Ready to learn about one of the oldest cryptocurrency exchanges still around today? In our Bitstamp review, we dive deep into all things Bitstamp. We investigate how safe it, especially considering the hacks that took place in 2016, plus what it has to offer beginner, intermediate, and advanced traders.
Don’t forget to read our Bitstamp review till the end to learn more about the history of exchanges, the opportunities and potential pitfalls with investing in crypto, and more.
What is Bitstamp?
Bitstamp is one of the oldest cryptocurrency exchanges still around today. It launched as an alternative to the then-dominate Mt. Gox, located in Japan. Bitstamp was located in Europe and positioned itself as the European choice for people who wanted an alternative to the already much larger Japanese-based exchange.
Today, you can trade the following the US dollar or the euro for the following cryptocurrencies:
Bitstamp is known for being a good option for best intermediate and experienced crypto traders, in part thanks to its relatively low fees. Because it has low fees and deals with fiat currencies, it’s also known as a fiat gateway, meaning it’s a good place to start if you want to start trading your dollars or euros for cryptocurrency.
Bitstamp is not, however, a good choice if you’re trying to exchange yen or other less dominant currencies; it’s also not a good choice if you want to dabble in alternatives to the major cryptocurrencies.
Bitstamp used to be one of the largest exchanges regarding daily trade volume; it’s since lost that spot to others like Coinbase and Kraken, but does that matter? Learn more about how exchanges got their start--and what to look for in an exchange--below.
What, Exactly, is Cryptocurrency, and Why Do We Need Exchanges?
Cryptocurrency is a type of peer-to-peer currency network based on the blockchain. The blockchain composed of a network of personal computers. Each computer on the network gets the entire log of every transaction made on the blockchain, contained in mathematical sets of information called blocks).
This decentralization of information allows for the democratization of ideas and leadership and provides a tremendous level of security. Hacking or making a fraudulent data entry on every single computer in the network would be extremely difficult, if not impossible.
Blockchains have application far beyond currency; anywhere trust is needed to make a system or market work, a blockchain can theoretically impose transparency and legitimacy to the system, potentially bypassing central authorities such as banks, governments, and nindependent auditors.
The Very First Cryptocurrency
Bitcoin was one of the first applications to take advantage of the blockchain’s potential. It uses the blockchain and creates new coins to give to miners, individuals who have purchased powerful computers and set them up to run constantly, providing the computational power to verify the increasingly complex mathematical algorithms that encrypt the data passing through the blockchain.
Miners earn coins for their work, which they then redistribute through the system. Bitcoin isn’t the only coin, but it is the largest regarding trading volume and worth, and certainly the best well-known.
Another very well-known coin that has a much smaller market cap is Ethereum. Both Bitcoin and Ethereum--as well as Litecoin and Ripple, two other well-known and heavily traded coins--are traded on Bitstamp. Exchanges like Bitstamp help buyers find sellers and sellers find buyers.
At this point, there are so many different kinds of cryptocurrency (as many as 1,600 and growing every day!) and so many different fiat currencies that finding the right market pair on your own would be very difficult. Exchanges help bridge the gap.
Depending on the exchange, they may also help you track cryptocurrency ups and downs and learn about the process--Binance, for example, aims to serve more than just the exchange needs of its customers by creating an academy and other services.
Some exchanges may also serve as digital wallets. A blockchain wallet or digital wallet is an encrypted digital vault that stores your encryption key. Some connect with exchanges to allow you to seamlessly invest or withdraw fiat currency.
What to Look for in an Exchange
Exchanges are an extremely important part of the cryptocurrency ecosystem, for several reasons. First, they are a necessary part of increasing the market--the number of people who want to buy and sell.
The easier the process is, the more people can take advantage of the opportunity.
A Security Breach Can Cause You to Lose Big Time
Exchanges are also important, however, because they represent a risk; they are a weak point in the cryptocurrency network.
Scams and hacks are rampant in this world and without stringent security measures from the exchange, you can find yourself losing a great deal of money.
Our case in point is Mt. Gox, the exchange that motivated Bitstamp to create an
It was, at one point, the largest exchange for cryptocurrency, but in 2014 the company closed its doors due to the loss of over 850,000 coins--a valuation of more than $450 million.
Most of the coins have still never been recovered, and some people lost millions, highlighting the importance of exchange best practices (more on that in a moment) and keeping up to date on
the latest in blockchain security.
Besides Security, What Else Do I Need in My Exchange?
In addition to security, you should also consider how easy it is to use the exchange’s platform. We’re not just talking aesthetics, either; some platformers require heavy verification before you can trade in large quantities.
This can take time as well as require a great deal of personal information to be sent online; you also need to make sure these communications are encrypted and protected.
Many exchanges also have daily withdrawal limits. Roughly speaking, you shouldn’t hold more than you’re allowed to withdrawal in a single day. If there’s a run on the market, the coin you can’t
pull out on the first day could become virtually worthless by the next day.
