If you’ve recently made your first crypto purchase using fiat currencies such as USD or CAD, then you may now be wondering how you can swap the Bitcoin or other digital asset you bought for another one.
Swapping cryptocurrencies is a fairly simple process and it’s actually a little easier than swapping traditional investment vehicles like stocks or ETFs. This is because unlike stocks, almost all cryptocurrencies can be swapped for one another as long as there is a trading pair for it.
With stocks, there are very few trading pairs, as they’re typically only paired to your local fiat currency. But with crypto, there are often trading pairs for Bitcoin, Ethereum, and stablecoins like USDT in combination with almost every crypto asset on the market. This means you can swap your BTC for ETH, ADA, SOL, BNB, DOGE, SHIBA, or whatever else you wish, without having to swap for cash and then for the asset you want, as you typically do with stocks.
In this guide, we’re going to go over the two main ways in which you can swap crypto for the first time, and show you just how to do so. Let’s jump in.
Ways to Swap Crypto
Centralized Exchange
A centralized exchange (CEX) such as Coinbase or Binance is the typical way for you to swap crypto for the first time, especially seeing as you likely had to on-ramp your fiat to an exchange in order to make your first crypto purchase.
Centralized exchanges tend to have two different ways for you to swap crypto. The first is through a simple buy/sell/convert option, which is often easy to do but will incur more fees than if you use the second option.
The second option is to place an order on the spot market, which means choosing how much of an asset you want to buy, and at what price. The order will then be filled when those parameters are met. This process is slower than using the simple option noted above, but will give you the best value for the swap.
Decentralized Exchange
A decentralized exchange or DEX is ostensibly the exact same thing as a centralized exchange. You can generally do the same two types of swaps, but the difference is that you’re now performing these transactions directly from your crypto wallet, rather than from an exchange account.
The advantage to using a decentralized exchange over a centralized one is that you can often find different assets and pairs than you would otherwise. You can also provide liquidity to a decentralized exchange, but that’s a separate topic you can learn about here.
How to Swap Crypto Using an Exchange
Now that you know where you can make your first crypto swap, we’re going to give you an example of how to do it.
We’re going to show you how to make a swap using a centralized exchange (Coinbase), but with both methods, so that you can decide which you want to do after seeing both processes.
The basic first two steps are the same regardless of which method you plan on using, then we’ll provide the steps for a simple swap conversion and a spot market swap.
Step 1: Log In to Your Account
The first step in making a swap using a crypto exchange is to log into your account.
Step 2: Choose Asset You Want to Swap
The next step is deciding which of your crypto assets you want to swap. It may be an asset that you’ve made gains on, or one that you want to get out of as soon as possible.
Once you know which asset you want to swap you actually have two different options. You can perform a simple swap, which is easier or a spot market market swap, which is potentially cheaper. Here’s how they both work:
Simple Swap Conversion
Step 1: Locate Buy/Sell on Dashboard
If you’re going to do a simple swap conversion, then you’ll now need to locate the Buy/Sell tab. Once you click it, you may be redirected to another page, but on Coinbase it simply pops up (see below image).
Step 2: Choose the Asset You Want to Trade and What to Swap it For
Once you’re on the page to make the swap, choose the asset you’re swapping, and what you’re swapping it for. Specify the amount you’re looking to swap.
Step 3: Preview Swap
Once you’ve entered the amount of the cryptocurrency you’re looking to swap, click “Review Order”, “Preview Swap”, or whatever the platform calls this step. You will be able to see the amount of crypto you’re swapping and what you will receive when it is completed.
Step 4: Confirm Swap
Assuming you’re satisfied with the preview of the swap, you simply then confirm the trade. The platform will execute it for you and deposit the new asset in your exchange account.
Alternative: Spot Market Swap
Step 1: Locate Spot Market or Advanced Trade
If you’re going to swap using an exchange’s spot market, then either click “spot market” from your dashboard, or in Coinbase’s case, toggle on “Advanced Trade” from the side bar.
Step 4: Find the Trading Pair You Want
Once you’re on the spot market page, find the trading pair you’re looking for. For example, if you’re looking to swap your Bitcoin for Ethereum, look for the BTC/ETH pair.
Step 5: Enter the Swap Parameters
Next, you’ll need to enter the parameters for your swap. If you’re buying ETH with BTC, then you’ll be entering the parameters under the “Buy” tab, but if you’re selling ETH for BTC, then you’ll be entering the parameters under the “Sell” tab. See the right side of the image below.
You can then choose how much of the asset you wish to buy, at what price you wish to buy it, and how much of your asset you’re looking to swap for it. Once all those parameters are to your liking, you can then add your order to the order book. This is a limit order. You can simply buy at the current market price by doing one of those orders instead.
Step 6: Wait for Swap to Be Filled
Once you’ve added your order to the book, the exchange will take care of the rest, filling the order if/when the parameters are met. It’s worth noting that if you place an order that already exists, it will be filled immediately. This is like a market order.
Once the swap is filled, the new assets will be available in your exchange account, where you can swap them or do what you wish.
Is There an Advantage to a Limit Order Over a Market Order?
Yes and no, it depends on the exchange. Typically, a limit order is considered a “maker” order, because you’re adding new liquidity to the exchange, and to encourage this many exchanges have lower trading fees for this type of swap.
A market order is considered a “taker” order because you’re taking liquidity off the exchange, and exchanges often charge a little more in fees for doing this. However, platforms like Binance charge the same for both maker and taker orders, meaning it doesn’t really matter.
For platforms that do have differing maker and taker trading fees, it’s advantageous to do a limit order because you’ll be charged less in fees, meaning more value for your money.
What About Swapping on a Decentralized Exchange?
The process for making a swap on a decentralized exchange is essentially the exact same, but there is typically only the spot market option. The main difference between making a swap on a decentralized exchange compared to a centralized one is that you’ll need to have the cryptocurrencies on an external wallet and connect it to the DEX in order to make your trades.
Closing Thoughts
Making your first crypto swap can be an intimidating concept, but it reality doesn’t need to be. Crypto exchanges have lots of options for you to make swaps, giving you as the user control over how much involvement you want to have in the transaction. As a result, the more convenient way to make your first swap is also the more expensive way, while the less convenient way will give you the most for your money. The option you choose is totally up to you.
