Introduction
Choosing a crypto exchange is one of the preliminary steps in trading cryptocurrencies. The exchange must include the features necessary to place orders with utmost precision. Also, the liquidity pools for different assets should be high enough to execute orders quickly. In addition, there are several other factors for evaluating an exchange, for example, being centralized or decentralized, supporting many coins and tokens, KYC policies, transaction fees, deposits and withdrawals, etc. This article will introduce the Binance exchange and evaluate it based on essential qualities an exchange must have. So, if you want to choose this broker for your trading activities, it is worthwhile to read this article.
Binance Exchange Foundation
Changpeng Zhao (commonly known as CZ) established the Binance exchange in 2017. CZ is a Chinese-Canadian computer engineer with a degree from McGill University in Montreal, Canada. CZ has prior experience as a developer in Bloomberg Tradebook for four years. After that, he established Fusion Systems, a platform for developing broker trading systems, in 2005. He has also co-developed Blockchain.com in 2013 and worked as chief technology officer at OKcoin.com.
Binance succeeded in collecting $15 million in the initial coin offering in Jul 2017. Eight months later, Binance became the largest crypto exchange in the market. Today, the exchange has around 90 million users worldwide, and the website receives over 1 million weekly visits. The daily Spot trading volume in the Binance exchange is approximately $12.3 billion and the total trading volume amounts to more than $70 billion. Binance has a diverse list of crypto assets consisting of 384 coins and tokens. The exchange also supports 46 fiat currencies, making deposits easier for international users. Additionally, there is another branch (Binance.us) dedicated to US citizens, thanks to the regulatory issues in the US related to the original exchange.
Binance Exchange Trading Methods
Convert
Binance exchange has provided a converting feature allowing you to buy or sell cryptocurrencies. The advantage of this feature is that you can convert cryptocurrencies in a few clicks. The method is practical for those who do not want to buy or sell the desired asset with any conditions or peculiarities. You just need to specify the assets and the amount you wish to exchange. Moreover, Binance has another panel for buying and selling cryptocurrencies via credit or debit cards.
Peer-to-Peer (P2P) exchange
Binance P2P allows you to trade crypto assets with various fiat currencies and payment methods. For instance, if you want to buy BTC with USD using P2P, you can open the respective panel, insert the desired amount, and select the payment method. Binance will show the related advertisements. Once you choose one of the offers, Binance will lock the seller’s asset until the trade is completed. Of course, P2P trading necessitates SMS and identity verification in advance. The advantage of the P2P trading method is that your transaction details will not be visible to the bank or the exchange. Furthermore, the transaction cost is lower, and you have more options regarding payment methods.
Spot orders
Binance exchange provides various trading methods. Spot trading is the most popular method among traders since it is safer than other trading methods. In spot trading, the trader buys an asset with a sum or all of the money they have deposited into their accounts. Then, they wait until the asset’s value increases and sell the purchased amount to make a profit.
Futures orders
Another trading facet in Binance exchange is Futures trading. In this method, you must buy or sell the desired asset at some point in the future. If you go long on the asset, you must buy it; if short, you must provide the asset at the preset price when the position expires. Futures trading is more common among professional traders as it comes with higher risks. Binance allows traders to take short or long positions with leverages up to 125X. Therefore, users can multiply their gains using the futures. However, it is a two-way street, and if the price goes against the direction of your position, you will incur losses proportionate to your leverage setting.
Perpetual Futures orders
The third trading method in Binance Exchange is Perpetual Futures. The difference between Futures and Perpetual Futures is that the latter does not have a preset exit price and expiry date. Orders in Perpetual Futures will use the funds in your spot account if the price keeps moving in the opposite direction until your funds are liquidated. Of course, you can exit your positions whenever you want.
Tiem-weighted Average Price (TWAP) orders
TWAP is a trading method for those who want to buy or sell large-scale assets. You can use this method to divide a large order into smaller ones and execute them at regular intervals to minimize the price impact.
Volume Participation (VP) orders
VP trading strategy also allows you to execute large orders with a specific urgency level. Based on this method, you can execute orders in a procedure that matches a part of the real-time market volume, unit the order reaches the volume participation level.
Binance Exchange Order Types
Binance exchange has several order types that allow you to place orders based on your strategy.
Market orders
The market order is the simplest order type to execute orders immediately at the current price. In other words, when you buy or sell an asset, your order will be completed on the spot without pending in the order book. Therefore, you cannot specify the price point at which you want to buy the asset in market orders. Thus, market orders are not suitable for highly volatile assets since your order might be executed at a price which is very different from the price you see on the screen.
Limit Orders
Binance exchange limit orders allow you to specify the price at which you want to purchase the asset. Limit orders go in the order book and stay there until another trader is willing to fill your order at the preset price. So, unlike market orders, the price has a higher priority than the speed of executing the transaction. A buy limit order activates when the price reaches the specified price or lower. Conversely, a sell limit runs the order when the price reaches the preset price or higher. For example, if you want to buy BTC at $17,000, the limit order will buy the desired amount of BTC when the price reaches $17,000 or lower. Binance allows you to apply stop-loss and take-profit settings for limit orders.
