Education, For Beginner Traders

Crypto Swapping: What Is It and How to Do It | Binance.US

February 08, 2023 - 8 min read

Learn what you need to start swapping crypto.

Swapping crypto is an effective way to exchange one coin or token for another. Doing so makes it easy to use the new cryptocurrency in a variety of ways — to purchase even more coins, tokens, fiat currency, or just to hold in your portfolio.

In this guide, we’ll review the basics of swapping crypto and discuss how to do it correctly.

What Is Crypto Swapping?

Crypto swapping (a.k.a. swapping crypto, coin swap, or token swap) is a process that allows a coin or token holder to exchange one type of digital currency for another.

For example, you may want to exchange Ether (ETH) for Bitcoin (BTC).

Without crypto swapping, you would have to convert your ETH into fiat currency (sell it) and then use that fiat currency to buy BTC. This typically takes time and may even require that you pay fees to facilitate the process.

Crypto swapping, on the other hand, allows you to cut out all the extra steps (and the extra fees) by directly exchanging one digital asset for another.

These swaps are usually conducted through a specialized crypto platform, such as Binance.US, but third-party options exist.

Swapping Crypto vs. Trading Crypto

While the mechanics of swapping crypto and trading crypto are very similar, the uses and outcomes are very different.

Trading crypto — i.e., executing an exchange based on the order book of a specific platform — is governed and restricted by the trading pairs available on said platform.

Swapping is similar but provides more flexibility in the exchange. Instead of only having access to the live pairs that the spot market provides, you can exchange any cryptocurrency for another.

This often eliminates many of the transaction fees that you have to pay (sometimes more than one) during the trading process.

At first glance, trading and swapping may look like the same thing, but it all comes down to the reasons for engaging in one or the other.

In general, trading is used as a way to make a profit (as in day trading), while swapping is a way to facilitate another transaction.

For example, if you want to buy something that only accepts Litecoin but your portfolio is limited to BNB, BTC, and ETH, you might consider swapping.

You’re not necessarily looking to make a profit on the exchange of your digital assets — you just want to convert one to another in order to get something done.

How to Start Swapping Crypto

The exact procedure for swapping crypto will differ from platform to platform, but the general steps are the same.

1) Choose the Right Crypto Ecosystem

The best way to set yourself up for easy crypto swaps — and even more advanced transactions — is to choose the right crypto ecosystem for your needs. This involves researching the potential platforms you’re considering.

In the process, do your best to look at each option with a critical eye and to ask such questions as:

What problems does the platform solve?
What benefits does the crypto ecosystem offer?
How many users does the platform have?
What do the users have to say about the platform?
Are there any fees involved in swapping crypto?
Does the platform offer other ways to manage my digital assets?
Will this platform still be useful as my portfolio grows?

Asking and answering these questions (and others) before you get involved with a specific platform will give you the tools, flexibility, and information you need to expand your activities beyond just swapping.

2) Set Up a Crypto Wallet

A crypto wallet is similar to the wallet you carry in your pocket in that it provides a place for you to store and manage your digital assets (e.g., coins, tokens, and NFTs) once you get involved in the cryptocurrency market.

Though crypto wallets can come with a variety of features, they generally fall into one of two categories: hot wallets and cold wallets.

Hot wallets are those that online crypto platforms offer to their customers and are usually software- or cloud-based.

Cold wallets, on the other hand, are those that store cryptocurrency offline in a more tangible asset, such as an external hard drive.

If you have the right technical knowledge, computer hardware, and funds to get started, you can create a crypto wallet and swap, buy, sell, trade, and stake on your own.

The vast majority of users, however, will be better served by making use of the hot wallets hosted by crypto ecosystems, such as Binance.US.

When you partner with a crypto platform, you can earn rewards without having to operate and maintain your own validator hardware or go through the long, complicated process to get things up and running.

3) Fund Your Account

Once you’ve found a platform that works for you, create an account and verify your identity.

If the platform doesn’t provide a crypto wallet, set up your own in preparation for the transactions you want to initiate.

Next, either transfer a digital asset into the new account or fund that account with fiat currency (government-backed money such as U.S. dollars).

