Reviews And Guide to Bitcoin Exchanges 2020
Whether you are well-versed in BTC or are a fresh user, using this cryptocurrency will often deal with the concept of Bitcoin exchanges. These trading platforms are virtual marketplaces where users can buy and sell Bitcoins using a built-in framework. Legacy exchanges are merely a method by which people sell and receive stocks or other goods.
In Bitcoin exchanges, individuals can place orders for coins or set prices to sell their on-hand currency. When a buyer and seller are matched via the exchange, the site facilitates the transaction as a mediator between the two parties. Here, I will provide the most useful and relevant information regarding Bitcoin exchanges to broaden your knowledge of these platforms.
How Do Bitcoin Exchanges Work?
Bitcoin marketplaces are much like banks. The first step is to deposit money into your online account. Using this currency, one can buy and sell cryptocurrencies using the site’s framework. Risk due to one party being fraudulent is mitigated because the exchange acts as a medium, provided the exchange is trustworthy. On any trading platform, you will see many components.
The most prominent, usually at the center of attention, is the graph. The graph depicts price alterations for a cryptocurrency over time. It shows the spread between the sell orders (otherwise known as ask prices) and the purchase orders (bid prices) simultaneously. Below, I’ll examine more closely how cryptocurrency exchanges work.
Order Book
The order book is a real-time numerical depiction of buy and sell orders. At any moment, there is a price higher than someone would like to buy, and a price lower than someone would like to sell. The order book is a complete record of these orders, and is used to gain insight into what prices participants are actively choosing.
Maker-Taker Model
The Maker-Taker Model is a simple framework that many exchanges use. In order for the exchange to be profitable, the company takes fees on every transaction. This model charges the person who places an offer into the order book (the “Maker”) a low fee, while charging the user fulfilling that order (the “Taker) more steeply.
CFD Trading
Some brokers trade CFD (contract for differences). Essentially, these contracts speculate on the price of a moving stock, or in this case, cryptocurrency. These brokers do not constitute a stock exchange, but the goals are the same, as profits and losses are made on differences in the market. Although these brokers are often more convenient, giving proper attention to the moving average price is advisable, as exchanges with more liquidity typically have lower prices.
Types
There are a few types of exchanges on the web, each with their own features. We have organized them based on locality, centralization, and trading functions. Let’s have a more magnified look at these exchanges below.
International & National-Level
International exchanges accept users from all backgrounds and locations. So, people around the globe have a chance to use their services. These marketplaces, such as Kraken and Bitstamp, accept money in a variety of currencies and are free to exchange at will. Some of them can also offer crypto to crypto pairs as well.
On the flip side, nation-based exchanges exist. These sites have regulations on what users may join in on the action. For example, trading place Gemini can only be accessed by residents in the US, while South Koreans can only access exchanges such as Bithumb or Korkit. These platforms obtain the same features as international ones.
Centralized & Decentralized
Centralized exchanges are user-friendly and offer more advanced trading options with great market liquidity. Despite this, they can be more of a risk to users. If the site gets hacked, such as the infamous incident of Mt. Gox in June 2011, participants could be out lots of money. Additionally, the exchange controls all funds goings in and out of their system, and the entire process is not anonymous.
Decentralized markets are more in-line with what the cryptocurrency movement was initially about. These exchanges are not reliant on a service to facilitate trading. Instead, trades only involve the two parties required. This is ideal for some because the individuals control their own money in an anonymous world with almost no hacking potential. While more discreet, this method is more complicated and lacks advanced features for trading.
Margin Trading Bitcoin Exchanges
Bitcoin margin trading, otherwise known as trading on margin, is an option for users who want to trade with more capital. Essentially, the process involves borrowing money from a broker to trade with. This process allows the user to trade more than with just their own funds and subsequently earn more in profit. Below, I’ll provide a list of certain exchanges that allow margin trading, their leverages, and any fees associated.
Trading Platforms |
Leverage |
Fees |
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Up to 3x |
Open fee: 0.20%
Rollover fee: 0.01% |
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Up to 5x |
Long position: 0.04%/day
Short position: 0.05%/day |
Visit Site |
Platforms with Exchanged Traded Fund
The Bitcoin ETF, or Exchanged Traded Fund, is a relatively new fund that copies Bitcoin’s current market price. This allows big market players to participate in the action, with authorities such as CME and CBOE offering this ETF. Additionally, a Bitcoin fund is available. The Bitcoin Investment Trust (GBTC) was created to record the price of Bitcoin and appreciates based on that fluctuating number.