Stop Order
Binance exchange also offers Stop Orders that have different types, including stop-loss, stop-entry, and trailing stop-loss. You can use stop orders when you want to place an order at a different price than the current price. The first type, stop-loss, terminates the trade at the given price if the price starts to move against your position. The next stop order is entry-stop which is useful when the market is ranging. For instance, the BTC value is moving between $17,180 and $17,200, and you believe that once the ranging movement ends, the price will go up. In this situation, you can use stop-entry to execute a buy order at, for example, $17,205 and set the stop-loss at $17,175.
The third stop order, trailing stop-loss, helps you lock in the profit you gain when the price is moving in the direction of your position. In the above example, when your order triggers at $17,205 and hits your first target at, e.g., $17,215, you can change the stop-loss level to $17,210. This way, if the market begins a bearish trend and goes below $17,210, you have locked a $5 profit from your trade.
One-Cancels-the-Other (OCO) orders
The OCO order type is a combination of limit order and stop order where the execution of either one cancels the other. Both orders must be in the same direction (short or long), and cancellation of either one terminates the order. Let’s say you want to buy BTC; if the current BTC price is $16,750 and there is a resistance level at $16,800, you can place an OCO order with the following details. The value for the limit order would be, e.g., $17,000 and the stop limit value slightly above the resistance level, say $16,810. Now, if the price decreases and reaches $17,000, the limit order activates, and the stop-limit cancels. Conversely, if the price increases and
Binance Exchange Native Token
Binance exchange comes with a utility token called BNB that you can use to pay transaction fees with a discount. BNB initially used the ERC-20 standard as it was developed on Ethereum Blockchain, but later Binance developed its blockchain and used it to create BNB using the BEP-2 standard. BNB is also used in the Binance blockchain (BNB chain) to pay for gas fees. You can also use the token to participate in Binance Earn program, stake your BNBs, and get 30% APY. Binance also has a stablecoin, Binance USD (BUSD), that traders can use as a collateral alternative to USDT and earn interest rates along with several other use cases. BUSD is one-on-one USD-backed and its regulation is under the New York State Department of Financial Services’ (NYDFS) scrutiny.
At the time of writing (12/20/2022), BNB is the fifth listed token at CoinMarketCap, worth $245.5. BNB has a maximum supply of 200 million tokens 80% (159.9 million) of which is already in circulation. The asset has a $39.5 billion market cap, and the daily trading volume is $895.4 million (including 1.3 million in decentralized exchanges). Furthermore, the asset has set an ATH at $690.9 and ATL at $0.88.
Binance Exchange Other Services
Binance is not just a centralized cryptocurrency exchange. It is also active among decentralized exchanges, but the quality is not comparable to the main trading platform. Binance also has an independent blockchain called Binance Smart Chain (BSC) that allows developers and programmers to develop dApps and other DeFi products. BSC has embedded Ethereum Virtual Machine (EVM); therefore, dApps developed on the ETH blockchain are compatible with Binance Blockchain. In addition, the Binance Launchpad is a medium that crypto projects can use to design and mint tokens for their crypto projects. There are several other services that you can use as a means of investment, including staking, mining, liquidity farming etc.
Binance Exchange Advantages
Security:
Binance has solid security schemes to protect clients against spammers and hackers in general. Binance requires that you activate at least one of the methods for two-factor authentication either via SMS or Google Authenticator app. You can also set a phrase that will appear on all of the emails you receive from Binance so that you can identify spam or fake emails. Another security feature is the trading passcode you must enter before each transaction on the platform once activated.
Binance Exchange Trading interface
Binance exchange features two trading interfaces. The Original is the platform’s native trading interface, and the other is developed by TradingView. Users can plot useful technical indicators on the interfaces and analyze the price movements.
Binance Exchange Trading Fees
Binance has a competitive taker/maker fee plan, and the transaction cost is determined based on the trader’s level. Binance categorizes the traders based on their trading volume in the past 30 days. The higher the trading volume, the higher the trader’s VIP rank and vice versa. Traders with high trading volumes pay lower fees than traders with marginal trading volumes. You can see the comprehensive trading fee table here.
Support
The Binance support team is active 24/7 and traders can contact them via email or telephone.
Binance Exchange Disadvantages
Complex platform
Due to the numerous provided services, Binance.com is overwhelmingly crowded. As a result, novice traders may need help to find their way around the platform.
Supported countries
Since Binance is a centralized exchange with strict KYC policies, not every trader can use the platform.
Binance.US
The Binance platform’s US variant does not support as many assets as the global version, and American traders have fewer trading options.
Final Words
Binance exchange is the biggest crypto exchange in the world by market cap. It has millions of active users quickly trading assets without facing web traffic congestion. However, the platform may not be the best option for novice traders or those with low funds. Thus, you can turn to other, more straightforward crypto exchanges if you have limited funds or do not need advanced trading features.
Disclaimer:
The guidelines we mentioned in this article are only for educational purposes. Please do not regard them as financial advice. Note that investing in financial markets requires a comprehensive trading plan. Any rash decision can easily spoil your capital.