Are Cryptocurrencies Safe Investments?

 Are Cryptocurrencies Safe Investments?

Cryptocurrencies have attracted a reputation as unstable investments, due to high investor losses as a result of scams, hacks, and bugs. Although the underlying cryptography is generally secure, the technical complexity of using and storing crypto assets can be a major hazard to new users.

In addition to the market risks associated with speculative assets, cryptocurrency investors should be aware of the following risks:

User risk: Unlike traditional finance, there is no way to reverse or cancel a cryptocurrency transaction after it has already been sent. By some estimates, about a fifth of all bitcoins are now inaccessible due to lost passwords or incorrect sending addresses.

Regulatory risks: The regulatory status of some cryptocurrencies is still unclear, with many governments seeking to regulate them as securities, currencies, or both. A sudden regulatory crackdown could make it difficult to sell cryptocurrencies, or cause a market-wide price drop.

Counterparty risks: Many investors and merchants rely on exchanges or other custodians to store their cryptocurrency. Theft or loss by one of these third parties could result in the loss of one's entire investment.

Management risks: Due to the lack of coherent regulations, there are few protections against deceptive or unethical management practices. Many investors have lost large sums to management teams that failed to deliver a product.

Programming risks: Many investment and lending platforms use automated smart contracts to control the movement of user deposits. An investor using one of these platforms assumes the risk that a bug or exploit in these programs could cause them to lose their investment.

Market Manipulation: Market manipulation remains a substantial problem in the cryptocurrency space, and some exchanges have been accused of manipulating prices or trading against their customers.

Despite these risks, cryptocurrencies have seen a major leap in prices, with the total market capitalization rising to over $1 trillion.

 Despite the speculative nature of the asset, some have been able to create substantial fortunes by taking on the risk of investing in early-stage cryptocurrencies.

Advantages and Disadvantages of Cryptocurrency

Cryptocurrencies were introduced with the intent to revolutionize financial infrastructure. As with every revolution, however, there are tradeoffs involved. At the current stage of development for cryptocurrencies, there are many differences between the theoretical ideal of a decentralized system with cryptocurrencies and its practical implementation.

Some advantages and disadvantages of cryptocurrencies are as follows.

Advantages

Cryptocurrencies represent a new, decentralized paradigm for money. In this system, centralized intermediaries, such as banks and monetary institutions, are not necessary to enforce trust and police transactions between two parties. Thus, a system with cryptocurrencies eliminates the possibility of a single point of failure, such as a large bank, setting off a cascade of crises around the world, such as the one that was triggered in 2008 by the failure of institutions in the United States.

Cryptocurrencies promise to make it easier to transfer funds directly between two parties, without the need for a trusted third party like a bank or a credit card company. Such decentralized transfers are secured by the use of public keys and private keys and different forms of incentive systems, such as proof of work or proof of stake.

Because they do not use third-party intermediaries, cryptocurrency transfers between two transacting parties are faster as compared to standard money transfers. Flash loans in decentralized finance are a good example of such decentralized transfers. These loans, which are processed without backing collateral, can be executed within seconds and are used in trading.

Cryptocurrency investments can generate profits. Cryptocurrency markets have skyrocketed in value over the past decade, at one point reaching almost $2 trillion. As of May 2022, Bitcoin was valued at more than $550 billion in crypto markets.

The remittance economy is testing one of cryptocurrency's most prominent use cases. Currently, cryptocurrencies such as Bitcoin serve as intermediate currencies to streamline money transfers across borders. Thus, a fiat currency is converted to Bitcoin (or another cryptocurrency), transferred across borders, and, subsequently, converted to the destination fiat currency. This method streamlines the money transfer process and makes it cheaper.

Disadvantages

Though they claim to be an anonymous form of transaction, cryptocurrencies are actually pseudonymous. They leave a digital trail that agencies such as the Federal Bureau of Investigation (FBI) can decipher. This opens up possibilities of governments or federal authorities tracking the financial transactions of ordinary citizens.

Cryptocurrencies have become a popular tool with criminals for nefarious activities such as money laundering and illicit purchases. The case of Dread Pirate Roberts, who ran a marketplace to sell drugs on the dark web, is already well known. Cryptocurrencies have also become a favorite of hackers who use them for ransomware activities.

In theory, cryptocurrencies are meant to be decentralized, their wealth distributed between many parties on a blockchain. In reality, ownership is highly concentrated. For example, an MIT study found that just 11,000 investors held roughly 45% of Bitcoin's surging value.

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One of the conceits of cryptocurrencies is that anyone can mine them using a computer with an Internet connection. However, mining popular cryptocurrencies requires considerable energy, sometimes as much energy as entire countries consume. The expensive energy costs coupled with the unpredictability of mining have concentrated mining among large firms whose revenues running into the billions of dollars. According to an MIT study, 10% of miners account for 90% of its mining capacity.

