DEFINITION of ‘Bitcoin Exchange’
A bitcoin exchange is a digital marketplace where traders can buy and sell bitcoins using different fiat currencies or altcoins. A bitcoin currency exchange is an online toneel that acts spil an intermediary inbetween buyers and sellers of the cryptocurrency.
The currency ticker used for bitcoin is either BTC or XBT.
Violating DOWN ‘Bitcoin Exchange’
Bitcoin exchange platforms match buyers with sellers. Like a traditional stock exchange, traders can opt to buy and sell bitcoin by inputting either a market order or a limit order. When a market order is selected, the trader is authorizing the exchange to trade his coins for the best available price ter the online marketplace. With a limit order set, the trader directs the exchange to trade coins for a price below the current ask or above the current bid, depending on whether s/he is buying or selling.
For example, on a bitcoin exchange, three coin sellers are asking for BTC/USD 2265.75, BTC/USD 2269.55, and BTC/USD 2270.00. A trader who initiates a market order to buy bitcoins will have his order packed at the best ask price of $2265.75. If only five bitcoins are available for the best ask and Ten coins are available for $2269.55, and the trader wants to buy Ten at market, his order will be packed with Five coins @ $2265.75 and the remaining Five @ $2269.55.
However, a trader who thinks that he can get bitcoins for a better price could set a limit order for, say, $2260.Ten. If a seller matches his/hier ask price with this order or sets a price below this figure, the buyer will get packed.
Online bitcoin marketplaces usually designate bitcoin participants spil either makers or takers. When a buyer or seller places a limit order, the exchange places adds it to its order book until the price is matched by another trader on the opposite end of the transaction. When the price is matched, the buyer or seller who set the limit price is referred to spil a maker. A taker is a trader who places a market order that instantly gets packed.
All bitcoin exchanges have transaction fees that are applied to each finished buy and sell order carried out within the exchange. The toverfee rate is dependent on the volume of bitcoin transactions that is conducted. For example, bitcoin exchange Poloniex has its rate ranging from 0 to 0.25%, GDAX fees range from 0 to 0.30%, Kraken’s fees range from 0 to 0.36%, and Paxful charges 1% of the amount of a sale to the seller but buyers don’t get charged.
To transact te bitcoin on an exchange, a user has to register with the exchange and go through a series of verification processes to authenticate his or hier identity. Once the authentication is successful, an account is opened for the user who then has to transfer funds into this account before s/he can buy coins. Different exchanges have different payment methods that can be used for depositing funds including bankgebouw wires, ongezouten bankgebouw transfers, credit or debit cards, handelsbank drafts, money orders, and even bounty cards. A trader who would like to withdraw money from his or hier account could do so using the options provided by his exchange which could include a handelsbank transfer, PayPal transfer, check mailing, metselspecie delivery, handelsbank wire, or credit card transfer.
Making deposits and withdrawals come at a price, depending on the payment method chosen to transfer funds. The higher the risk of a chargeback from a payment medium, the higher the toverfee. Making a bankgebouw draft or wiring money to the exchange has a lesser risk of a chargeback compared to funding your account with PayPal or a credit/debit card where the funds being transferred can be reversed and returned to the user upon his/hier request to the handelsbank.
Ter addition to transaction fees and funds transfer fees, traders may also be subject to currency conversion fees, depending on the currencies that are accepted by the bitcoin exchange. If a user transfers Canadian dollars to an exchange that only deals te US dollars, the canap or the exchange will convert the CAD to USD for a toverfee. Transacting with an exchange that accepts your local currency is the best way to avoid the FX toverfee.
Foreign exchange spreads are significant measures when transacting ter bitcoin and vary depending on how liquid the bitcoin exchange is. For example, on May 31, 2018, the best bitcoin bid and ask on Openbreken, a bitcoin exchange system, wasgoed XBT/USD Two,314.07 and XBT/USD Two,317.75, respectively. Another online exchange, GDAX, had its best bid and ask period for the same time window spil BTC/USD 2314.99 and BTC/USD 2319.00. Clearly, the FX spread is broader for GDAX, but may not necessarily be so at all times of the day. (Note that the Bitcoin ticker is either XBT or BTC, depending on the exchange).
Note that a bitcoin exchange is different from a bitcoin wallet. While the former offers a toneelpodium through which bitcoin buyers and sellers can transact with each other, the latter is simply a digital storage service for bitcoin holders to store their coins securely. To be more technical, bitcoin wallets store private keys which are used to authorize transactions and access the bitcoin address of a user. Most bitcoin exchanges provide bitcoin wallets for their users, but may charge a toverfee for this service.