The Pros And Cons Of Centralized Exchanges

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Cryptocurrency exchanges play a vital role in the development of the entire crypto space. While all exchanges are not created equal, each still aims to connect users in the best way to buy, sell, and trade digital assets.

As the crypto space grows, investors and crypto traders tend to the most reliable cryptocurrency exchanges for their trading needs. Moreover, it’s important to know the differences between each exchange—no matter if it is centralized or decentralized.

If you prefer using a centralized exchange (CEX), however, this article is for you. We will dive into the pros and cons of centralized exchanges.

The Pros and Cons Of Centralized Exchanges
ProsCons

1. Consistently high liquidity
2. Consistently high trading volume
3. Fast transaction speeds
4. Good user experience
5. Enables complex trading types/services
6. Protection from fraud and scandals
7. User-friendly interface
8. Provides an extra layer of security and reliability 
9. Offer higher levels of comfort

1. You don’t ‘fully control’ your assets
2. CEXs are prime targets for bad actors because of the high trading volume in it
3. Some exchanges are accused of manipulating the market prices of cryptocurrencies 
4. Offers less privacy than DEXs (decentralized exchanges)
5. Since CEXs are private businesses, it is prone to bankruptcy risks as well
6. Some CEXs offer less variety of cryptocurrencies in their platform

In addition, centralized exchanges, unlike decentralized exchanges, have more rules. As it is governed by a central authority, these authorities decide on the specific services that the CEX will provide its users.

Conversely, its user-friendly interface enables it to be the most preferred type of exchange, especially for beginners. The transactions are quite fast, as well—centralized exchanges mostly provide spot trading, among many other functions.

With this, only the user can decide if he will come to a centralized exchange knowing these pros and cons. Nevertheless, as a trader, it’s your responsibility to do your own research and invest only what you can afford to lose—the two golden rules in crypto trading.

Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Enifex. Nothing in this article should be interpreted as investment guidance. Enifex encourages all clients to do their own research before investing in cryptocurrencies.