Similarly as in the case of stocks or commodities, the vast majority of trading on the crypto-currency market takes place through stock exchanges. However, they do not have a physical trading place – they are virtual and completely decentralized (similarly to the Forex market). They provide access to a number of the most important market information – values of individual virtual coins, valuations, trends, volumes and so on.
Exchanges are extremely important for any trader of virtual currencies, regardless of their level of sophistication. They are designed to meet the needs of the unique, dual industry characteristics. They are tailored both to the expectations of traders with experience and knowledge of traditional markets and to the expectations of beginner investors who have never traded on a traditional stock exchange before.
Sale and purchase of cryptocurrencies directly on the stock exchange
There are two basic ways to buy and sell coins on the cryptocurrencies exchanges. The first one is a direct buyout from the exchange itself – in this case no other investor is involved in the transaction. The whole thing works on a very simple principle – the physical currency is transferred from your bank account and exchanged into virtual currencies according to their current valuation. Please note, however, that if you purchase digital coins directly from stock exchange owners, the transaction will be subject to additional handling fees.
The second method is the one in which the exchange only plays the role of an intermediary. It becomes a platform for meeting buyers and sellers and for executing exchange transactions between them. Bids can be placed in the form of an auction or a direct order – we inform how many coins we want to buy/sell and at what price. Many investors prefer this solution because the role of the stock exchange is limited and additional fees are either non-existent or very small.
Of course you do not need the exchange to exchange cryptocurrencies. We can find potential buyers/sellers on our own. In such a case – without the arbitrage of the exchange – the risk that we will be deceived increases.
Independent valuation of cryptocurrencies
If you have ever followed Bitcoin’s price, you will have noticed that the difference between the quotes on each stock exchange can be as much as a few percent. This is due to the fact that cryptocurrencies as a completely decentralised form of payment does not have a superior regulatory authority. Each exchange sets its own BTC price based on the market situation and the supply and demand forces within its own structures. While prices of individual stock exchanges correlate rather strongly with each other, the differences are often noticeable – especially in the case of less popular coins, which are characterized by the highest volatility.
Get to know the most popular crypto-currency exchanges
In the following section, we would like to introduce you to the most popular cryptocurrencies exchanges in terms of volume or number of users) operating on the market:
Bitbay (Polish Stock Exchange)