How to Set Up a Cryptocurrency Exchange

Written By Matthew Thompson
Last updated April 21, 2021

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Investing
April 21, 2021

Simple. Thrifty. Living.

Bitcoin’s astronomical growth has many people interested in learning how to use cryptocurrency exchanges so they can profit from current and emerging coins. In October 2013, you could buy bitcoin for about $196. Had you held on to that bitcoin, you would have an asset worth about $57,880 in April 2021.

Still, cryptocurrency exchanges often are so intimidating that potential investors stay away from them. This article should make it easier for you to invest with confidence.

Some cryptocurrency exchanges really do make it difficult for ordinary people to purchase and sell assets. You don’t want to use them unless you have an in-depth understanding of blockchains and currency mining.

Finding a cryptocurrency exchange app for people without niche tech knowledge takes you a long step closer to setting up an account. Some of the best cryptocurrency exchanges and apps are:

Each of these services offers unique features that will influence which one you choose.

Coinbase

Coinbase lets you buy and sell a broad variety of cryptocurrencies, including Bitcoin, Ethereum, Litecoin and Bitcoin Cash.

When you create a Coinbase account, you only need to provide basic info, including your:

  • First and last name
  • Email address
  • U.S. state
  • A secure password

Once you have an account, you will need to add a funding source that lets you purchase cryptocurrencies from other users.

The dashboard gives you straightforward analytics that let you know how each currency is performing.

Another benefit of joining Coinbase is that you get a card that lets you use your currency practically anywhere. You also get a digital wallet that stores your cryptocurrencies securely.

Kraken

Kraken is an excellent resource for people of all experience levels. Before you create an account, the service asks you how much experience you have. If you’re an absolute beginner, choose “I’m new to crypto. I need someone to explain how it all works.”

Kraken will help introduce you to crypto through a series of videos and articles chosen by the company’s editors. You can focus on the currency that interests you or learn as much as possible about your options. It’s completely up to you.

When you sign up, you provide your basic info to create an account. It’s as easy as signing up for a Google Account.

Crytohopper

Cryptohopper can help you get as much from your cryptocurrencies as possible. For a small monthly fee, you can connect your existing crypto account and let Crytohopper automate your trading.

You make a single investment. Then, you let the bot analyze your opportunities and grow your wealth. You don’t have to do anything except check your account to make sure you like the results.

BitIRA

BitIRA is admittedly a little more complicated than the other services on this list. When you create an account, you roll over some of your IRA investments into digital currency.

BitIRA complies with all federal guidelines, so it isn’t breaking any laws or regulations. You do have to wonder whether a cryptocurrency’s volatility will increase or decrease your investment, though. It’s a risk. Then again, all investments come with risk.

Recommended reading: Little Known Investment Opportunities

Creating a basic account doesn’t take much effort or information. However, you may need to provide more documentation before you can start buying, selling and trading cryptocurrencies.

Some—but not all—cryptocurrency exchanges will ask you to provide:

  • Personal identification that confirms you are who you claim to be. A state-issued ID card usually fills this need.
  • A payment method, such as a credit card or bank account, that you can use to fund your purchases.

You might also need to prove your contact information by responding to an email or text message.

Some of this may seem intrusive. Keep in mind a cryptocurrency exchange must follow strict laws. Many governments do not know how they plan to regulate independent currencies, so exchanges must take precautions that show they have taken every step to protect clients.

Once you start an account with a cryptocurrency exchange, you may need to do a few other things to protect your assets and follow the law. Security needs will differ from person to person. The following rules apply to people living in the United States. If you live in a different country, seek a resource that explains crypto regulations in your area.

Get a Wallet to Hold Your Cryptocurrency

Coinbase already comes with a wallet, so you probably don’t need to worry about this part if you start a Coinbase account. Still, it’s not a bad idea to create an independent wallet that only you can access.

You can choose desktop or mobile wallets to hold your crypto.

Mycelium is a secure option for mobile devices. Most people consider this the most secure option because Mycelium doesn’t have connections to currency exchanges. You maintain complete control over your mobile device wallet.

With responsibility comes control, though. If you lose access to your wallet, you will lose your cryptocurrency. It’s the same as losing a physical wallet full of cash.

Protect yourself by making a backup wallet and keeping it in a safe place.

Exodus is probably your best option as a desktop wallet, although you can also use it as a mobile wallet.

Many people like Exodus because it can store more than 100 different types of cryptocurrencies. You can also create a hardware wallet and keep it offline in “cold storage.” The offline wallet keeps your funds safe. It’s especially useful for people who decide to purchase large amounts of cryptocurrencies.

Keep Track of Your Crypto Investments

The IRS now requires people in the U.S. to report virtual currencies. Visit the IRS website for details.

Investing in cryptocurrencies could help you make a lot of money. The sector’s volatility also means that you could lose your investments.

Make sure you diversify your investment types to protect yourself from significant losses.

About the Author

Matthew Thompson

With more than two decades of writing and optimization experience, I know how to keep readers engaged, mimic brand voices, and get first-page rankings on search engine results. I have written for companies in diverse industries, including emerging technologies, wellness, consumer apps, enterprise software, UI/UX, outsourcing, and education.

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