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

Bitcoin exchange platforms match buyers with sellers. Just like a traditional stock exchange, traders can opt to buy and market bitcoin by inputting either a market order or a limit order. When a market order is chosen, the trader is authorizing the exchange to trade his coins to get the best available price in the online marketplace.

For instance, on a bitcoin exchange, three coin sellers are asking for BTC/USD 2265.75, BTC/USD 2269.55, and BTC/USD 2270.00. A dealer who initiates a market order to buy bitcoins will have his order filled at the best ask price of 2265.75. If only five bitcoins are available for the best ask and 10 coins are offered for $2269.55, and the dealer wants to purchase 10 at market, his order will be filled with 5 coins @ $2265.75 and the remaining 5 @ $2269.55. .

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

Online bitcoin marketplaces usually designate bitcoin participants as both manufacturers or takers. When a buyer or seller places a limit order, the exchange puts adds it to its order book until the purchase price is matched by another dealer on the other end of the transaction. When the price is matched, the purchaser or seller who place the limit price is referred to as a manufacturer.

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

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

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

Making deposits and withdrawals come at a cost, depending on the payment method chosen to transfer funds. The greater the risk of a chargeback from a payment medium, the greater 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 where 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 fees, traders might also be subject to currency conversion prices, depending on the currencies which are accepted by the bitcoin exchange. In case an individual transfers Canadian dollars to an exchange that only deals in US dollars, the bank or the exchange will convert the CAD to USD for a commission.

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

(Note that the Bitcoin ticker is either 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 i loved this provides a stage through which bitcoin buyers and sellers can transact with each other, the latter is simply a digital storage support for bitcoin holders to store their coins safely. To be more technical, bitcoin pockets store personal keys which are used to authorize transactions and access the bitcoin address of an individual.

Actual exchanges, like MtGox or even Bitstamp, are really only a moderate between dealers. People can place limit orders to purchase / sell bitcoins for a certain cost. The exchange will suit buyers and sellers when conditions of both the purchaser and the seller are met.