Bitcoin Deposit & Withdraw Methods
There are a ton of methods to depositing and withdrawing both Bitcoin and local currencies from exchanges. These include everything from the near-instant, online variety to the slower, less restricted modes. Users appreciate the variety, and so we will list the most popular ones below.
Credit and Debit Cards
Credit and Debit cards are among the most used forms of depositing and withdrawal. All one needs to do is to navigate to the credit/debit card deposit function on their exchange of choice. After entering their information and an amount, the money will automatically be transferred from their card account to the exchange.
This process time can vary based on card (mastercard, Visa, etc) and exchange. In some circumstances the process takes minutes, while in some exchanges the process may take days. This method is still one of the best ways to purchase BTC.
Cash
Bitcoins are surprisingly fluid to transfer with cash. The first step is to search for a seller who accepts cash as payment. Popular methods of searching for a cash seller are through websites such as LocalBitcoins.com. Then, decide how many coins you would like to purchase. The other party will then send you their bank account information.
After you have deposited money into their account, you will be required to upload the transaction details. The seller will then send you BTC via your public key. Transfer times vary with cryptocurrency and can take anywhere from half an hour to an entire business day. BTC fees are currently very steep (for example, a $13 fee on a $10 purchase) as the blockchain becomes more congested, so the person engaging the BTC sale must be wary of this, especially for smaller amounts.
Bitcoin ATMs are also an option that have popped up all over the globe recently. One can deposit cash into the ATM to receive BTC to their personal account, or conversely sell BTC to the ATM to receive cash. This method, however, includes a high premium cost for the convenience.
Wire Transfer
The Wire transfer is a convenient method to receive or deposit money into a Bitcoin exchange. Using your IBAN number, a code to help banks identify and authorize transactions, and your SWIFT code, a number which indicates your bank account, and any other pertinent personal information, you can load money onto an exchange in 24 hours.
This is comparable to such methods as the ACH in the United States which can take weeks. Fees on Wire Transfers vary between exchanges, but are usually low.
E-Wallets
Purchasing Bitcoin with online wallets such as Paypal, Neteller, or Skrill is convenient and easy. Most exchanges will have an option to add E-wallets as a payment method. There are typically no fees associated with E-wallets, but this may vary by exchange. Additionally, since there are no physical banks involved, transaction times for E-wallets can take 1-3 days, or even less.
Legality Aspect of Bitcoin Exchanges
Many people wonder if Bitcoins or other cryptocurrencies are illegal. Others wonder if that fact is even important in a decentralized economy. However, for the average user, the legality aspect of Bitcoin is very important. Trading in a country where cryptocurrency activity is legal and regulated is the most safe and secure way to trade.
Those countries with unregulated exchanges are more hazardous, because there is no guarantee your money is safe. I’ve made a research for you, so below is a table detailing the legality of bitcoin and any available exchange regulation data.
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Compliance Requirements
There are a few basic types of Bitcoin exchanges when it comes to verifying user identity: those who verify users, and those that do not. The first kind of exchange is regulated. These exchanges include the US market Gdax operated under Coinbase, which verifies all US residents with their driver’s license and other personal information. This makes it difficult for thieves to enter the marketplace without being exposed.
The second kind of site is hazardous to the user, but makes you anonymous and ensures privacy. These unregulated trading places are often illegal or have connections with money laundering, such as Coin.mx, the operators of which were convicted on criminal charges. This type is not secure, so I suggest to avoid it.
The final type of exchange asks for identity verification up front, but their checking process is not thorough or sincere, which means would-be fraudsters aren’t controlled in the market. These exchanges are not safe and are not recommended.
It is up to the individual to decide what risk factors they are okay with, but most prefer the authorized exchanges that operate within their territory, if any are available. It is also worth noting that many exchanges do not accept PayPal. This is because PayPal has a refund option, and platforms would be taking on a huge risk with criminals scamming the system with BTC-to-fiat transactions.
How to Choose the Best Exchange Platform
It is in your best interest to not pass over these next points. The security of your money depends on how well you choose your exchange. What should be prioritized when choosing an exchange? Below are the top 5 things to consider when you begin trading. Here I have some steps that users better not skip, because safety of their money depends on these aspects. So, what should users look at for choosing the right exchange?
1. Ease of Use
Usability is a prime aspect for those new to the scene. Take a look at the interface. Are the graphs simple to decipher? Are the fees and coin prices readily accessible? Are the payment methods available to you? You want an exchange that will not be a hassle to use or figure out.
