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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 acts 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 market bitcoin by inputting either a market order or a limit order. When a market order is chosen, the trader will be authorizing the exchange to exchange his coins for the best available price in the online market.

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 dealer who initiates a market order to get bitcoins will have his order filled at the best ask price of $2265.75. If only five bitcoins are available for the best request and 10 coins are available for $2269.55, and the dealer wants to buy 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 to get a better price could decide on a limit order , say, $2260.10. If a seller matches his/her request price with this order or sets 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 cost is matched, the purchaser or seller that place the limit price is known as a manufacturer.

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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 commission rate is dependent on the volume of bitcoin transactions that's 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 percent, 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 set of verification procedures 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 s/he can buy coins.

A trader who'd like to draw money from his or her account could do so using the options provided by his exchange that could include a bank transfer, PayPal transfer, check mailing, money 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 chance of a chargeback in the payment medium, the higher the fee. Making a bank draft or wiring money to the exchange includes a lesser chance 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 petition to the bank. .

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In addition to transaction fees and funds transfer fees, traders may also be subject to currency conversion fees, depending on the currencies which are approved by the bitcoin exchange. In case a user 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 very best bitcoin bid and ask on Kraken, a bitcoin exchange program, 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 exact 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 platform through which bitcoin buyers and sellers can transact with one another, the latter is only a digital storage support helpful hints for bitcoin holders to store their coins securely. To be more technical, bitcoin pockets store personal keys that are used to authorize transactions and access the bitcoin address of a user.

Real exchanges, such as MtGox or even Bitstamp, are actually just a moderate between traders. People can place limit orders to purchase / sell bitcoins for a certain price. The exchange will suit buyers and sellers when conditions of both the purchaser and the seller are fulfilled.