The cryptocurrency market has become so popular over the years that many traders are looking for trading opportunities. As a result, different types of crypto exchanges were launched, each providing traders with different services and products. In order to be a successful trader in the Forex market and cryptocurrency Market, you need to distinguish different types of trading platforms and understand which of them provides the greatest advantages. There are many types of crypto exchanges. Some offer an easy-to-use experience platform, while others offer a more complex trading platform. In Aron Groups, we have decided to provide you with a guide to help you understand different types of crypto exchanges.
Table of Contents
What is an exchange?
Before talking about different types of crypto exchanges, we need to elaborate on cryptocurrency exchange in general. A cryptocurrency exchange is a web service that helps traders exchange their cash money into virtual currencies and vice versa.
On the other hand, a crypto exchange is a platform that allows you to buy, sell, and trade cryptocurrencies. Different types of cryptocurrency exchanges provide you with different services. For example, some might enable you to trade one type of coin for another, while others allow you to purchase cryptocurrency using the US dollar. Many different types of exchangers are available today, and here we will discuss their differences.
What types of crypto exchanges are there?
As touched upon above, there are different types of cryptocurrency exchanges in the world. There are seven main types of crypto exchangers recognized by crypto investors and users, which are as follows:
- Decentralized cryptocurrency exchanges or DEX
- Centralized cryptocurrency exchanges or CEX
- Hybrid cryptocurrency exchanges or HEX
- Retail brokerages
- P2P exchanges
- Non-custodial exchanges
- OTC exchanges
Keep reading the article to learn the benefits, similarities, and differences among the seven types of crypto exchanges.
1. Centralized crypto exchanges
Centralized crypto exchanges are similar to traditional stock exchanges, and you are familiar with them. Suppose you have been trading cryptocurrency for a while. In that case, you’re familiar with Binance, Coinbase, and Kraken, which are categorized as centralized crypto exchanges in the world and are the biggest names in the cryptocurrency exchange industry. Essentially, currency exchanges manage transactions and hold funds until a trade occurs.
This type of exchange acts as a middleman and matches the buyers and sellers. By using a centralized cryptocurrency exchange, you need to trust a third party to manage your money.
When using a centralized Exchange, you put in a sell order for your crypto; the exchange will find another Trader looking to buy and much you. Typically, the CEX will take a fee in exchange for photo services. This type of exchange tends to be easy to use, and if you are big enough, it is recommended to go for a centralized cryptocurrency exchange.
This type of exchange allows fiat to cryptocurrency exchange and might even provide you with insurance against theft. Another benefit of using centralized exchanges is Having access to customer support, which is more important than trading cryptos. The Cryptocurrency market is open 24 hours a day, and you might need some advice.
2. Decentralized cryptocurrency exchanges
A single entity does not control the second type of cryptocurrency exchange; this type of platform is automated and executed via small contracts on the blockchain. Decentralized exchanges run on the Ethereum blockchain. A DEX does not act as a middleman and allows peer-to-peer trades. Uniswap is one of the largest decentralized exchange platforms, holding 0.006% of the market share.
As there was no middleman in decentralized crypto exchanges, the fees were lower, the security was higher, and you would benefit from more privacy. On the other hand, this type of exchange might be a bit difficult for business, and the number of decentralized exchanges that do not accept fiat-to-cryptos is higher.
As fewer people tend to use decentralized exchanges due to the lack of customer support, their liquidity is less than that of a centralized Exchange.
3. Hybrid Clips are exchanges
As you might have to figure out, hybrid crypto exchanges Are the combination of the best features of centralized exchanges and decentralized exchanges to create an easy-to-use platform that benefits from blockchain technology.
Usually, brokers, professional investors, and people who are familiar with crypto trading use hybrid exchanges like Qurrex.
When using a hybrid Exchange, you can’t wait for capabilities directly from your wallet. This type of exchange provides you with the anonymity and security of a decentralized exchange with the regulation and customer support of centralized exchanges. These platforms allow fear to cry fiat to crypto exchanges, with 24/7 support. But as these types of exchanges are new, you will be provided with a few crypto choices to trade. The user interface might be a bit difficult for beginners.
4. Retail brokerage
in the fourth category, we have retail brokerages such as Robinhood that provide users with traditional financial instruments such as stock and cryptocurrencies. These platforms enable you to trade crypto, stocks, and ETFs under one hood.
The spread in this type of exchange is higher, and so is the fee. Retail brokerage is easy to use for beginners and supports local fiat currencies. But, the number of cryptocurrencies is limited, and the fees are usually high.
5. P2P exchanges
P2P exchanges or peer-to-peer exchanges allow you to buy and sell cryptocurrencies directly with one another. In this type of exchange, buyers and sellers are able to negotiate with one another. The exchange will provide you with a range of payment methods, but you should find a reliable seller with good reviews.
There are centralized exchanges like Binance that also offer P2P trading, allowing users to buy soccer directly with one another through the platform.
There are also decentralized textures that have P2P trading built into their structure.
6. Non-custodial exchanges
This type of exchange just does not hold onto your private keys and funds. Using this type of exchange, you could be able to send cryptocurrencies directly to your wallet. Some Traders find this feature so interesting because they don’t have to trust the exchange to keep their digital assets safe.
Easy Crypto in Australia is an example of a non-custodial exchange. However, these types of exchanges are more expensive and slower, as decentralized exchanges are non-custodial, too, and fewer traders use non-custodial exchanges.
7. OTC exchanges
Over-the-counter exchanges or platforms designed for high net-worth clients Portrayed large amounts of cryptocurrency. The OTC exchangers provide institutions with perfect customer support and customer Solutions.
Final thoughts
Now that you’re familiar with different types of cryptocurrencies, you know that Aron Groups broker is considered a centralized broker providing investment opportunities, including forex, commodities, and stocks.
Many types of cryptocurrency exchanges provide you with a trading platform and allow you to buy and sell cryptocurrencies differently. You might find them a bit similar, but you should know the differences to choose the best platform for your needs.
There are over 700 crypto exchanges globally. That makes it a bit hard to choose the best one.
No one can tell you what type of exchange is best for you; you need to find that on your own, considering your needs and priorities.
But as a big and very common, you can use the centralized exchanges that offer you customer support and a user-friendly interface.
Centralized exchanges provide you with a wide range of payment options, making it easy to trade cryptocurrencies. Do your research when it comes to fees, reputation, and security before choosing a cryptocurrency Exchange.