Cryptocurrency exchanges are platforms that enable users to buy and sell digital assets and crypto currencies like Bitcoin and Ether. Crypto exchanges are platforms that users can exchange digital currencies for other assets, including cryptocurrencies like Bitcoin, Ethereum, Litecoin, and common currencies such as dollars and euros. Some exchanges only trade cryptocurrencies; others let users exchange fiat currencies, such as dollars, for cryptocurrencies such as bitcoin.
Centralized exchanges facilitate a start in crypto-trading, by allowing users to directly convert their fiat currencies, such as dollars, to cryptocurrencies. You can use the exchanges to exchange one cryptocurrency for another – converting bitcoin into litecoin, for instance – or buy cryptocurrency using conventional currencies, such as dollars. Cryptocurrency exchanges typically allow users to deposit and withdraw funds either in fiat (such as the U.S. Dollar) or cryptocurrency, purchase cryptocurrency using the U.S. Dollar or another currency, exchange one cryptocurrency for another, send cryptocurrency to another person (or company), and sell cryptocurrency for the U.S. dollar.
Platforms For Crypto Exchanges
Not all cryptocurrencies can trade directly against each other, and some platforms have more trading pairs than others. Some platforms might also permit trading cryptocurrencies to cryptocurrencies, and some do not. Alongside cryptocurrency exchanges and brokerages such as Robinhood, some payment services let users buy and sell crypto, though your options will be more limited with tokens, and you usually will not be able to transfer cryptocurrency from an account into a private wallet.
Users can either deposit money to an exchange to purchase crypto, or they can put in crypto of their own to exchange it for another currency, known as crypto-to-crypto trading. Many cryptocurrency exchanges run their own wallets, so users can begin trading cryptocurrencies once they open an account, without having to worry about getting their own digital wallet.
A crypto exchange also offers storage and custodial options for users who want to securely secure their crypto assets from theft and hacking. Individuals use on-platform storage who believe that they may soon wish to trade their cryptocurrency, or wish to participate in the exchanges participation and rewards programs. Private companies own centralized exchanges, and provide investors with a platform for trading crypto.
Centralized or Decentralized?
Exchanges may be centralized or decentralized in how they handle and exchange cryptocurrencies. According to Ethan Vera, centralized exchanges such as Coinbase have regulations, are user-friendly, trustworthy, and enable digital-to-fiat exchanges (i.e., dollars).
Decentralized exchanges do not allow trading of fiat currencies for digital, making them less convenient for users who do not hold any cryptocurrency yet. Due to their nature of being centralized exchanges, which enable peer-to-peer cryptocurrency trading, decentralized exchanges protect users from market manipulation, protecting users from false trades, and washed tradingWash tradingWash trading — also called round-trip trading — is an illegal practice in which investors purchase and sell the same financial instruments simultaneously. A cryptocurrency exchange is an online market that is borderline illegal, where users can trade one type of digital asset for another, according to the market value of said asset. When trading in BTC, one may trade into other cryptos, another way to sell BTC.
Converting Cryptocurrency
You can also convert cryptocurrency back to U.S. dollars or another currency at the exchange, either leaving it as cash in your account (if you wish to exchange it back to cryptocurrency at a later date) or withdrawing it into a normal bank account. If you already have cryptocurrency, you can move it to your account from your digital wallet or other platform, and then use that for trading. You can hold it in an exchange or a digital wallet, such as one of the crypto wallets described in our blog post Which Cryptocurrency Wallet To Choose. For most people, the easiest way to obtain cryptocurrency is by purchasing it, either on an exchange or by another user.
Once you have decided that you want to purchase some bitcoin, ether, or some other cryptocurrency, you will have to set up an account with a cryptocurrency exchange platform in order to trade your dollars (or another currency) for digital assets. If you are looking to trade in a particular cryptocurrency, it is best to verify the exchange supports the cryptocurrency you are looking to trade in before signing up.
Exchange Features
If youare planning on buying, selling, or trading your cryptocurrency, the exchange you pick needs to have sufficient trading volumes to make sure that your holdings are relatively liquid, meaning that you can sell them whenever you like. With whatever crypto coins you are considering buying from the exchange, trade only at cash values that you are willing to lose. If youare planning on trading your cryptocurrency for dollars, itas important to make sure that the exchange youare using offers support in U.S. dollars.
An exchange doesnat allow you to borrow money for trading cryptocurrency for the time being, and they donat offer futures (legal contracts that give you a choice of exchanging the security at a certain price at an imminent date). Like CEX.IO, the exchange uses a set fee schedule for makers/takers that is based on your 30 days trading volume (the number of cryptocurrencies you exchanged in the last 30 days).
The exchange also has a limited amount of crypto assets (see the complete list of supported assets here). Not every exchange offers each of the thousands of cryptocurrencies out there.
Pure Play Crypto Exchanges
Pure-play cryptocurrency exchanges do not offer you access to the major assets such as stocks and bonds, but generally they offer a far better selection of cryptocurrencies, as well as a greater number of crypto storage options within their platforms. For more experienced users, there are decentralized exchanges, which may charge lower fees than those charged by centralized platforms.
Some 99% of cryptocurrency transactions are powered by centralized exchanges, suggesting they are responsible for a large portion of trading volumesVolume of TradeVolume of trade, also known as trade volumes, refers to the amount of shares or contracts belonging to a given security traded daily. An exchange is the middleman between the buyer and seller of bitcoin, most famously, or any other cryptocurrency.