Some exchanges also have apps, which can make buying and selling much easier. You should also consider the fees that your potential exchange charges. Bitstamp is known for its low fees which makes it a good place for high-volume trading, but other sites can charge high fees and are best left for novelty coins.
Everything You Need to Know About Bitstamp
Bitstamp isn’t generally the best option for new users, as we’ll explain later, but it is a well-designed platform that’s fairly easy to use. Bitstamp provides helpful educational memes and blog articles on social media and offers both Android and iOS apps.
Fees, as we’ve already mentioned, are very competitive. They’re also easy to compare since, unlike some exchanges, Bitstamp works with relatively few market pairs. Bitstamp also gets good marks for its customer service. It has a robust FAQs section, as well as customer support available via email.
Bitstamp is also available in over sixty countries, including South Korea, Hong Kong, India, and Australia.
Is Bitstamp Safe?
Given everything we’ve already told you about exchanges being a weak point in the cryptocurrency ecosystem--and what happened to Mt. Gox--we’re not surprised that you’re asking about Bitstamp’s safety.
It’s a good question, especially since Bitstamp was the victim of one of the biggest cryptocurrency heists to
date--hackers stole 19,000 bitcoin before the breach could be repaired.
The good news, however, is that these hacks weren’t the result of tech failures. Instead, they were the result of clever phishing schemes that outwitted Bitstamp employees.
Since then, Bitstamp has put additional safety measures in place, and it’s yet to have another attack. One of those measures is cold storage. No, not refrigerated storage; cold storage refers to the process of keeping coins offline.
Cold storage is a best practice that any good exchange will practice because it means that most of the exchange’s liquid investments (coins) can’t be reached by hackers--they’re not connected to the
In addition to best practices such as cold storage, Bitstamp also offers additional levels of security for its customers, including two-factor authentication. You’ll have to enable this yourself, but security experts highly recommend you do this.
If you’re an American trading in the US, your account will be ensured by the FDIC. This means no anonymous trading, but it does mean redress is available in case of a breach!
How Does Bitstamp Compare to the Competition?
Bitcoin might be the only cryptocurrency you’ve heard of, but that doesn’t mean it’s the only or even the best choice.
It’s the same with Bitstamp; there are lots of other exchanges. In our final section of this Bitstamp review, let’s take a look at some of the best ones out there to see how Bitstamp compares!
Bitstamp vs. Binance
Binance is currently the largest cryptocurrency exchange in the world, making it a popular choice because it’s one most people even vaguely familiar with crypto have likely heard before. As we mentioned earlier, this exchange has big plans for providing blockchain infrastructure support, wallets, and more, and since its market cap is currently sitting around the $1 billion mark, there’s a good chance it will make good on those ideas.
It’s safe, popular, and has a low transaction fee, and you’ll be able to trade as many as 130 cryptocurrencies--far more than Bitstamp.
Plus, it has a unique option that allows you to set your trading mode to beginner or advanced. The two major downsides for most people--especially beginners--are that you can use fiat currency (the dollar or euro, for example), and there’s little regulation. Unless you’re looking for an additional exchange so you can abide by best practices, you’ll probably like Bitstamp better.
Bitstamp vs. Kraken
Kraken was launched in Japan just a few months after Mt. Gox liquidate; it became the court-appointed trustee to help return coins to Mt. Gox customers where possible. It is the largest volume trader in the world for euros, though, with the huge number of market pairs that it has, its fee schedule is complicated.
If you’re looking for specialty coins or have yen or some other non-major fiat currency to unload, it’s a good option. It can be bulky to use for beginners, however, and the fees aren’t usually that great. It has yet, however, to have experienced a major hack--most users consider it to be one of the most secure trading options available.
Bitstamp vs. Coinbase
Coinbase is about the same age as Bitstamp, Kraken, and Binance, but it earned “unicorn” startup status in 2012 when it hit a $1 billion valuation as part of its ICO (initial coin offering). Like Bitstamp, Coinbase is an exchange and wallet, and it provides trading in a limited number of fiat currencies and cryptocurrencies.
Fees are a little higher than Bitstamp, but that’s nearly negligible unless you’re trading at extremely high volume. What is great about Coinbase is how user-friendly it is, especially for beginners.
Plus, Coinbase is licensed to operate in most parts of the United States, with the FDIC ensuring coin holdings up to $250,000. If you’re a beginner, this makes Coinbase a no-brainer over Bitstamp.
The Bottom Line
Our goal with this Bitstamp review is to help you understand how to choose a cryptocurrency exchange and how to decide for yourself whether or not the exchange is right for you. That said, Bitstamp is an excellent exchange both from a low fee perspective and a security perspective. If you’re new to crypto trading, you’ll be able to buy in because the site supports fiat currency. If you’re a seasoned investor, you’ll be able to trade at high volumes without losing your shirt in fees. Either way, it’s a solid option.
featured image source: Bitstamp