Though cryptocurrency blockchains are highly secure, other crypto repositories, such as exchanges and wallets, can be hacked. Many cryptocurrency exchanges and wallets have been hacked over the years, sometimes resulting in millions of dollars worth of "coins" stolen.

Cryptocurrencies traded in public markets suffer from price volatility. Bitcoin has experienced rapid surges and crashes in its value, climbing to as high as $17,738 in December 2017 before dropping to $7,575 in the following months.

 Some economists thus consider cryptocurrencies to be a short-lived fad or speculative bubble.

Blockchain

 

Blockchain

Central to the appeal and functionality of Bitcoin and other cryptocurrencies is blockchain technology. As its name indicates, blockchain is essentially a set of connected blocks or an online ledger. Each block contains a set of transactions that have been independently verified by each member of the network.

Every new block generated must be verified by each node before being confirmed, making it almost impossible to forge transaction histories.1 The contents of the online ledger must be agreed upon by the entire network of an individual node, or computer maintaining a copy of the ledger.

Experts say that blockchain technology can serve multiple industries, such as supply chains, and processes such as online voting and crowdfunding. Financial institutions such as JPMorgan Chase & Co. (JPM) are testing the use of blockchain technology to lower transaction costs by streamlining payment processing.2

Cryptocurrency investment scams

 

Scammers are always looking for new ways to steal your money, and the massive growth of cryptocurrency in recent years has created plenty of opportunities for fraud. Cryptocurrency crime had a record-breaking year in 2021 – according to a report by blockchain data firm Chainalysis, fraudsters stole $14 billion of crypto that year. If you’re interested in crypto, it’s important to be aware of the risks. Read on to find out more about common crypto scams, how to spot them, and how to avoid them.

Cryptocurrency investment scams

There are many types of crypto scams. Some of the most common include:

Fake websites

Scammers sometimes create fake cryptocurrency trading platforms or fake versions of official crypto wallets to trick unsuspecting victims. These fake websites usually have similar but slightly different domain names from the sites they attempt to mimic. They look very similar to legitimate sites, making it difficult to tell the difference. Fake crypto sites often operate in one of two ways:

• As phishing pages: All the details you enter, such as your crypto wallet's password and recovery phrase and other financial information, end up in the scammers' hands.
• As straightforward theft: Initially, the site may allow you to withdraw a small amount of money. As your investments seem to perform well, you might invest more money in the site. However, when you subsequently want to withdraw your money, the site either shuts down or declines the request.

Phishing scams

Crypto phishing scams often target information relating to online wallets. Scammers target crypto wallet private keys, which are required to access funds within the wallet. Their method of working is similar to other phishing attempts and related to the fake websites described above. They send an email to lure recipients to a specially created website asking them to enter private key information. Once the hackers have acquired this information, they steal the cryptocurrency in those wallets.

Pump and dump schemes

This involves a particular coin or token being hyped by fraudsters through an email blast or social media such as Twitter, Facebook, or Telegram. Not wanting to miss out, traders rush to buy the coins, driving up the price. Having succeeded in inflating the price, the scammers then sell their holdings – which causes a crash as the asset's value sharply declines. This can happen within minutes.

Fake apps

Another common way scammers trick cryptocurrency investors is through fake apps available for download through Google Play and the Apple App Store. Although these fake apps are quickly found and removed, that doesn't mean the apps aren't impacting many bottom lines. Thousands of people have downloaded fake cryptocurrency apps. 

Fake celebrity endorsements

Crypto scammers sometimes pose as or claim endorsements from celebrities, businesspeople, or influencers to capture the attention of potential targets. Sometimes, this involves selling phantom cryptocurrencies that don't exist to novice investors. These scams can be sophisticated, involving glossy websites and brochures that appear to show celebrity endorsements from household names such as Elon Musk.

Giveaway scams

This is where scammers promise to match or multiply the cryptocurrency sent to them in what is known as a giveaway scam. Clever messaging from what often looks like a valid social media account can create a sense of legitimacy and spark a sense of urgency. This supposed ‘once-in-a-lifetime’ opportunity can lead people to transfer funds quickly in the hope of an instant return.

Blackmail and extortion scams

Another method scammers use is blackmail. They send emails that claim to have a record of adult websites visited by the user and threaten to expose them unless they share private keys or send cryptocurrency to the scammer.

Cloud mining scams

Cloud mining refers to companies that allow you to rent mining hardware they operate in exchange for a fixed fee and a share of the revenue you will supposedly make. In theory, this allows people to mine remotely without buying expensive mining hardware. However, many cloud mining companies are scams or, at best, ineffective – in that you end up losing money or earning less than was implied.

