Crypto Exchanges

Cryptocurrency exchanges are market places for continuous trading of bitcoin and altcoins, with prices changing every second. These are literally markets that never sleep!

Crypto exchanges are similar to OTC (Over The Counter) Markets and traditionally there are two types of buy and sell order: ‘limit’ orders and ‘market’ orders. The cryptocurrency exchange software matches these with traders.
  • Limit Orders: these allow traders to buy cryptocurrency below the current price and sell above the current price. These orders are only executed once another user (or counterparty) accepts them.
  • Market Orders: these orders find the best matching limit order or prevailing price at the time of purchase or sale.

Bitcoin exchanges
Crypto exchanges are 24 hour continuous trading, with prices changing every second

Decentralised Exchanges

The evolution of traditional cryptocurrency exchanges is leading to a new wave of decentralised exchanges, which do not possess order books. This is where buy and sell orders are matched peer to peer, without fees. These decentralised exchanges are financed from tokens which must be purchased before trading or by multi-signature escrow accounts.

There are still many advantages however in using traditional cryptocurrency exchanges, most prominently ease of use. However technically with some exchanges (especially those in jurisdictions without strong compliance oversight), coins are not owned by the customer until they are withdrawn so trust is being placed in a third party. Against this, traditional cryptocurrency exchanges possess the benefit of higher trading volumes. This means higher liquidity than the decentralised models.

Choosing an Exchange

Be aware there are no official cryptocurrency prices, as they vary from exchange to exchange. It is a good idea therefore to check the average price of bitcoin and how that compares with each exchange before trading. Also, perform your own due diligence before choosing an exchange and also open a bitcoin wallet so coins can be transferred out of the exchange if needed. Factors to take into account when choosing an exchange include:
  • Fees: what is paid for transactions?
  • Trading Volume: lack of trading volume leads to poor liquidity and volatile prices.
  • Location: this should be considered in regards to the regulatory oversight of the exchange and the laws to be complied with.
  • Trading Opportunity: how many cryptocurrencies are supported on the exchange?
  • Customer Support: how responsive is the exchange to queries?

Some of the well-known cryptocurrency exchanges include:
For more information on cryptocurrency exchanges, see bitcoin.org/en/exchanges.

Happy Trading!

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