Crypto Trading·Crypto Fundamentals
Exchanges vs DEXs: Where to Buy Crypto
Two Ways to Trade Crypto
Before you can trade crypto, you need to know where to buy it. There are two main types of platforms: centralized exchanges (CEXs) and decentralized exchanges (DEXs). Each has distinct advantages and risks. The choice between them is one of the first and most important decisions a crypto trader makes.
In November 2022, the second-largest crypto exchange in the world — FTX — collapsed overnight. Over $8 billion in customer funds were lost. Customers who held crypto on FTX had no access to their assets. Customers who had withdrawn to their own wallets were unaffected. This single event reshaped how the industry thinks about exchange risk and self-custody.
A
Centralized exchange (CEX)
- Custodial — they hold your keys, you hold an IOU
- KYC required, jurisdictional risk
- Deep liquidity, sub-millisecond fills
- Familiar UI, customer support, fiat ramps
- Counterparty risk · FTX, Mt. Gox, Celsius all imploded
B
Decentralized exchange (DEX)
- Non-custodial — your wallet, your keys, your coins
- No KYC, permissionless, censorship-resistant
- Liquidity comes from AMM pools, not order books
- Slippage on size, gas fees on every swap
- Smart-contract risk · audits matter, MEV is real
Definition
CEX (Centralized Exchange)
A crypto trading platform operated by a company that holds custody of user funds. Examples: Coinbase, Kraken, Binance. CEXs require identity verification (KYC), offer fiat on-ramps, and provide customer support. The trade-off: you trust the company with your assets.
Definition
DEX (Decentralized Exchange)
A peer-to-peer trading platform that runs on smart contracts with no central operator. Examples: Uniswap, dYdX, Curve. DEXs let you trade directly from your own wallet. No KYC, no account creation, no custody risk — but also no customer support and no way to recover lost funds.
A
Centralized Exchange (CEX)
- Company-operated (Coinbase, Binance, Kraken)
- Requires KYC — passport/ID verification
- Easy to use — familiar order book UI
- High liquidity, fast execution
- Fiat on-ramp (buy with bank/card)
- Customer support available
- Risk: the company can freeze your account or be hacked
- Risk: exchange insolvency (FTX, Mt. Gox)
B
Decentralized Exchange (DEX)
- Protocol-operated (Uniswap, dYdX, Curve)
- No KYC — connect your wallet and trade
- You always hold your own keys
- Liquidity can be lower for small tokens
- Cannot buy with fiat directly
- No customer support — you are on your own
- Risk: smart contract bugs and exploits
- Risk: front-running by MEV bots
Knowledge check
What is the primary custody difference between a CEX and a DEX?
Exchange Comparison Table
| Exchange | Type | Founded | Key Feature | Fee Range | Best For |
|---|---|---|---|---|---|
| Coinbase | CEX — Regulated | 2012 | US-regulated, beginner-friendly | 0.4-0.6% | US beginners, fiat on-ramp |
| Kraken | CEX — Regulated | 2011 | Security track record, proof-of-reserves | 0.16-0.26% | Security-conscious traders |
| Binance | CEX — Global | 2017 | Largest by volume, most altcoins | 0.02-0.10% | Active traders, global access |
| Bybit | CEX — Derivatives | 2018 | Perpetual futures, high leverage | 0.02-0.06% | Derivatives trading |
| Uniswap | DEX — Spot | 2018 | Largest DEX, AMM pioneer | 0.3% pool fee | Self-custody spot swaps |
| dYdX | DEX — Perps | 2017 | Decentralized perpetual futures | 0.02-0.05% | Non-custodial derivatives |
| Hyperliquid | DEX — Perps | 2023 | CEX-like speed, on-chain settlement | 0.01-0.035% | Advanced on-chain traders |
Wallets: Custodial vs Non-Custodial
When you buy crypto on a CEX, the exchange holds your funds — you have an account balance, but the exchange owns the private keys. This is a custodial wallet. When you use a DEX, you connect a non-custodial wallet (like MetaMask or Phantom), where you hold your own private keys. The crypto industry phrase sums it up: 'Not your keys, not your coins.'
Definition
Private Key
A secret number (typically 256 bits) that proves ownership of a crypto wallet. Whoever has the private key controls the funds. Never share it. Losing it means losing access to your crypto forever — there is no 'forgot password' in crypto.
Definition
Seed Phrase (Recovery Phrase)
A list of 12 or 24 random words that can regenerate your private key. Write it on paper or stamp it on metal and store it safely offline. Anyone with your seed phrase has full access to your wallet. Never store it digitally, never photograph it, never type it into a website.
Definition
Hot Wallet
A crypto wallet connected to the internet (MetaMask, Trust Wallet, Phantom). Convenient for daily trading and DeFi interactions. Higher risk because it is always online and vulnerable to hacking or phishing attacks. Keep only your active trading funds in a hot wallet.
Definition
Cold Wallet (Hardware Wallet)
A physical device (Ledger, Trezor) that stores your private keys offline. Transactions must be physically confirmed on the device. Considered the gold standard for long-term crypto storage. Even if your computer is compromised, your cold wallet funds remain safe.
