards if you do any of the following:

  • Refer new users
  • Hold a certain cryptocurrency
  • Stake a certain cryptocurrency

Referral bonuses are simple: Just invite someone new to the platform, and you’ll get a bonus if they complete the required actions. Some exchanges provide rewards, usually in the form of crypto, for holding or staking a certain coin. Sometimes this reward comes in the form of a fee discount. Usually, you need to hold the exchange’s own coin (ex., BNB for Binance, FTT for FTX, etc.) to get a discount, but there are more options when it comes to staking.

We scored each exchange using a range from zero to one based on the number of reward programs it offers; the more reward programs, the better the score. Reward programs accounted for 3% of the total score.

Earn Interest on Crypto

Some exchanges allow you to earn interest on your crypto simply by holding it in your exchange wallet. Only certain coins are eligible to earn interest, depending on the exchange. You may need to opt-in before you’ll start earning interest.

We gave exchanges a score of one if they allow you to earn interest on crypto, and a score of zero if they do not. This feature accounted for 2% of the overall score.

Credit Card Availability

A few crypto exchanges have their own credit cards that allow you to make purchases using the funds in your exchange account. These cards earn rewards as well, usually in the form of cryptocurrency of some kind.

We gave exchanges a score of one if they have a credit card available, and a score of zero if they do not. Credit card availability accounted for 2% of the total score.

Loan Options

Some crypto exchanges allow you to borrow cryptocurrency, much like how banks allow you to borrow fiat money. You typically have to provide collateral in the form of crypto. In some cases, this feature is built into margin/leveraged trading options, which may have more KYC requirements. Depending on the exchange and loan type, your crypto loan may have a term length and interest rate, just like a personal loan.

We gave exchanges a score of one if they have loan options, and a score of zero if they do not. Loan options accounted for 2% of the total score.

Choosing the Best Cryptocurrency Exchange for You

There’s a diverse selection of cryptocurrency exchanges to choose from, and no two are exactly the same. Fees, features, and available cryptocurrencies vary greatly from one to the next, so many traders may set up accounts on multiple exchanges. Take a look at some of the best cryptocurrency exchanges to see which ones offer the services needed for your personal trading strategy.

Our reviews aim to give readers a comprehensive look at what it’s like to buy, sell, and trade crypto with any particular company, and we strive to be objective in our methodology of choosing and reviewing the top cryptocurrency exchanges. We concluded that security, fees, offerings, availability, and features were the most important high-level lenses through which to view exchanges. We used publicly available information, along with information from company representatives, to assign scores fairly to each exchange.