Fraudulent initial coin offerings (ICOs)

An initial coin offering or ICO is a way for start-up crypto companies to raise money from future users. Typically, customers are promised a discount on the new crypto coins in exchange for sending active cryptocurrencies like bitcoin or another popular cryptocurrency. Several ICOs have turned out to be fraudulent, with criminals going to elaborate lengths to deceive investors, such as renting fake offices and creating high-end marketing materials.

How to spot cryptocurrency scams

So, how to spot a crypto scam? Warning signs to look out for include:

Promises of guaranteed returns: No financial investment can guarantee future returns because investments can go down as well as up. Any crypto offering that promises you will definitely make money is a red flag.

A poor or non-existent whitepaper: Every cryptocurrency should have a whitepaper since this is one of the most critical aspects of an initial coin offering. The whitepaper should explain how the cryptocurrency has been designed and how it will work. If the whitepaper doesn’t make sense – or worse, doesn’t exist – then tread carefully.

Excessive marketing: All businesses promote themselves. But one way that crypto fraudsters attract people is by investing in heavy marketing – online advertising, paid influencers, offline promotion, and so on. This is designed to reach as many people as possible in the shortest time possible – to raise money fast. If you feel that the marketing for a crypto offering seems heavy-handed or makes extravagant claims without backing them up, pause and do further research.

Unnamed team members: With most investment businesses, it should be possible to find out who the key people behind it are. Usually, this means easy-to-find biographies of the people who run the investment plus an active presence on social media. If you can’t find out who is running a cryptocurrency, be cautious.

Free money: Whether in cash or cryptocurrency, any investment opportunity promising free money is likely to be fake.

What can you buy with cryptocurrency?

 What can you buy with cryptocurrency?

When it was first launched, Bitcoin was intended to be a medium for daily transactions, making it possible to buy everything from a cup of coffee to a computer or even big-ticket items like real estate. That hasn’t quite materialized and, while the number of institutions accepting cryptocurrencies is growing, large transactions involving it are rare. Even so, it is possible to buy a wide variety of products from e-commerce websites using crypto. Here are some examples:

Technology and e-commerce sites:

Several companies that sell tech products accept crypto on their websites, such as newegg.com, AT&T, and Microsoft. Overstock, an e-commerce platform, was among the first sites to accept Bitcoin. Shopify, Rakuten, and Home Depot also accept it.

Luxury goods:

Some luxury retailers accept crypto as a form of payment. For example, online luxury retailer Bitdials offers Rolex, Patek Philippe, and other high-end watches in return for Bitcoin.

Cars:

Some car dealers – from mass-market brands to high-end luxury dealers – already accept cryptocurrency as payment.

Insurance:

In April 2021, Swiss insurer AXA announced that it had begun accepting Bitcoin as a mode of payment for all its lines of insurance except life insurance (due to regulatory issues). Premier Shield Insurance, which sells home and auto insurance policies in the US, also accepts Bitcoin for premium payments.

If you want to spend cryptocurrency at a retailer that doesn’t accept it directly, you can use a cryptocurrency debit card, such as BitPay in the US.

Cryptocurrency fraud and cryptocurrency scams

Unfortunately, cryptocurrency crime is on the rise. Cryptocurrency scams include:

Fake websites: Bogus sites which feature fake testimonials and crypto jargon promising massive, guaranteed returns, provided you keep investing.

Virtual Ponzi schemes: Cryptocurrency criminals promote non-existent opportunities to invest in digital currencies and create the illusion of huge returns by paying off old investors with new investors’ money. One scam operation, BitClub Network, raised more than $700 million before its perpetrators were indicted in December 2019.

"Celebrity" endorsements: Scammers pose online as billionaires or well-known names who promise to multiply your investment in a virtual currency but instead steal what you send. They may also use messaging apps or chat rooms to start rumours that a famous businessperson is backing a specific cryptocurrency. Once they have encouraged investors to buy and driven up the price, the scammers sell their stake, and the currency reduces in value.

Romance scams: The FBI warns of a trend in online dating scams, where tricksters persuade people they meet on dating apps or social media to invest or trade in virtual currencies. The FBI’s Internet Crime Complaint Centre fielded more than 1,800 reports of crypto-focused romance scams in the first seven months of 2021, with losses reaching $133 million.

Otherwise, fraudsters may pose as legitimate virtual currency traders or set up bogus exchanges to trick people into giving them money. Another crypto scam involves fraudulent sales pitches for individual retirement accounts in cryptocurrencies. Then there is straightforward cryptocurrency hacking, where criminals break into the digital wallets where people store their virtual currency to steal it.

Is cryptocurrency safe?

