Experienced traders have laid out their tips for choosing a cryptocurrency exchange, learning from the lessons of 2022 that are characterized by the back-to-back collapse of giant players against a backdrop of war in Ukraine.
The tips were relayed by WOO Network representative Julia Bulakh as a guest speaker at the Community Hub podcast by Forklog, one of the oldest and biggest online media in the Russian language that covers bitcoin, blockchain technology, and the digital economy.
Bulakh noted that while the industry is still in crypto-winter, traders are already preparing for their next move when users head back to centralized exchanges (CEX). She said CEXs are especially active and have been preparing for the end of the cold period on the market.
CEXs scramble to prove their reliability
Bulakh noted that CEXs on the other hand are finding ways to improve their capability to onboard as many users as possible. She said one way to prove their reliability is to publish evidence of their own reserves, which would confirm the availability of user funds and their readiness for withdrawal.
“However, WOO Network considers these efforts to be an inferior solution. The exchanges of the future should have the liquidity of a centralized exchange and the security of a decentralized one, with transparent proof of reserves. The first implementations of the novelty were released by the WOO Network team in a form of a transparency dashboard,” she said.
“Such innovations are necessary as the collapse of FTX eroded the confidence in centralized platforms of both traders and investors. It is in the interest of exchanges to reclaim it.”
Traders’ tips for choosing a CEX
Bulakh went on to detail a recent internal survey by Kronos Research aimed at determining the behaviors of professional traders. The survey was conducted among 20 experienced crypto traders who have been trading for one to ten years with a trading turnover of more than $100,000 per month.
Have more than one account
The survey showed that most participants have accounts on three to five exchanges, most commonly in Binance, and also hold deposits on at least three exchanges. The respondents noted that most current platforms still cannot fully cover all the needs of traders.
16% of respondents were forced to switch from the exchange they use due to restrictions by the government on their citizens.
Look into fees and liquidity
Professional traders tend to prioritize an exchange’s fee rates and liquidity. For instance, 80% of respondents take into account the fees applied when developing their own trading strategy. They said that it is also important for them to access both spot and futures markets.
Do away with the fluff
A common theme of response from professional traders is that they are usually not interested in various promotions such as staking, airdrops and launchpads when choosing the exchange. Rather, market participants consider the previous achievements of the project creators and their activity.
Respondents also aired that the choice of exchanges is not influenced by the nationality or the mentality of the trader, as most trading platforms tend to copy each other's capabilities.
Zero-fee model attracts experienced traders
During the conversation, the topic of introducing the zero-fee model for certain trading pairs on some major exchanges was touched upon. Bulakh said the key feature of WOO X is commission-free trading on spot and futures, as well as the customizable user interface so such an innovation could lure users to the trading platform.
“Our zero-fee model is part of our business model, unlike others that make this feature conditional (sometimes they have it, sometimes they don’t),” Bulakh noted.
Bulakh also said that most often, experienced traders choose CEXs since DeFi exchanges are not yet able to take on a large turnover, and support traders with useful features such as having a customer support team, a large number of trading pairs, and so on. She said CEXs can simplify the procedure for recording transactions for further taxation, and therefore traders are not against the practice of passing KYC.
“When choosing a cryptocurrency exchange, Bulakh recommends that traders and investors clearly understand their current trading habits. Exchanges can either be used a hundred times a day or once every six months - and just with this in mind, different solutions will cover different needs.”
She said it is also important to understand the features of the different types of trading platforms, adding that risks be studied well, for example, smart contract hacking risk just as prevalent as exchange insolvency risk.
“CEXs mostly hold user assets at several addresses, which, if done incorrectly, can create security risks… the exchange is primarily a tool for trading, and you should not consider it as a wallet for storing all your funds… Ultimately, everyone chooses a platform based on their own individual needs,” she noted.
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