How to Choose the Canadian Crypto Trading Platform That’s Right For You

Your little brother, your gamer cousin, and more than a few (bad) Tinder dates have tried to evangelize to you the benefits of investing in Bitcoin/crypto. You’ve had colleagues think they would quit their jobs in early 2021 from it, you’ve seen friends get scammed, and even your best friend’s dad managed to buy ‘paper’ bitcoin via his traditional online stock brokerage.

If you know you need to get started but don’t know where to begin, this guide is for you.

This week we cover a short section on fees: This is how these companies pay rent and keep the lights on. Next week, we’ll go through a hypothetical example to illustrate how crucial Fee Transparency and literacy can be throughout one’s investing life… And finally, in January, the last section will cover all the other important factors you’ll probably want to look into before picking your crypto trading platform. Onward!

Over the average investor’s lifespan, fees and commissions can (and do) add up to millions. So how does one learn to “do their own math” when navigating these (purposefully) murky waters? This is what we’d like to help you learn how to do in these next few short weekly articles.

The total cost of buying crypto isn’t only about how much commission you pay your broker or the spread they pocket: It’s about the long-term opportunity cost compounded over the time one holds it… (It’s a lot.)

Say you paid a 1.5% spread on a $1,000 Bitcoin purchase 6-years ago. Any idea how much that 1.5% is worth today?

$7,300.00. Now that we have your attention, let’s dive in.

A spread (also known as the market spread or bid/ask spread) is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller will accept (ask).

Spreads are how market makers get paid for their services: It’s not necessarily dishonest if there’s clarity.

Spread = Lowest asking price - Highest bidding price. ASK - BID = Spread

Spread as a percentage = (Spread/Ask)*100

Say your crypto trading platform is selling bitcoin at $41K (this is the ask), but buying it at $40k (the bid). The spread is $1K.

Spread as a percentage? ($1,000/$41,000)*100 = 2.4%

Generally, the spread is a fair indicator of market liquidity. Typically, a high spread could indicate low liquidity and a low spread is often a result of high liquidity.

But liquidity is also determined by the demand for an asset and a crypto trading platform ’s order books and market depth.

Price Slippage occurs when you receive a less advantageous price than intended.

E.g.: Ask price for 1 BTC: $50,000. You bid $50K…

And your trade indeed executes, but you only receive 0.97 BTC! What gives? You suffered price slippage, sir/madam.

The truth about fees & spreads, when you get down to brass tacks, is that what may seem like an insignificant amount up front, over time turns out to be closer to a yearly salary. How did you think the financial industry became so large?

You buy bitcoin ($1000). You pay a 1% commission fee. ($10) but secretly, you also lose 1.5% more to slippage (the spread; $15).

This transaction cost you $25 of bitcoin. That’s not terrible, right? Wrong: Enter the 8th Wonder of the World… Compound interest.

“He who understands it, earns it; he who doesn't, pays it.”

• Einstein (meaning no doubt to include all genders…)

Evaluate the platform's security measures, including cold storage, multi-signature authentication, and insurance policies. Does the platform just talk a good deal, or have they put their money where their mouth is? If that’s not on their website… Probably safest to look elsewhere. 

Assess the platform's trading volume and liquidity to ensure efficient order execution. This alone will determine how large or small your spreads are. For example, part of why Ndax’s spreads are so consistently thin is that Ndax is one of the largest crypto trading platforms by volume in Canada. More volume means more liquidity and more liquidity means thinner spreads.

Evaluate the platform's ease of use, navigation, and overall user experience. Is the platform optimized for simplicity, transparency, and ease of use?

Assess the availability of advanced trading tools, technical analysis indicators, and market research resources. Do they offer recurring purchases? Do they have a great referral program?

Chances are, if you use online banking, you’re most likely tech-savvy enough to buy Bitcoin or crypto. But even if you doubt your ability, this doesn’t necessarily mean you should seek out the most childish platform available––it’s more likely that you’ll want a platform with amazing customer support. (Beware of companies that rely on cartoonish branding or that treat you like a child! Remember that if you’re not paying for a product, the product is likely you.)

• Determine your preferred investment style. Are you the type to invest everything in one lump sum and forget about it, or would you prefer to “dollar cost average (DCA)” by spreading that investment budget out over several months?
• Set realistic investment goals and risk tolerance! Don’t invest more than you can afford to not touch for at least 5 years! Since Digital Assets can be very volatile, it would be a shame to have to sell something at a loss because you invested too much upfront and need some of it back.

• Regulatory Compliance

Has your Canadian crypto trading platform undergone the Pre-Registration Undertaking (PRU) required by Canadian regulators in 2023? Are they registered with Fintrac? When applicable, are they licensed in Canada as a Money Service Business, or in Québec by Revenu Québec? Canada has historically been quite open to digital assets–if your platform is not registered, that’s a red flag.

• Customer Support

Assess the quality and availability of customer support services. What are the reviews telling you about a crypto trading platform’s dedication to making (and keeping) their current customers happy?

• Mobile App

Evaluate the availability and functionality of a mobile app for convenient trading on the go… What are other people saying about it on the Apple and Google Play stores? Anything less than 4 stars out of 5 across the board may not be a company with whom you want to entrust your hard-earned crypto. Which brings us to–

• Reputation and Trustworthiness

Research the platform's reputation, track record, and user reviews. Has your platform of choice had any public audits performed on their company? If not, that should be a red flag. 

Weigh the pros and cons of each platform based on your specific needs. Consider creating a shortlist of potential platforms and conducting further research.

Once you’ve narrowed down your list, choose the platform that feels like the right fit for you. Get your driver's license or passport ready, sign up and fund your account via Interac transfer!

Moving your ‘monetary value’ from one (banking) system to another (digital) system.

Every monetary system is its own parallel universe for ‘monetary value’, each blockchain its own private silo that may or may not be capable of communicating with other open, public networks (like Bitcoin) or closed, private networks (like CAD, Euro, USD).

Therefore (until you can mine or earn crypto directly), to acquire digital assets, one must transfer their ‘money’ from one network to another, and to bridge these networks, an intermediary is required.

Hence, the Canadian Crypto Trading Platform.

If you held that BTC for 5 years, compounded at 125%/y, the spread alone cost you $865… 10 years? Compounded annually at 125% for 10 years, $15 dollars becomes $49,879: That’s why Einstein called compound interest “the eighth wonder of the world”.

“It’s science.”

-Ron Burgundy, ANCHORMAN

Disclaimer: This article is not intended to provide investment, legal, accounting, tax or any other advice and should not be relied on in that or any other regard. The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of cryptocurrencies or otherwise.