2. Safety of Platform
Do your due diligence in researching your platform. Do they have good reviews? Ensure that you are getting actual Bitcoins for your money, not similar forks such as Bitcoin Gold or Bitcoin Cash. You may consider contacting users of the exchange to get their feedback. Check the site’s policies on withdrawals and deposits so you know what to expect—nothing is worse than going in blind and getting burned.
3. Price of BTC
Many exchanges will charge a premium for Bitcoin. If the exchange price seems high, look in another direction for your market of choice. Similarly, if the price of BTC seems too low, question the exchange’s motives. How could they afford to sell the coin at such a low price? Look at the general price in the market and be sure your chosen exchange is within a few percent points of that median price.
4. Fees
Examine the fee structure for each exchange you consider. This goes for two aspects: Deposit / Withdrawal fees and Trading fees. Every reputable website has clearly labeled sections where they point out fees. If you plan to make a lot of deposits and withdrawals, consider going with an exchange that won’t hurt your wallet on that front. If you want to make lots of trades, go for the lowest trading fee exchange around.
5. Trading Volume
Volume is how many units of Bitcoin are bought and sold through that exchange in a 24-hour period. A high volume is indicative of an exchange that is trustworthy and closer to the average price than other markets. A low volume can result in volatility, and is an indicator that the site does not get a lot of traffic. This can mean the place is not reputable.
FAQ
1. What Are The Main Steps of Buying BTC on an Exchange Platform?
The first step is to choose your platform by researching it. Once chosen, create an account with the website, go through any verification processes, and add a payment method. After this, you’ll need to deposit your local currency to your account. When the money appears in your wallet, you can begin purchasing Bitcoin on the exchange, trading, and withdrawing amounts as you see fit.
2. Is It Safe to Store Purchased Bitcoins in the Exchange?
While regulated exchanges are typically more secure, leaving your coins on one isn’t usually a good idea. Consider investing in a hardware wallet or a paper wallet. These methods are immune to hackers.
3. How to Transfer Bitcoin Into Real Money?
The most obvious method is to trade them for cash on the exchange and wire it directly to your bank account. Other ways include using a Bitcoin ATM, trading for cash using LocalBitcoins, or selling directly to another user.
4. What is an Arbitration Process?
The Arbitration Process is the method by which traders use the price difference between exchanges to earn money. For example, if one exchange lists the average price of Bitcoin at €12,500 and a different one lists it at €12,600, a user could purchase at the lower priced exchange and sell at the higher priced marketplace. The net profit would be €100.
Exchange Rates
The exchange rate is the amount of Bitcoin you can receive for a certain amount in your local currency. Users don’t need to purchase an entire bitcoin, but can purchase increments as small as 0.001 of a coin. For example, at current prices, 0.01 BTC would exchange to 143 USD. Below, we’ll look at the demanding questions concerning exchange rates.
Factors That Most Affect Bitcoin Exchange Price
In some way, every user affects the aggregate Bitcoin price. Each time someone buys, the price increases slightly. Conversely, every sale lowers the price. Although each of these corrections is small, thousands of buys or sells can dramatically shape the price. But this is not a the main thing, which influences BTC value.
Additionally, investors and gamblers have an affect on Bitcoin’s going rate. Investor’s will dump loads of money into the coin long-term, which will increase the price. Stock gamblers, who have access to a great amount of funds, can buy and sell great amounts of Bitcoin to shift the price. However, it’s not the last point.
Global events and powers can also shape the market. If a nation decides to ban the exchange of Bitcoin, or a marketplace is hacked, or some criminal scheme is uncovered which utilizes the cryptocurrency, the price will plummet. Similarly, global tensions such as wars or natural disasters can impact the coin.
Most recently, CME launched Bitcoin Futures, an exchange dedicated to the cryptocurrency. This has led to more companies trading large quantities. Speculation and shorting in the market will correct and shift the price on a daily basis.
Growth Stats and Market Forces
Bitcoin has grown exponentially over the years. In May of 2016, the coin was worth just $450. By the same time in 2017, the coin was worth over four times that amount. Today, the coin is worth around $14,000 or even more. But anyone who thinks Bitcoin’s growth has been a steady climb are anything but correct.
The market around Bitcoin is popularly described as volatile and with good reason. Seemingly at random, the price can lose half of its value overnight, such as in early January 2017 where the price plummeted by 30% in a week. However, certain forces have promulgated the rise and fall of the price. Both the events of the government seizure of Silk Road and the calamity of Mt.
Gox affected the price negatively. Access, on the other hand, such as new exchanges opening, and more marketing campaigns being deployed have spread interest in Bitcoin, driving the price to current heights. In the year of 2017 alone, Bitcoin’s price multiplied by 15.