Cryptocurrencies are usually built using blockchain technology. Blockchain describes the way transactions are recorded into "blocks" and time stamped. It's a fairly complex, technical process, but the result is a digital ledger of cryptocurrency transactions that's hard for hackers to tamper with.

In addition, transactions require a two-factor authentication process. For instance, you might be asked to enter a username and password to start a transaction. Then, you might have to enter an authentication code sent via text to your personal cell phone.

While securities are in place, that does not mean cryptocurrencies are un-hackable. Several high-dollar hacks have cost cryptocurrency start-ups heavily. Hackers hit Coincheck to the tune of $534 million and BitGrail for $195 million, making them two of the biggest cryptocurrency hacks of 2018.

Unlike government-backed money, the value of virtual currencies is driven entirely by supply and demand. This can create wild swings that produce significant gains for investors or big losses. And cryptocurrency investments are subject to far less regulatory protection than traditional financial products like stocks, bonds, and mutual funds.

Four tips to invest in cryptocurrency safely

According to Consumer Reports, all investments carry risk, but some experts consider cryptocurrency to be one of the riskier investment choices out there. If you are planning to invest in cryptocurrencies, these tips can help you make educated choices.

Research exchanges:

Before you invest, learn about cryptocurrency exchanges. It’s estimated that there are over 500 exchanges to choose from. Do your research, read reviews, and talk with more experienced investors before moving forward.

Know how to store your digital currency:

If you buy cryptocurrency, you have to store it. You can keep it on an exchange or in a digital wallet. While there are different kinds of wallets, each has its benefits, technical requirements, and security. As with exchanges, you should investigate your storage choices before investing.

Diversify your investments:

Diversification is key to any good investment strategy, and this holds true when you are investing in cryptocurrency. Don't put all your money in Bitcoin, for example, just because that's the name you know. There are thousands of options, and it's better to spread your investment across several currencies.

Prepare for volatility:

The cryptocurrency market is highly volatile, so be prepared for ups and downs. You will see dramatic swings in prices. If your investment portfolio or mental wellbeing can't handle that, cryptocurrency might not be a wise choice for you.

Cryptocurrency is all the rage right now, but remember, it is still in its relative infancy and is considered highly speculative. Investing in something new comes with challenges, so be prepared. If you plan to participate, do your research, and invest conservatively to start.

One of the best ways you can stay safe online is by using a comprehensive antivirus. Kaspersky Internet Security defends you from malware infections, spyware, data theft and protects your online payments using bank-grade encryption.

 Cryptocurrency examples

There are thousands of cryptocurrencies. Some of the best known include:

Bitcoin:

Founded in 2009, Bitcoin was the first cryptocurrency and is still the most commonly traded. The currency was developed by Satoshi Nakamoto – widely believed to be a pseudonym for an individual or group of people whose precise identity remains unknown.

Ethereum:

Developed in 2015, Ethereum is a blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum. It is the most popular cryptocurrency after Bitcoin.

Litecoin:

This currency is most similar to bitcoin but has moved more quickly to develop new innovations, including faster payments and processes to allow more transactions.

Ripple:

Ripple is a distributed ledger system that was founded in 2012. Ripple can be used to track different kinds of transactions, not just cryptocurrency. The company behind it has worked with various banks and financial institutions.

Non-Bitcoin cryptocurrencies are collectively known as “altcoins” to distinguish them from the original.

How to buy cryptocurrency

You may be wondering how to buy cryptocurrency safely. There are typically three steps involved. These are:

Step 1: Choosing a platform

The first step is deciding which platform to use. Generally, you can choose between a traditional broker or dedicated cryptocurrency exchange:

Traditional brokers. These are online brokers who offer ways to buy and sell cryptocurrency, as well as other financial assets like stocks, bonds, and ETFs. These platforms tend to offer lower trading costs but fewer crypto features.

Cryptocurrency exchanges. There are many cryptocurrency exchanges to choose from, each offering different cryptocurrencies, wallet storage, interest-bearing account options, and more. Many exchanges charge asset-based fees.

When comparing different platforms, consider which cryptocurrencies are on offer, what fees they charge, their security features, storage and withdrawal options, and any educational resources.

Step 2: Funding your account

Once you have chosen your platform, the next step is to fund your account so you can begin trading. Most crypto exchanges allow users to purchase crypto using fiat (i.e., government-issued) currencies such as the US Dollar, the British Pound, or the Euro using their debit or credit cards – although this varies by platform.

Crypto purchases with credit cards are considered risky, and some exchanges don't support them. Some credit card companies don't allow crypto transactions either. This is because cryptocurrencies are highly volatile, and it is not advisable to risk going into debt — or potentially paying high credit card transaction fees — for certain assets.

