What Are Crypto Swaps and How to Do Them the Right Way
Crypto swaps have become a favoured trading method by many due to their convenience and lower fees. Hence, in this guide, we will cover what crypto swaps are, how they work and what benefits they can offer. Regardless of your experience level as a trader, understanding crypto swaps could open up fresh opportunities and give your investment strategy a boost.
Definition of Crypto Swaps
Crypto swaps are a method that allows you to exchange one cryptocurrency for another of equivalent value directly, without the involvement of any crypto-to-fiat exchange. As a result, you can swap your coins or tokens for a lower fee and save time. Unlike a traditional cryptocurrency exchange, where you buy and sell crypto assets, a crypto swap occurs directly between two parties. This makes it much easier for people to partake in projects they are interested in and wish to commit to.
Sometimes, selecting a crypto swap service is necessary. This helps in covering a transaction fee that can only be paid using the native coin of a certain blockchain. On other occasions, traders use such services in hopes of making the most of an impending market move.
Since everything is fluid in the cryptocurrency market, not a lot can be said in favour of stability. However, you must note that participating in specific protocols, like decentralized finance (DeFi), is only attainable through certain blockchains. Nonetheless, it is not very difficult to achieve.
Choosing a Reliable Swap Platform
It is completely understandable that choosing a trustworthy swap platform can be a difficult task. Therefore, when doing so, you must consider a host of things such as:
- Fees
- Security
- Supported assets
- Payment methods
- Customer service
- Reputation and user feedback
The lack of any of these can lead to a highly distressing and painful experience. So, you must do your research and make sure that you do not lose out on opportunities. High fees can also reduce your profits, so it’s important to review fee structures and transparency in pricing before opening an account.
How Crypto Swaps Work
You need to be a bit patient and understand that the end-to-end process and timeline of crypto swapping may vary depending on the platforms you use. If you sign up on a particular application or website, crypto swapping takes just a few steps and is completed within seconds. This applies to both the Swap feature and the Easy Swap Engine.
Here’s how:
- Choose the currencies you would like to swap.
- Enter the amount you want to swap.
- Proceed with a PIN code to complete the transaction.
You can carry out this procedure and acquire the token you want through various crypto swap platforms, such as Shapeshift, Changelly, Airswap, Swapy and Changenow. This approach is paramount for obtaining coins with low market capitalisation. For example, when traditional crypto exchanges restrict lesser-known tokens or coins, crypto swap platforms allow you to access your desired cryptocurrency more easily.
Setting Up Your Crypto Wallet
The most popular and easy-to-set-up crypto wallet is a hosted one. When you buy digital coins using an application on your phone or laptop, your crypto gets automatically held in a hosted wallet, meaning a third party keeps it for you. This is quite similar to how a bank holds your money in a savings or current account.
The biggest advantage of a hosted wallet is that it can never be lost as it is completely virtual. Also, if you forget your password by any chance, you will not lose your crypto. One downside, however, is that you may not have access to some features like staking, advanced trading options or certain decentralized apps (dApps).
1. Verify Your Token Address
Remember that double-checking the address is crucial. So first, make sure that it is pasted correctly in the transaction window to save yourself some headaches. Then, use online verification tools to decode the format of the wallet address and validate its authenticity. Note that each cryptocurrency has a unique address format. Understanding these formats can help you identify inconsistencies and, consequently, ensure a smooth transaction process.
2. Beware of Slippage in Crypto
Slippage is a typical occurrence in the world of cryptocurrency trading, one that takes place fairly often. It refers to the difference between the expected price of a trade and the price at which the trade is eventually executed. This dissimilarity can occur due to rapid price fluctuations in the market between the time an order is placed and when it is completed.
One strategy to prevent this is to use limit orders instead of market orders. A limit order trades a coin at a specific or better price. Another approach is setting a slippage tolerance. This allows traders to specify the maximum amount of slippage they are willing to accept.
3. Keeping Your Private Keys Secure
There are several ways in which private keys can be stored safely. One method is using paper wallets, where keys are written or typed on paper. You can also use software to generate QR codes, which can be printed or scanned for transactions.
Alternatively, you can use devices specifically designed for storing private keys, which can be connected to your computer or other storage medium. These tools can transfer and secure your keys from your hot wallet.
Once Again: Checking Out Transaction Costs
Some exchanges might still charge a per-transaction fee. However, most of them have transitioned to a combination fee schedule similar to the one used by Coinbase. Normally, small and infrequent trades are not very cost-efficient at crypto exchanges, unless you only want to buy a cryptocurrency. In such cases, most exchanges charge a spot trading fee, which is used to purchase and take possession of a digital coin.
Stay Tuned
Following News and Updates on Regulations
Keeping up with news and updates on crypto regulations across the world is important as it will help you get a fair idea of when and how these regulations might affect you. It will also allow you to adjust your trading patterns and crypto swap strategies accordingly.
Tracking Market Trends and Price Movements
The initial increase in liquidity in crypto-assets can be traced back to Bitcoin’s use for trades on Silk Road, the first modern dark web marketplace. The use of Bitcoin (BTC) for these dealings by early adopters set in motion a sequence of circumstances. These included the rise of other digital currencies, technological assets, exchange outlets and wallets. This ultimately led to BTC achieving its $1.3 billion market cap in May 2013. To better understand future market movements, you must analyse historical data first. This will allow you to model different scenarios and test trading strategies.
Researching New Crypto Swap Platforms
While it may be challenging to research up-and-coming crypto platforms, it is essential to stay on top of your game and not let the market disappoint you. On that note, here is a list of the top new crypto swap platforms:
- Exodus
- Margex
- OKX
- Bybit
- Binance
- Changelly
- ChangeNOW
- KuCoin
- Coinbase
- MetaMask
Keeping Up with Security Best Practices
It is not easy by any means to keep up with the best security practices while dealing with crypto swaps, but it is important nonetheless. With the advent of digital crimes across the world, it is essential to protect your assets. If you are careful with the cryptos that you swap, you can avoid potential harm. To help you stay safe, we have compiled a list of best security practices to follow:
- Use strong, complex, long passwords.
- Activate Two-Factor Authentication (2FA).
- Store your seed phrase offline in a metal card.
- Use a VPN to protect your traffic data.
- Use multiple wallets.
- Choose secure platforms for trading.
- Update software regularly.
- Avoid using public WiFi.
FAQ
Can I perform crypto swaps on a mobile device?
Are there fees associated with crypto swaps?
Can I reverse a crypto swap if I make a mistake?
