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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 serves as an intermediary between buyers and sellers of all the cryptocurrency.

Bitcoin exchange programs match buyers with sellers. Like a traditional stock exchange, traders can opt to buy 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 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 trader 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 offered 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 with 5 coins @ $2265.75 and the remaining 5 @ $2269.55. .

However, a trader who thinks that he can get bitcoins for a better price could set a limit order for, say, $2260.10. If a seller matches his/her ask price with this purchase or sets a price below this figure, the purchaser will get filled.

Online bitcoin marketplaces usually designate bitcoin participants as either manufacturers 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 opposite end of the transaction. When the price is matched, the purchaser or seller who place the limit cost is known as a manufacturer.

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All bitcoin exchanges have transaction fees that are applied to every finished buy and sell order completed within the exchange. The fee rate is dependent on the volume of bitcoin transactions that is conducted. By way of 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 fees range from 0 to 0.36 percent, and Paxful charges 1 percent of the amount of a sale to the seller but buyers don't get billed. .

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

A dealer who'd like to withdraw money from her or his account could do so using the options provided 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 higher the chance of a chargeback in the payment medium, the higher 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 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 fees, depending on the currencies that are approved from the bitcoin exchange. In case an individual transfers Canadian bucks 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 best bitcoin bidding 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 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 platform by which bitcoin buyers and sellers can transact with one another, the latter is only 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 speech of an individual.

Real exchanges, such as MtGox or Bitstamp, are really only a moderate this between traders. Folks can place limit orders to buy / sell bitcoins for a certain cost. The exchange will match buyers and sellers when conditions of the buyer and the seller are fulfilled.