Some platforms will also accept ACH transfers and wire transfers. The accepted payment methods and time taken for deposits or withdrawals differ per platform. Equally, the time taken for deposits to clear varies by payment method.

An important factor to consider is fees. These include potential deposit and withdrawal transaction fees plus trading fees. Fees will vary by payment method and platform, which is something to research at the outset.

Step 3: Placing an order

You can place an order via your broker's or exchange's web or mobile platform. If you are planning to buy cryptocurrencies, you can do so by selecting "buy," choosing the order type, entering the amount of cryptocurrencies you want to purchase, and confirming the order. The same process applies to "sell" orders.

There are also other ways to invest in crypto. These include payment services like PayPal, Cash App, and Venmo, which allow users to buy, sell, or hold cryptocurrencies. In addition, there are the following investment vehicles:

Bitcoin trusts: You can buy shares of Bitcoin trusts with a regular brokerage account. These vehicles give retail investors exposure to crypto through the stock market. 

Bitcoin mutual funds: There are Bitcoin ETFs and Bitcoin mutual funds to choose from. 

Blockchain stocks or ETFs: You can also indirectly invest in crypto through blockchain companies that specialize in the technology behind crypto and crypto transactions. Alternatively, you can buy stocks or ETFs of companies that use blockchain technology.

The best option for you will depend on your investment goals and risk appetite.

How to store cryptocurrency

Once you have purchased cryptocurrency, you need to store it safely to protect it from hacks or theft. Usually, cryptocurrency is stored in crypto wallets, which are physical devices or online software used to store the private keys to your cryptocurrencies securely. Some exchanges provide wallet services, making it easy for you to store directly through the platform. However, not all exchanges or brokers automatically provide wallet services for you.

There are different wallet providers to choose from. The terms “hot wallet” and “cold wallet” are used:

Hot wallet storage: "hot wallets" refer to crypto storage that uses online software to protect the private keys to your assets.

Cold wallet storage: Unlike hot wallets, cold wallets (also known as hardware wallets) rely on offline electronic devices to securely store your private keys.

Understanding Cryptocurrencies

There are more than 1,600 cryptocurrencies in circulation today, with a combined market cap of over $289 billion, according to CoinMarketCap data. Investors around the world are eager to trade in this rapidly-growing space, and a slew of cryptocurrency platforms have emerged to meet the need for infrastructure to support the exchange of digital currencies.  Though they call themselves "exchanges," from an investor's standpoint they function similarly to e-brokerages and their rapid rise is reminiscent of the explosion of electronic discount brokerage firms during the dotcom bubble of the late 1990s.

These exchanges allow consumers buy, sell, and trade cryptocurrencies, whether through fiat currency like dollars, euros, or yen, or another cryptocurrency like bitcoin or ether. Less common cryptocurrencies, called altcoins, often must be traded against bitcoin and cannot be purchased directly with fiat currency. Not every exchange supports every coin, and many investors use more than one platform.

Some exchanges are better suited to less experienced traders and retail investors, while some are geared towards institutions or full-time traders.

The law governing these exchanges vary widely based on location and the type of services each exchange offers. Some exchanges are unregulated, some are not available to customers in certain countries, and all are vulnerable to an ever-changing regulatory environment. After China’s crackdown on cryptocurrency in November 2017, Chinese exchanges were forced to move their operations elsewhere or shut down completely. Other exchanges recently suspended service to Japanese customers following new guidelines issued by the Japanese Financial Services Agency.

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American exchanges are subject to state-by-state regulations as well as federal guidelines. New York State, for instance, implemented “BitLicense” regulations, which grant licenses to virtual currency businesses, in 2015.

There is a dizzying array of offerings and options at exchanges. Though the space is hyper-competitive, each has a different fee structure, trading features, coins on offer, and security and insurance measures in place.

Most exchanges charge trading fees based on a “maker-taker” model, under which “takers” place orders that are executed immediately (read: market order), removing liquidity from the market, while “makers” place orders that sit on the books, below the ticker price for a buy and above it for a sell (read: limit order). Makers create more liquidity in the market and are often rewarded with lower fees and rebates. Takers are typically charged higher fees, which in these exchanges generally hover around 0.1% or 0.2%.

Perhaps most importantly, each exchange has a different compliance framework. Thus, it is important to read the fine print for each exchange, before registering to trade.

To date, there are more than 200 cryptocurrency exchanges that support active trading, and the combined 24-hour trade volume of the top ten is more than $6.5 billion.

Below, take a closer look at some of the major exchanges operating today.

*All data is as of 3:00 pm EST on June 19, 2018. Fee calculations are based on a bitcoin trade worth $1000.

