Put simply, a Bitcoin or Cryptocurrency exchange is a place to buy and sell either Bitcoin, or one of the many different Cryptocurrencies known as ‘Altcoins’. Similar to stock exchanges or Foreign Currency Exchanges, these platforms provide users with access to the markets and a place to trade their assets. Anyone can buy or sell, as they please, all in exchange for a small transaction fee.
How do I buy Bitcoin?
Each exchange is similar in many ways to a more traditional currency or stock exchange platform. The major difference being that those platforms cannot access or offer Bitcoin and it’s wide range of cryptocurrency cousins (Altcoins), whereas these exchanges can.
In most cases these platforms are now well established, and increasingly sophisticated. They tend to be backed by larger financial institutions or venture capital. They are increasingly well versed in the very latest security protocols.
A place to ‘view the market’ and buy-in
What they offer is a secure place to buy and sell your Bitcoin (or other Altcoins). They do this by providing a simple exchange interface, through which you can ‘view the market’. On a cryptocurrency exchange you will also find some key market data. It’s typical to see recent price data in the form of graphs and trend lines. You will also see a record and frequently updated tracker showing the current ‘Bid’ and ‘Ask’ prices, and options to set the price at which you want to make your own trade(s).
Getting started with a Crypto Exchange
Setting yourself up with an account on one of these exchanges is relatively straightforward and simple. However with increased security concerns around Cryptocurrencies, they do tend to have a few extra steps, which can sometimes feel a little laborious. In general though, it’s not too dissimilar from setting up a new Paypal account. Indeed on some Cryptocurrency exchanges you can even deposit and send money to your exchange wallet, from your Paypal account.
Your ‘exchange wallet’ is basically your online fund account. It contains any fiat currency ($USD or #GBP for example) which you have deposited, and any amounts of Bitcoin or Altcoins which you also currently hold. There are a number of other ways to first move your money onto a Cryptocurrency exchange and fund your wallet. These include linking your bank account or making a Credit or Debit card payment. Many exchanges also offer SEPA or SWIFT methods of international bank transfer.
Typically this is where things tend to feel a little slower and involved than most mainstream transactions. If you do make an international bank transfer to a Cryptocurrency exchange, your deposits can take a few working days to process before they then appear in your exchange wallet. This can be a bit disconcerting for the everyday consumer who is used to sending money online and seeing the funds move quickly from one account to another. It can also be particularly frustrating if you want to move quickly to ‘buy into’ the market at the right time, but then find that your funds aren’t available for a few days.
This might all be considered the ‘cost of doing trade’ with the Bitcoin ecosystem at the minute though.
Bitcoin and the wider Cryptocurrency ecosystem is still in its relative infancy. Because of that, and people’s heightened fear of security issues, it can unfortunately take longer to get setup and actually get your money in. often the quickest way to enter the Bitcoin market and buy-in, is to make a Credit or debit card purchase direct with the exchange. This is quick, although the drawback is that a lot of exchanges will charge a higher transaction fee for this, and you’ll also buy your Bitcoin or Altcoins at the ‘market average’ rate. You may well have been able to access more favourable prices by using the exchange platform and placing a bid order yourself.
Many exchanges are now making huge efforts to offer superior levels of service and security. As with any other type of currency and financial service provider, they also have to combat the issue of money laundering. This has all mean that a lot of exchanges will now go to great lengths to verify your identity at point of account setup. They will typically ask for digital copies of your passport, drivers licence or similar.
It’s not uncommon to also have to setup what’s known as 2FA authentication. This stands for “two factor approval”. In simple terms, it’s often just the process of having a code sent to your linked mobile phone. This acts as a second source of identification (alongside your email, passwords etc.) to prove that it is in fact you trying to access your account. You may have already come across this practice on Facebook or across a variety of Google services. It is quickly becoming an industry standard for identity verification across the web, and it’s no bad thing.
Learn more, and try these exchanges for yourself
To learn more about any of those 3 major Bitcoin exchanges discussed above, we recommend the following great sites: