Binance/FTX saga: How to choose a crypto exchange
Binance has confirmed it has signed a letter of intent to acquire rival exchange FTX.
It follows Binance founder Changpeng Zhao (CZ) and FTX founder Sam Bankman-Fried’s months-long row on social media, which escalated earlier this week.
CZ said he has reached the decision after the three-year-old exchange FTX asked him for help. “To protect users, we signed a non-binding LOI, intending to fully acquire FTX and help cover the liquidity crunch. We will be conducting a full DD in the coming days,” he wrote in a tweet.
The financial details of the deal have not been disclosed and it is likely to garner significant regulatory scrutiny.
Also, it could be reasonably argued that, as CZ holds all the cards right now, the agreement is unlikely to be that good for FTX clients. Call me a cynic.
How to choose a crypto exchange?
Against this backdrop, which has rocked the crypto industry, how do you choose the right cryptocurrency exchange?
Liquidity is important. You should find out that you can exchange your traditional currencies into crypto and vice versa easily. You can find this out to a large extent by trading volumes – the higher the volumes, the better.
I would also check out who owns the exchange. Is it an individual or a company? Are they well-known and established? Is it a global company that can handle complicated issues across multiple jurisdictions? Is it experienced in both fintech and traditional financial services? Is there a decent client service department to deal with any issues quickly and effectively? Are there news and educational resources available?
READ MORE: Binance look to buy out FTX
Potential users need to research on fees as these can vary a great deal from exchange to exchange; and the way and how they are charged can also be different.
Another major point for me would be security. I’d go for an exchange with robust protocols which could include two-factor authentication, the need for official ID to open a new account, and the requirement to put in codes when you make transactions.
There’s no doubt that the future of finance is digital, and getting a foot in sooner rather than later will be advantageous in the longer term.
But in order to avoid unnecessary problems down the track, doing your own research into the exchange you might want to use will be a good investment.