Coinbase: San Francisco, California

24-hour trading volume	N/A
Tradeable coins	4
Accepts fiat	Yes
Fees	Purchase fees 1.49%-3.99%; typical $1000 bitcoin cost: $14.90
Short selling	No
Margin trading	No

Founded in 2012, Coinbase is a wallet, an exchange, and a set of tools for merchants, all built on the same platform. Most consider it to be the blue-chip among crypto platforms. Users can buy, sell, store, and trade tokens, and Coinbase partners with companies like Expedia, Overstock.com, and Dish who want to accept bitcoin payments.

Coinbase was one of the first exchanges to find mainstream popularity in the United States. It was also the first cryptocurrency startup to attain “unicorn” status (a valuation of more than $1 billion). The platform is easy to use and popular with beginners, and it now has more than 20 million accounts. Coinbase’s sister platform, GDAX, is intended for more advanced traders and has far lower fees per trade (see below). GDAX will become Coinbase Pro later this month.

In June, the company announced plans to enter the Japanese crypto market, and it recently acquired Keystone Capital in a bid to become an SEC-regulated broker-dealer. In May, Coinbase also announced that it had acquired Paradex, a decentralized exchange platform that allows users to trade tokens directly between their wallets without the assistance of a third party. The company plans to offer this service to international users before making it available to US customers.

Regulation: Licensed to engage in money transmission in most US jurisdictions. Registered as a Money Services Business with FinCEN. Late last year, the IRS got Coinbase to agree to share user account information with it. Tax dodgers, beware.

BitMEX: Hong Kong

24-hour trading volume	$1.71 billion
Tradeable coins	1
Accepts fiat	No
Fees	Maker/taker fees -0.05%-0.25%; typical $1000 bitcoin contract cost: $0.75 (without leverage)
Short selling	Yes
Margin trading	Yes, up to 100x

BitMEX is the Bitcoin Mercantile Exchange, a platform intended for dedicated traders rather than retail investors. It consistently processes over $2 billion in transactions in a 24-hour period. The platform offers very high leverage on trades, up to 100x.

BitMEX is unique in that it offers leveraged contracts (futures contracts and perpetual contracts) that are bought and sold using bitcoin rather than direct ownership of coins themselves. This means that even if users trade in altcoins, all profits and losses will be in realized in bitcoin. BitMEX does not handle fiat currency and is not available to customers in the United States.

Regulation: Registered in the Republic of Seychelles. Little regulation.

Binance: multiple locations in Asia

24-hour trading volume	$1.26 billion
Tradeable coins	136
Accepts fiat	No
Fees	0.1% trading fee; typical $1000 bitcoin cost: $1
Short selling	No
Margin trading	No

Launched just last year by Changpeng " CZ" Zhao, Binance has quickly become one of the world’s largest crypto exchanges. After moving its offices out of China and its servers offshore, Binance now supports more than 130 coins and consistently processes over $1 billion in transaction value over a 24-hour period. It has both beginner and advanced trading modes, and while users are not currently able to exchange fiat currency for coins, news reports indicate that a separate but affiliated fiat-to-cryptocurrency platform, based in Malta, is in the works.

Binance also supports its own token, the Binancecoin (BNB). Users who hold BNB in their wallets on the platform can receive a discount on fees when they use BNB. The coin’s market cap currently stands at more than $1.7 trillion, according to Coinmarketcap data.

Regulation: Little regulation. Has been warned by regulators in Japan and Hong Kong.

OKEx: Hong Kong

24-hour trading volume	$1.15 billion
Tradeable coins	145
Accepts fiat	Yes
Fees	Maker/taker fees 0.02%-0.2%; typical $1000 bitcoin cost: $2
Short selling	Yes
Margin trading	Yes, 3x, 10x, and 20x

OKEx, based in Hong Kong and helmed by CEO Chris Lee, is a robust trading platform with access to 145 coins. The exchange announced in May that it will expand to Malta, citing the country’s “comprehensive blockchain initiatives.”

The platform also issues its own token, the OKB, which gives users a discount on trading fees, voting rights in the company, and other premium services like fiat trading and margin trading for verified traders. The exchange also manages trades of about $1.5 billion worth of Bitcoin futures daily, according to its website.

OKEx does not serve customers certain countries, including Hong Kong, Cuba, Iran, North Korea, Sudan, Bolivia, Ecuador, Kyrgyzstan, and the United States, due to regulatory issues.

Regulation: Not governed by U.S. entity. Will be subject to Maltese regulations following upcoming move.

Huobi: Multiple Asian offices, United States office

24-hour trading volume	$685.60 million
Tradeable coins	248
Accepts fiat	Yes
Fees	Maker/taker fees 0%-0.2%; typical $1000 bitcoin cost: $2
Short selling	Yes
Margin trading	Yes, on certain pairs and with higher fees. For Huobi pro users.

