A Bitcoin exchange is a digitally run marketplace where traders can either sell or buy bitcoins by utilizing various altcoins or fiat currencies.
Bitcoin currency exchanges are online platforms that perform as intermediaries between sellers and buyers of the cryptocurrency. The currency ticker utilized for bitcoin is either XBT or BTC.
Essential Takeaways
- A bitcoin exchange is the intermediary between the seller and a buyer or using the cryptocurrency tongue, a “taker” and a “maker.”
- A bitcoin exchange operates like a brokerage that allows you to deposit money via wire, bank transfer, or other types of deposit. But, you will often need to pay for the service.
- If a trader wishes to trade between cryptocurrencies, they must pay the currency conversion fee, which is similar to banks that charge you a fee for exchanging money from various countries.
- Sales and purchases are contingent on the exact ordering system than existing brokerages, where the taker places a limit order, which can then be sold when a corresponding cryptocurrency becomes available from the maker.
Understanding The Bitcoin Exchanges
- Bitcoin exchange platforms like Crypto Head match buyers with sellers. Just like old-fashioned stock exchange, traders can choose to buy or sell bitcoin by inputting either a limit order or market order.
When a market order is chosen, a trader is authorizing the exchange in order to trade his coins for the best price in the online marketplace.
With the limit order, the trader leads the exchange in trading coins for a price above the current bid or below the current ask, contingent on whether they are selling or buying.
- To transact in bitcoin on any exchange, a user must register with the exchange and first complete a series of identity verification processes.
Once authentication is done, an account is opened, which allows the user to transfer funds into his account before they can purchase coins. Various exchanges have varied payment methods that can be utilized for depositing funds, which include direct bank transfers, bank wires, bank drafts, credit or debit cards, and even gift cards.
A trader that wants to withdraw money for his account can make use of options offered by the exchange, which could be PayPal, bank transfer, cash delivery, check mailing, credit card transfer, or bank wire.
Fees
Making withdrawals or deposits are billed, contingent on the chosen payment method to transfer the funds. The more substantial the risk of a chargeback from the payment medium, the higher the fee will be.
Wiring money or making a bank draft to an exchange has a lower risk of a chargeback in comparison to funding the account with credit/debit card or PayPal, where the funds are transferred and can be returned or reversed upon the user’s request to the bank.
Besides, fund transfer fees and transaction fees, traders might also be subjected to currency conversion fees, contingent on the currencies that are accepted by a bitcoin exchange.
Transacting with a cryptocurrency exchange that allows your local currency is always the best way of avoiding the FX fee.
