28 Feb 2014 was a red-letter day in the history of digital-meeting-real-world.
Very red. As in a stunning bankruptcy.
An accompanying filing was made in the USA on 9 Mar 2014, ostensibly to stop legal action by traders claiming the Mt Gox cryptocurrency exchange was a fraud.
Full disclosure: We’ve done well with Bitcoin, which we believe is because we utilize it as a means of commercial exchange as opposed to an investment commodity.
The instability of cryptocurrency markets is only one reason why, but it’s a major factor. The number of digital exchanges in this world is rapidly approaching 200, and really, most of them represent a bigger gamble than speculating on the cryptos.
Government regulation should serve to bring crypto exchanges into the mainstream, but as was evident yet again in the recent attempts to come to grips with cyber-issues, those bodies are usually days late and dollars short in their action.
Until this sort of intervention occurs, one course of action would be for the reputable exchanges to self-regulate. In the current environment, though, that’s still akin to herding cats.
Of course, as in virtually everything else, the ultimate responsibility of managing your digital assets lies with you.
When selecting a cryptocurrency exchange, here are factors you must research:
- How hackproof is it? Two-step authentication is absolutely necessary. Just ask the Coincheck exchange that got hit for $530million of users’ deposits in January 2018.
- How reliable is it? The exchange should offer a training section where you can practice trades in real time — especially in high-volume scenarios — to orient yourself with its platform.
- How visible is it? Confirm its hard address and contact details. Check its history. Determine its liquidity so you know it can execute trades at market standards.
- How regulated is it? Industry pros strongly suggest selecting an exchange in the same country as you. Then, confirm it’s filed all routine documentation at the least.
- How expensive is it? Confirm all fees and margin requirements, which means actually reading the small print in their customer agreement’s boilerplate section.
These considerations are essential before investing in Initial Coin Offerings (ICOs), as well.
The regulations governing them aren’t as definitive as other public offerings, and they can serve as effective vehicles for hit-&-run scams. The Securities & Exchange Commission has actually posted a sample scam site so you’ll have a better idea of what to avoid.
After all, it was created simultaneously with Bitcoin to safely and efficiently handle those sorts of transactions.
And frankly, using a tool the way it was intended is rarely a bad choice.