A cryptocurrency exchange is a digital marketplace where traders can buy and sell cryptocurrency using different fiat currencies or cryptocurrencies. It is an online platform that acts as an intermediary between buyers and sellers of cryptocurrencies just like the stock markets.
Market or limit order
Cryptocurrency exchange platforms match buyers with sellers. Like a traditional stock exchange, traders can opt to buy and sell their crypto by inputting either a market order or a limit order. A market order authorizes the exchange to trade the coins for the best available price in the online marketplace. With a limit order, the trader tells the exchange to trade coins for a price below the current ask price or above the current bid, depending on whether they are buying or selling.
Almost all exchanges have transaction fees that are applied to each completed buy and sell order carried out within the exchange. The fee differs. For example, exchange Poloniex has its rate ranging from 0 to 0.25%, GDAX fees range from 0 to 0.30%, Kraken’s fees range from 0 to 0.36%, and Paxful charges 1% of the amount of a sale to the seller but buyers don’t get charged.
Know your customer (KYC)
To transact in crypto on an exchange, a user has to 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 has to transfer funds into this account before they can buy coins. Different exchanges have different payment methods that can be used for depositing funds including bank wires, direct bank transfers, credit or debit cards, bank drafts, money orders, and even gift cards.
A trader who would like to withdraw money from his or her account could do so using the options provided by his exchange which could include a bank transfer, PayPal transfer, check mailing, cash delivery, bank wire, or credit card transfer.
Exchanges per region
In the early stages there were only a few cryptocurrency exchanges. But the last couple of years a lot of different exchanges arose. Most regions in the world now have their own crypto exchange(s). We will list the exchanges with the most volume per region below.
Binance was founded in July 2017 by Changpeng Zhao and is currently the worlds leading exchange for cryptocurrencies. They offer a wide range of different cryptocurrencies so, it is your go to place for buying altcoins. Binance has a certified matching engine which is capable of processing 1,400,000 orders per second, making it one of the fastest exchange in the market today.
The underlying Binance platform has been deployed on 30+ exchanges already. It supports all devices and offers support in multiple languages. We always advise to store your coins on your personal wallet instead of at any exchange but so far funds has always been SAFU. To create an account at Binance click here.Kucoin was founded by a team of blockchain enthusiast with a background at companies such as Ant Financial, Jianbang Communication, and GF Securities. Kucoin is relatively new in the world of cryptocurrency exchanges, but the exchange has been in the works for years. The exchange has a very clean and modern layout throughout the website and this extends to the markets overview screen where you can see the available trading pairs.
Trading fees are 0.1 percent, based on the asset that you purchase. The fees for a withdrawal depend on the cryptocurrency in question and deposits are free. Kucoin tends to be quick in listing new assets, sometimes offering a change to get in before the Binance boom. At time of writing, the daily volume is 3000 BTC ranking Kucoin at place 51 of all exchanges at coinmarketcap. To create an account at Kucoin click here.Founded by former bankers Arthur Hayes(Citi), Samuel Reed and Ben Delo (J.P. Morgan) in 2014, BitMEX is a trading platform operating in Hong Kong and registered in the Seychelles. BitMEX only accepts deposits through Bitcoin, which can then be used to purchase a variety of other cryptocurrencies.
BitMEX allows traders to leverage their position. With leverage a trader has the ability to place orders bigger than the users’ existing balance. This could lead to a higher profit, but also a higher loss in comparison to normal trading. Trading in such conditions is called “Margin Trading”.
To register an account at BitMex click here.
Huobi was founded in Sep 2013, they have 5 years of experience in digital asset financial services. Huobi has local trading service centers in many cities throughout Asia (Hong Kong, Seoul, Singapore and Tokyo). Their Platform is accessible by multiple platforms (iOS, Android, Windows and Mac). To create an account at Huobi click here.
Bithumb is a South Korean exchange founded in June 2016. The exchange is part of BTC KoreaCom Corporation. They mother company has around 280 employees and is located at 17, Teheran-ro 16-gil, Gangnam-gu, Seoul, Korea (Dongwoo Building). Bithumb is the largest Korean exchange and the website is available in multiple languages allowing all traders from all over the world to trade there. To create an account at Bithumb click here.
OKEx was Founded in January 2014. They have gained millions of dollars’ worth of investments from leading enterprises such as VenturesLab. OKEx provides hundreds of token & futures trading pairs. It is one of the top digital asset exchanges by trading volume, serving millions of users in over 100 countries. To create an account at OKEx click here.Bitfinex has emerged as one of the world’s leading bitcoin exchanges. Based in Hong Kong, the company first entered the market in October 2012, and has enjoyed steady expansion ever since.Today, Bitfinex is a trusted source of cryptocurrency trading, with daily volumes well north of 200 million USD. In addition to bitcoin, Bitfinex provides access to the world’s leading altcoins.
Bitfinex offers leveraged margin trading through a peer-to-peer funding market, allowing users to securely trade with up to 3.3x leverage. To open an account at Bitfinex one needs atleast 10.000 USD of equity which makes the exchange unavailable for most people who just joined the game. Click here to register an account at Bitfinex.
Bitstamp was founded by Damijan Merlak and Nejc Kodrič in 2011. After starting out in Slovenia, Bitstamp branched out by opening a UK office in 2013 and one in Luxembourg in 2016. Currently they also have a New York office.
Bitstamp’s fees depend on the volume of the trade, they start at 0.25% and decrease when buying/selling a larger volumes. Bitstamp currently handles over $45m worth of cryptocurrency trades a day, and is one of the top exchanges for BTC/EUR, ETH/EUR trading pairs. To create an account at Bitstamp click here.
Information about the Litebit.eu exchange. To register an account at Litebit.eu click here.
Information about the Coinbase exchange. To register an account at Coinbase click here.
Bittrex is a North American exchange founded by Bill Shihara, who worked as a security engineer at Amazon and Blackberry before creating the exchange. Shihara was motivated by the security breaches and reliability issues users where facing with the exchanges at that time.
Bittrex has been in operation since 2014 and up until this point, has been free of any reported hacks. Bittrex currently generates a 24 hour trading volume of just over $40M. All trades on the exchange have a 0.25% commission and withdrawal fees vary depending on the asset.
Bittrex offers a wide range of cryptocurrencies tradeable against BTC, ETH and even some USD pairings. To register an account at Bittrex click here.
Information about the Poloniex exchange. To register an account at Poloniex click here.
Information about the Kraken exchange. To register an account at Kraken click here.
Information about the Cryptopia exchange. To register an account at cryptopia click here.
Arbitrage is the act of buying and selling on different exchanges to capitalize on the difference in the spread between exchanges. Arbitrage opportunities occur due to differences in exchange reputation, regional community coin preferences and ease of bank funding. Take note that fees, limits and prices could change anytime when you are transferring your coins between exchanges, especially during volatile times.
Exchanges and private keys
When holding your funds on an exchange you are basically trusting the exchange with your private keys since they control them. As you might understand this is not ideal. Imagine what happens with your funds if the exchange gets hacked or worse decides to run of with your funds. To make sure this never happens one should always have control over their private keys. And keep most of their funds in some sort of wallet as described in the wallets section.