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Cryptocurrency Exchange Types Every Investor Should Know

When you’re ready to join the crypto-craze and start investing, you’ll have to choose where to buy your coins. That can be a little confusing, because there are three main types of cryptocurrency exchanges and each one has unique features.

Cryptocurrency exchanges are websites where you can trade fiat money for cryptocurrencies like Bitcoin, Ether, or Zcash. The crypto market is constantly fluctuating, so the value of these currencies rises and falls on a daily basis.

When you buy coins on an exchange, you’re making a trade with another customer who wants out before the coin’s value goes down, so they sell their coins at less than they purchased them for.

Other companies keep all customer money in a decentralized “wallet” that isn’t kept in any one place—the wallet is protected by cryptography and nobody can access it without your private key.

Centralized Cryptocurrency Exchange (CEX)

Centralized cryptocurrency exchanges are just like traditional stock trading platforms—you deposit your funds and then trade them for other cryptocurrencies. You have to trust that the exchange is holding your funds securely and that they’ll stay in business long enough for you to withdraw them when you want to.

Centralized exchanges are great if you want a large selection of altcoins (alternative cryptocurrencies) with high liquidity, but there’s always a risk that the exchange will be hacked or will shut its doors one day.

This means that the exchange is a company that has its own office building or headquarters, with a real physical location. The company controls your funds and holds your private keys on your behalf, just like a bank does.

This is generally the least safe type of exchange since the company itself is responsible for keeping your money safe, and there is always room for human error, especially when dealing with large sums of money. Centralized exchanges include KuCoin and Gemini.

Pros and Cons of Centralized Exchanges

Centralized exchanges have several advantages including:

  • Users can trade fiat currency for cryptocurrency and vice versa
  • Many centralized exchanges are insured by outside organizations, protecting users from risk of theft or fraud
  • Centralized exchanges offer extra services such as margin trading, lending, and derivatives markets

However, centralized exchanges also present disadvantages:

  • They are an attractive target for hackers
  • Centralized exchanges can be shut down or their assets frozen by governments, which can cause you to lose your funds
  • There is generally a delay in processing orders, which makes them unfavorable to traders who need quick execution

Decentralized Cryptocurrency Exchange (DEX)

A decentralized exchange is a platform that doesn’t rely on a third party service to hold the customer’s funds. Instead, trades occur directly between users (peer-to-peer) through an automated process. They match buyers and sellers using an order book.

Some examples of decentralized exchanges are EtherDelta, Bitshares, WavesDEX, and OpenLedger DEX. Some have a trust rating system for users to identify scams and phishing websites whereas others have not so much security or trust features in place.

However, they all share one common aspect; they are all trustless systems which means that you don’t have to place any trust in a third party service when using them because everything is handled by the network itself.

Pros and Cons Of Decentralized Exchange

  • Decentralized exchanges allow users to trade coins without having to rely on a trusted third party.
  • Decentralized exchanges have much lower trading fees than centralized exchanges.
  • They function without a central authority, meaning that no single person or entity can shut them down.
  • Decentralized exchanges have been made possible by blockchain technology, which allows different computers around the world to have access to the same information at the same time.


  • there’s always a risk of hacking or data breaches leading to the loss of money or personal information.
  • These exchanges can be difficult for beginners who aren’t familiar with how cryptocurrency works, making them less convenient overall.

Hybrids – Different Types of Cryptocurrency Exchanges

Hybrid exchanges offer both fiat to crypto and crypto to crypto trading pairs including APTUSDT and XRPUSDT. This is important because it means that investors can use their bank account or credit card to purchase cryptocurrency without having to first acquire funds through a bank wire transfer or a service like Coinbase Wallet.

Hybrid exchanges also let traders immediately sell their cryptocurrency and receive their earnings in fiat currency, which is especially useful for day traders who want to avoid navigating the complicated process of converting their cryptocurrency back into fiat currency after each session.

Pros Of Hybrid Crypto Exchange

  • A hybrid crypto exchange is a new type of cryptocurrency exchange that combines the best features of traditional fiat exchanges with those of decentralized exchanges.
  • A hybrid crypto exchange is like the best of both worlds for cryptocurrency users: it can secure your assets in an offline digital wallet, but still allows you to trade on a centralized platform.
  • Hybrid crypto exchanges combine the predictability of traditional markets with the growth potential of cryptocurrencies
  • They support fiat-to-crypto transactions, which means that even new users who have yet to learn about cryptocurrencies can make use of them.
  • They also have a high level of security, because many of them are regulated by financial authorities.


  • If you don’t have the private keys to your cryptocurrency, you don’t actually own it, so any exchange that holds private keys for its users is vulnerable to hacks.
  • Private keys stored on hybrid exchanges are vulnerable to loss by the exchange operator or employees.
  • Fiat deposits and withdrawals can be halted due to bank account closures without prior warning.

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