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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 their cryptocurrency.

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

As an 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 dealer who initiates a market order to get bitcoins are going to 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 available for $2269.55, and the dealer wants to purchase 10 at market, his order will be filled up with 5 coins @ $2265.75 and the remaining 5 @ $2269.55. .

But a trader who thinks he can buy bitcoins for a better price could set a limit order , say, $2260.10. If a vendor matches his/her request price with this order or sets a price below this figure, the buyer will get filled.

Online bitcoin marketplaces usually designate bitcoin participants as either makers or takers. When a buyer or seller places a limit order, the exchange places 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 buyer or seller that place the limit price is referred to as a maker.

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All of bitcoin exchanges have transaction fees which are applied to each completed purchase and sell order completed within the exchange. The fee rate is dependent on the volume of bitcoin transactions that's conducted. By way of example, bitcoin exchange Poloniex has its speed ranging from 0 to 0.25 percent, GDAX prices range from 0 to 0.30%, Krakens prices range from 0 to 0.36 percent, and Paxful charges 1% of the amount of a sale to the seller Bitcoin Mining Card but buyers don't get billed. .

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

A trader who would like to draw money from her or his account could do this using the options provided 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 risk of a chargeback in the payment medium, the greater the fee. Making a bank draft or wiring money to the exchange has 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 user 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 fees, depending on the currencies that are approved from the bitcoin exchange. In case a user 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 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 time 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 provides a stage by which bitcoin buyers and sellers can transact with one another, the latter is simply a digital storage support for bitcoin holders to store their coins securely. To be more technical, bitcoin wallets store private keys which are used to authorize transactions and access the bitcoin address of an individual.

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