Bitcoin’s popularity among investors and traders has fueled the digital economy and influenced the traditional financial system. In 2009, it aimed to serve as a better alternative to banks by facilitating transactions without intermediaries.
This goal has been achieved in just ten years as the cryptocurrency market is now globally recognised. People worldwide have seen this industry’s potential to grow their assets and expand their business reach. To some extent, governments also benefit because it contributes to the overall economy.
However, not everyone who uses Bitcoin gets the same share of profits. Some people invest too little and lack some knowledge of crypto exchanges. As a result, their returns are relatively small.
Compared with the veteran traders, the results are far different from the veteran traders because these people have mastered the game’s rules. This means that knowledge and experience are key factors that would determine the outcome.
For this reason, amateur players should not invest until everything is clear. That’s the basic rule. A good way to start is learning the essential facts about cryptocurrency, such as the Bitcoin exchange, which could offer more profits for the well-informed trader.
The following article will guide you in this line of business.
What Is A Bitcoin Exchange?
Bitcoin exchange is not a new term because it’s been in the cryptocurrency industry since the time Bitcoin was launched to the public in 2009. It’s probably unfamiliar among investors who have not been involved in financial transactions using Bitcoin.
But it’s never too late to learn the subject and enjoy the benefits that it could offer. This digital marketplace allows traders to buy and sell coins using fiat currencies or altcoins. In other words, it’s an online platform that functions as an intermediary between cryptocurrency traders.
A Bitcoin exchange functions like a brokerage; thus, traders can deposit money via bank transfer, wire, and other available mediums. But this service usually comes with fees. For instance, if you want to trade between two different cryptocurrencies, you may have to pay a currency conversion fee, similar to banks, when you trade money from another country. The purchases and sales made on the Bitcoin exchange are based on the same ordering system as existing brokerages. A buyer can limit orders and sell them when a corresponding currency becomes available from the seller.
How Does Bitcoin Exchange Work?
Bitcoin exchange platforms work by matching buyers and sellers. These traders can choose to buy and sell Bitcoin by providing either a market order or a limit order. When a trader selects a market order, authority is given to the exchange to trade the coins for the best available price in the online marketplace. On the other hand, when a limit order is chosen, the trader directs the exchange to trade coins for a price below or above the current bid.
The user’s registration with the exchange is the requirement to participate in a Bitcoin exchange. In the process, interested traders will have to provide information to verify and authenticate their identities. Once the authentication is successful, an account will be created, and the user can begin transferring funds and doing business on the platform.
However, traders should understand that different exchanges have different payment methods that can be used for depositing funds, including direct bank transfers, bank wires, and credit or debit cards, among others. Also, withdrawing money from the user’s account could be made through the options provided by their exchanges, such as bank transfer, PayPal, and bank wires.
When it comes to smooth transfers, an array of trading tools, and a trusted reputation, many traders opt for reliable or well-known platforms. The official Bitcoin Profit website, for example, is especially popular for newcomers seeking a beginner-friendly entry into crypto trading.
Special Considerations in Bitcoin Exchange
Bitcoin exchange offers promising returns to various traders. However, there are special considerations to bear in mind before joining this platform. They are briefly explained below for your advantage.
- Makers and Takers – when you join the online Bitcoin marketplaces, you’ll be designated as either a maker or a taker. A maker is the one who places a limit order, while the taker is the one who sets a market order that can be filled.
- Fees – all Bitcoin exchanges are subject to transaction fees for each completed buy and sell order. The rate depends on the volume of transactions made in the network. Currency conversion fees may also be imposed depending on the currencies being used.
- Bitcoin Wallets – some people confuse the two, but Bitcoin exchange is different from Bitcoin wallets. The former is an online platform where traders can buy and sell Bitcoin, while the latter is used to store private keys to access a user’s address.
Remember that the Bitcoin exchange is one of the many crypto exchanges today. These platforms generally oversee the trading and valuing of digital currencies and are considered an integral part of the industry.
They are also categorised into centralised and decentralised exchanges, but their function is almost the same—the difference between the two lies in how transactions are carried out.
Likewise, given the lack of regulation in many countries, there are no rules about setting up cryptocurrency exchanges. But more commonly, the most popular platforms are preferred because they use powerful servers and security features. Today, there are at least 259 exchange platforms where you can trade different cryptocurrencies.
Bitcoin and other cryptocurrencies are inherently volatile, meaning their prices can spike or plunge without any apparent indicators. Only factors could provide a basis for investors to make valid predictions.
The same holds true in Bitcoin exchange, but properly equipped traders usually have an edge in achieving favourable results.
Michael C Vang is a passionate blogger. He has been blogging since 2013 on a variety of topics. He is committed to creating informative and engaging content that helps readers learn more about everything.