If you’re going the fiat currency route, you can fund an account via one of the methods offered by the platform, which usually include:

Debit or credit card
ACH from an existing bank account
Bank or wire transfer
Other established payment services (check platform for details)

Once the fiat currency hits your account, you can use it to buy any of the cryptocurrencies the platform offers in preparation for the swap.

4) Place a Swap Order

Once you’ve got a digital asset in your account (either through transfer or direct sale), you can use the platform’s tools to initiate a swap order.

You’ll need to specify which coin or token you currently hold (e.g., ETH), and which coin or token you want to swap for (e.g., BTC).

At this point, there might be a few intermediary steps, such as verifying your identity, providing your public key, or other housekeeping necessities.

Keep in mind that the cryptocurrency market changes very quickly, and swapping crypto depends, in large part, on the price of both cryptos (the one you hold and the one you want to swap for) at the moment.

Before initiating any swap orders, research and analyze the market to develop a strategy to guide your decision-making process.

5) Wait for the Order to Be Fulfilled

After you’ve placed the swap order, wait for the transaction to complete.

Once completed, the system will deposit the cryptocurrency into your account for you to use to purchase other cryptocurrencies, withdraw, or pay for products and services.

Whatever your ultimate use for the swapped crypto, be sure to store it in one of the crypto wallet options discussed earlier (i.e., a hot wallet or a cold wallet).

Tips for Swapping Crypto Safely

1) Make a Plan

Rushing headlong into any cryptocurrency transaction — swapping crypto included — can be a risky endeavor. To better set yourself up for potential success, have a plan before making any moves.

Depending on your strategy and overall plan, buying and trading may be the better option. Or buying and then staking.

Whatever plan you put in place, do your best to stick to it as closely as possible and resist the urge to switch things up at the last minute.

Making a plan first can help protect your portfolio from the ups and downs of the cryptocurrency market.

2) Set Limits

In the process of planning your strategy and researching the various aspects of swapping crypto, consider setting limits on your activities and the losses you can tolerate.

This is just a good idea in general — regardless of the type of transaction in which you want to engage.

With limits in place, you’ll be less likely to get swept away by the emotion, adrenaline, or fear of missing out (FOMO) that can lead you to initiate a transaction into a losing position.

3) Diversify

Swapping is an easy way to get started putting your digital assets to use in the cryptocurrency market.

But, if you have all of your money in one basket (that is, one cryptocurrency), your portfolio will be more susceptible to the volatility of the market.

One of the best ways to protect yourself from becoming overexposed is to diversify your digital holdings.

Though you may settle a large percentage of your funds in one coin, token, or crypto strategy, you can set up a safety net of sorts by purchasing other coins or by getting involved in an entirely different part of the crypto market (e.g., buying, selling, or trading).

The Right Tool for the Job

Swapping crypto is an easy way for crypto holders to use their digital assets effectively and further their overall strategy.

But it takes the right tool to get the job done correctly and efficiently. Binance.US can help.

Whether your strategy involves swapping, dollar-cost averaging, day trading, HODLing, staking, or anything in-between, choosing Binance.US as your crypto platform is one of the fastest, most convenient ways to expand your portfolio and grow your crypto.

Download the Binance.US app to trade on the go: iOS | Android

This material has been prepared for general informational purposes only and should NOT be: (1) considered an individualized recommendation or endorsement of any digital asset or services discussed herein; and (2) relied upon for any investment activities. All information is provided on an as-is basis and is subject to change without notice. We make no representation or warranty of any kind, express or implied, regarding the accuracy, validity, reliability, availability or completeness of any such information. Binance.US does NOT provide investment, legal, or tax advice in any manner or form. The ownership of any investment decision(s) exclusively vests with you after analyzing all possible risk factors and by exercising your own independent discretion. Binance.US shall not be liable for any consequences thereof.

Risk warning: Buying, selling, and holding cryptocurrencies are activities that are subject to high market risk. The volatile and unpredictable nature of the price of cryptocurrencies may result in a significant loss. Binance.US is not responsible for any loss that you may incur from price fluctuations when you buy, sell, or hold cryptocurrencies. Please refer to our Terms of Use for more information.

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