Huobi was founded in China in 2013 by Leon Li and is now headquartered in Singapore with offices in the United States, Japan, Korea, and Hong Kong. It is not available to US users due to regulatory uncertainty.

There are several versions of Huobi; the Huobi OTC platform allows consumers to trade fiat currency for digital tokens without any fees, while Huobi Pro offers an exchange platform that supports more advanced trading between cryptocurrencies.

Huobi recently announced HB10, a cryptocurrency ETF that will allow users to invest in a diverse basket of digital assets. Huobi Pro offers 24/7 customer service.

Regulation: Registered in the Republic of Seychelles. Little regulation.

Bitfinex: Hong Kong

24-hour trade volume	$424.61 million
Tradeable coins	79
Accepts fiat	Yes
Fees	Maker/taker fees 0%-0.2%; typical $1000 bitcoin cost: $2
Short selling	Yes
Margin trading	Yes, up to 3.3x

Bitfinex, founded in 2012 and headquartered in Hong Kong, is also unavailable to US customers due to an uncertain regulatory environment. It has also been the subject of widespread scrutiny in recent months thanks to a high-profile hack and price-manipulation scandal.

In 2016, Bitfinex lost more than $70 million in bitcoin after the exchange was compromised by hackers. And late last year, Bitfinex and Tether, a stablecoin pegged to the US dollar, were subpoenaed by the SEC amid speculation that the reserve funds that were said to support the Tether stablecoin did not exist. Bitfinex and Tether shared the same CEO at the time, according to a Bloomberg report. A research paper released this month suggests that Tether was used to manipulate the price of Bitcoin on the Bitfinex exchange.

Bitfinex users are not required to verify their identities before trading cryptocurrencies, but they must do so to deposit or withdraw fiat currencies.

Regulation: Incorporated in the U.S. Virgin Islands. Little regulation.

Bithumb: South Korea

24-hour trading volume	$266.51 million
Tradeable coins	37
Accepts fiat	Yes
Fees	Maker/taker fee 0.15%; typical $1000 bitcoin cost: $1.50
Short selling	No
Margin trading	No

Based in Seoul, Bithumb was founded in 2013 and is today one of the top cryptocurrency exchanges in South Korea. Bithumb is a fiat-to-crypto exchange, and does not support crypto-to-crypto trades. The exchange only accepts local users who must use the South Korean Won for transactions.

On Wednesday, June 20, Bithumb confirmed that hackers had stolen around $31 million in cryptocurrency from the exchange. According to a Coinbase report, the XRP currency was targeted. Bithumb has confirmed that it will pay back customers using its own reserves.

Along with several other Korean exchanges, Bithumb was raided by the Korean government in January for alleged tax evasion, according to Reuters. At the time, the government had announced plans to ban cryptocurrency trading, which it has since walked back.

Regulation: Subject to strict South Korean regulations.

UPbit: South Korea

24-hour trading volume	$265.75 million
Tradeable coins	142
Accepts fiat	Yes
Fees	Maker/taker fee 0.05%; typical $1000 bitcoin cost: $0.50
Short selling	No
Margin trading	No

UPbit is another top South Korean exchange. It was formed through a partnership between Kakao Corp., the Korean mobile and internet giant, and Bittrex, a US-based crypto trading platform, and launched in late 2017. The exchange is only open to Korean users.

News reports in May indicated that UPbit was under investigation by the South Korean police for alleged fraud. According to Coindesk, UPbit was suspected of selling cryptocurrency that it did not hold to customers. The exchange’s activities have not been affected by the investigation.

The exchange’s website lists 142 tokens and 272 markets.

Regulation: Subject to strict South Korean regulations.

HitBTC: Hong Kong

24-hour trading volume	$263.93 million
Tradeable coins	22
Accepts fiat	No
Fees	0.01% maker rebate, 0.1% taker fee; typical $1000 bitcoin cost: $1
Short selling	Yes
Margin trading	Yes, 3x

HitBTC launched in 2013 and is currently based in Hong Kong. It bills itself as the “most advanced cryptocurrency exchange,” and offers features like a rebate system for market makers and an advanced matching algorithm.

Users cannot trade with fiat currency nor connect a bank account, but they are able to purchase bitcoin on the platform using a credit card.

On June 3, HiTBTC announced that it would suspend trading services for residents of Japan in response to regulatory changes by the Japanese Financial Services Agency. The exchange said it is in the process of establishing a licensed subsidiary in the Japan.

Regulation: Little regulation. Preparing to launch a licensed subsidiary in Japan.