How to Set Up a Crypto Wallet
Setting Up Your First Non-Custodial Wallet
- 1
Choose a wallet
For Ethereum and EVM chains: MetaMask (browser extension + mobile). For Solana: Phantom. For multi-chain: Rabby or Trust Wallet. Only download from official websites — never from ads or third-party links.
- 2
Install and create a new wallet
Download the wallet extension or app. Select 'Create a new wallet.' Set a strong password for the app itself (this is NOT your seed phrase — it just locks the app locally).
- 3
Write down your seed phrase
The wallet will display 12 or 24 words. Write them down on paper in the exact order. Do NOT screenshot them. Do NOT save them in a notes app. Do NOT email them to yourself. This seed phrase IS your wallet. Lose it, and you lose everything.
- 4
Verify your seed phrase
The wallet will ask you to confirm several words from your seed phrase to ensure you wrote it down correctly. Complete this step carefully.
- 5
Fund your wallet
Copy your wallet address (starts with 0x for Ethereum). Go to your CEX (Coinbase, Kraken) and withdraw crypto to this address. Start with a small test amount first to confirm everything works.
- 6
Upgrade to cold storage when ready
Once your crypto holdings exceed $2,000-$5,000, invest in a hardware wallet (Ledger Nano X or Trezor Model T). Transfer your long-term holdings there and keep your hot wallet only for active trading.
The three exchange disasters every crypto trader should know
Mt. Gox (2014): 850,000 BTC stolen — the largest hack in crypto history. QuadrigaCX (2019): Founder allegedly died with the only keys to $190 million in customer funds. FTX (2022): $8 billion in customer funds misappropriated by executives. These are not edge cases — they are reminders of why self-custody matters.
Starting out
For most beginners: buy BTC or ETH on a regulated CEX like Coinbase or Kraken, then transfer to a hardware wallet once you own more than $1,000-$2,000 worth. On Markitel you can track and trade crypto signals using your connected exchange accounts.
How to Spot a Scam or Rug Pull
Red Flags That Indicate a Potential Scam
- 1
Anonymous team with no track record
Legitimate projects have identifiable founders with verifiable histories. If the team uses cartoon avatars and pseudonyms with no prior crypto work, proceed with extreme caution.
- 2
Unrealistic return promises
Any project guaranteeing fixed returns (e.g., '2% daily guaranteed') is almost certainly a Ponzi scheme. No legitimate investment can guarantee returns. Anchor Protocol offered 20% 'guaranteed' yield on Terra/Luna — it collapsed to zero in May 2022.
- 3
Unlocked or concentrated token supply
Check if the founding team holds a massive percentage of tokens with no lock-up period. If insiders can dump at any time, the token is a ticking time bomb. Use tools like Etherscan or Bubblemaps to verify token distribution.
- 4
No audit of smart contracts
Reputable projects have their smart contracts audited by firms like CertiK, Trail of Bits, or OpenZeppelin. No audit means no one has verified the code for vulnerabilities or backdoors.
- 5
Aggressive social media marketing with no product
If a project spends more on Twitter influencers than on development, it is marketing a story — not building technology. Check GitHub for actual code activity.
Crypto Regulation: The Evolving Landscape
Crypto regulation varies dramatically by jurisdiction and is evolving rapidly. As a trader, understanding the regulatory environment affects which exchanges you can use, how your gains are taxed, and what protections (if any) you have if something goes wrong. The general trend worldwide is toward more regulation — not less.
| Region | Regulatory Status | Key Body | Implications for Traders |
|---|---|---|---|
| United States | Evolving — SEC and CFTC asserting jurisdiction | SEC, CFTC, FinCEN | Must use US-licensed exchanges; crypto taxed as property; ETFs approved |
| European Union | MiCA regulation enacted | ESMA, national regulators | Comprehensive framework; stablecoin rules; exchange licensing required |
| United Kingdom | FCA regulated | Financial Conduct Authority | Crypto marketing rules; exchange registration required; no leverage for retail |
| Singapore | MAS regulated, crypto-friendly | Monetary Authority of Singapore | Clear licensing framework; global hub for crypto companies |
| Japan | Fully regulated since 2017 | FSA | Exchanges must hold reserves separately; strong consumer protections |
| China | Banned for trading | PBoC | All crypto trading and mining banned; severe penalties |
Crypto taxes are real
In most jurisdictions, crypto-to-crypto trades, selling crypto for fiat, and using crypto for purchases are all taxable events. Even swapping BTC for ETH triggers a capital gains calculation. Keep meticulous records of every trade. Use crypto tax software (Koinly, CoinTracker) to generate reports. The penalty for underreporting crypto gains can be severe.
Definition
Rug Pull
A scam where developers create a token, attract investors by pumping the price, then suddenly withdraw all liquidity or sell their holdings — crashing the price to zero. In 2021 alone, rug pulls accounted for over $2.8 billion in stolen funds according to Chainalysis.
Knowledge check
What does 'Not your keys, not your coins' mean?