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A bitcoin exchange is an electronic marketplace where traders can buy and sell bitcoins using different fiat currencies or altcoins. A bitcoin currency exchange is an online platform that acts as an intermediary between buyers and sellers of the cryptocurrency.

Bitcoin exchange platforms match buyers with sellers. Like a traditional stock exchange, traders can choose to purchase and market 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 deal in the online marketplace.

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 are going to have his order filled at the best ask price of $2265.75. If only five bitcoins are offered for the best ask and 10 coins are available for $2269.55, and the trader wants to buy 10 at market, his order will be filled with 5 coins @ $2265.75 and the remaining 5 @ $2269.55. .

But a trader who thinks that he can buy bitcoins to get a better price could decide on a limit order , say, $2260.10. If a vendor matches his/her ask price with this order or puts a price below this figure, the purchaser will get filled.

Online bitcoin marketplaces usually designate bitcoin participants as either makers or takers. When a purchaser or seller puts a limit order, the exchange puts adds it to its order book until the purchase price is matched by another trader on the other end of this transaction. When the price is matched, the purchaser or seller who place the limit price is known as a maker.

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All bitcoin exchanges have transaction fees which are applied to every completed purchase and sell order completed within the exchange. The commission rate is dependent on the volume of bitcoin transactions that's conducted. For example, bitcoin exchange Poloniex has its own speed ranging from 0 to $ 0.25 percent, GDAX fees range from 0 to 0.30 percent, Krakens try this out fees range from 0 to 0.36%, and Paxful costs 1 percent of the amount of a sale to the vendor but buyers don't get charged. .

To transact in bitcoin on an exchange, an individual must register with the exchange and go through a series of verification processes to authenticate their identity. Once the authentication is successful, an account is opened for the user who then has to transfer funds into this account prior to s/he can purchase coins.

A trader who would like to draw money from his or her account could do so using the options supplied by his exchange which could include a bank transfer, PayPal transfer, check mailing, cash delivery, bank card, or credit card transfer. .

Making deposits and withdrawals come at a cost, depending on the payment method chosen to transfer funds. The higher the chance of a chargeback from a payment medium, the higher the fee. Making a bank draft or wiring money to the exchange includes a lesser risk of a chargeback compared to funding your account with PayPal or a credit/debit card at which the funds being transferred can be reversed and returned to the consumer upon his/her request to the bank. .

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In addition to transaction fees and funds transfer charges, traders might also be subject to currency conversion prices, depending on the currencies which are accepted by the bitcoin exchange. If an individual transfers Canadian dollars to an exchange which only deals in US dollars, the bank or the exchange will convert the CAD to USD for a fee.

Foreign exchange spreads are important measures when transacting in bitcoin and vary depending on how liquid the bitcoin exchange is. For example, on May 31, 2017, the very best bitcoin the original source bidding and ask on Kraken, a bitcoin exchange program, was XBT/USD 2,314.07 and XBT/USD 2,317.75, respectively. Another online exchange, GDAX, had its very best bid and ask period for the exact same time window as BTC/USD 2314.99 and BTC/USD 2319.00.

(Note that the Bitcoin ticker is XBT or BTC, depending on the exchange). .

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Note that a bitcoin exchange is different from a bitcoin wallet. While the former offers a platform by which bitcoin buyers and sellers can transact with each other, the latter is only a digital storage support for bitcoin holders to store their coins securely. To be technical, bitcoin wallets store private keys which are used to authorize transactions and get the bitcoin address of an individual.

Real exchanges, such as MtGox or Bitstamp, are really only a medium between dealers. People can place limit orders to purchase / sell bitcoins for a certain price. The exchange will suit buyers and sellers when conditions of both the purchaser and the seller are met.