ZB.COM: Samoa

24-hour trading volume	$261.35 million
Tradeable coins	61
Accepts fiat	Yes
Fees	Maker/taker fees 0.06%-0.2%; typical $1000 bitcoin cost: $2
Short Selling	Yes
Margin trading	Yes, 3x

ZB.COM, registered in Samoa and focused on the Chinese market, launched in November of 2017.

Users must verify their identity in order to trade on the platform, and those who invite their friends to complete successful trades save 10% on transaction fees. Users who pay the transaction fee with ZB, the exchange’s own coin, receive a discount.

The trading platform has both simple and advanced interfaces and its website is available in both English and Chinese.

Regulation: Not regulated. Registered in Samoa.

Bit-Z: Hong Kong, Beijing, Singapore

24-hour trading volume	$226.78 million
Tradeable coins	74
Accepts fiat	No
Fee	Maker/taker fee 0.1%; typical $1000 bitcoin cost: $1
Short selling	No
Margin trading	No

Bit-Z was founded in 2016 and has offices in Hong Kong, Beijing, and Singapore. It caters to Chinese customers. According to CoinMarketCap, the exchange hosts 105 active markets. Bit-Z’s native token is the DKKT. As of June 19, the top token trading on Bit-Z was APIS.

Bit-Z also hosts over-the-counter trading.

Regulation: Not regulated.

Bibox: China, with global operations centers

24-hour trading volume	$205.97 million
Tradeable coins	62
Accepts fiat	No
Fees	Maker/taker fee 0.1%; typical $1000 bitcoin cost: $1
Short selling	Yes
Margin trading	Yes, 3x

This Chinese exchange launched in 2017 and quickly grew. In less than a year's time, Bibox is consistently on the list of top exchanges by 24-hour trading volume. The exchange supports five base currencies: BTC, ETH, USDT, DAI, and BIX. It has established operation centers in Estonia, the United States, Canada, Mainland China, Hong Kong and Japan.

The platform’s native token is the BIX, which was available for purchase during Bibox's ICO in October 2017. Users who pay fees with BIX get a 50% discount.

The exchange advertises AI algorithms that optimize trades.

Regulation: Not regulated.

Kraken: San Francisco, California

24-hour trading volume	$135.69 million
Tradeable coins	17
Accepts fiat	Yes
Fees	Maker/taker fees 0%-0.26%; typical $1000 bitcoin cost: $2.60
Short selling	Yes
Margin trading	Yes, up to 5x on Bitcoin

On the Kraken platform, users can deposit and withdraw funds using several fiat currencies, including the Euro, US Dollar, the British Pound, the Yen, and the Canadian dollar. An account must be verified before a user can begin trading. Founded in 2011, Kraken is one of the earliest American cryptocurrency exchanges.

Kraken offers proof-of-reserves audits and is a partner in the first cryptocurrency bank.

Following the massive hack of the Toyko-based exchange MtGox, Kraken was appointed to assist in the investigation into the missing bitcoins, receiving claims, and distributing assets to creditors.

Regulation: In April, Kraken’s CEO Jesse Powell made headlines when he publicly refused to comply with an inquiry sent to 13 cryptocurrency exchanges by the New York Attorney General. The company has stated that it remains committed to working with regulators.

GDAX: San Francisco, California

24-hour trading volume	$130.14 million
Tradeable coins	4
Accepts fiat	Yes
Fees	Maker/taker fees 0%-0.3%; typical $1000 bitcoin cost: $3
Short selling	No
Margin trading	No

GDAX (Global Digital Asset Exchange) is the advanced trading platform managed by Coinbase. While the Coinbase platform is intended for newcomers to cryptocurrency and retail investors, GDAX is built to handle the needs of more serious traders. It is backed by the New York Stock Exchange, Andreessen Horowitz, and Union Square Ventures, among other investors.

Users can instantly transfer funds between their Coinbase and GDAX accounts, and GDAX fully insures all coins held in online storage up to a value of $250,000 per customer.

At the end of June, GDAX will become Coinbase Pro and the GDAX name will be retired.

Regulation: Bitlicense from the New York Department of Financial Services.

Gemini: New York, New York

24-hour trading volume	$21.97 million
Tradeable coins	3
Accepts fiat	Yes
Fees	Maker/taker fees 0%-1%; typical $1000 bitcoin cost: $10
Short selling	No
Margin trading	No

Gemini is the trading platform developed by venture capitalists Cameron and Tyler Winklevoss. It launched in 2015 and now provides services to customers in the United States, Europe, and Asia. Both individual investors and institutions can use the platform. 

The exchange has a relatively small selection of coins but is known for its commitment to cooperating with regulators. As such, it does not offer short selling or trading on margin. The exchange holds US Dollar deposits in FDIC-insured banks. Digital assets are held in a trust on the customer's behalf.

Regulation: New York trust company regulated by the New York State Department of Financial Services (NYSDFS).