What are cryptocurrency exchanges?

What are cryptocurrency exchanges?

Cryptocurrency is in constant motion. Many people own some type of digital currency, and day after day, new people join the group of crypto investors or sell their cryptocurrencies to acquire fiat money.

This fact has led to the emergence of platforms that serve precisely to make this business between people, which many refer to as “trading,” more manageable.

What are the exchanges?

They are online platforms where you can trade tokens for other tokens or fiat money, what we could compare, depending on the type of exchange, with a stock exchange or a currency exchange of the one found in an airport, for example.

There are different types of exchange:

Exchanges of “traditional” cryptocurrencies: these would be the most similar to stock exchanges in which buyers and sellers avail themselves of the current market price of the cryptocurrency (1) in question established by the platform.

This type of platform charges a fee typically for each transaction. Some of them hardly accept cryptocurrencies; others also allow fiat money. The main currency accepted on this type of platform is the US dollar. As an example of this type of exchange, we could mention Kraken.

Direct trading platforms: In this type of platform, users can trade directly with each other. Therefore, the price is not stipulated anywhere. Those who want to sell establish their exchange rate and those interested in buying find sellers through the platform and perform an Over the Counter (OTC) or indicate the prices for which they would be willing to pay and the platform connects the Buyers and sellers that fit best.

This type of exchange is usually not the best option. However, there are areas where it is the only option. In the regions where they are limited to this type of exchange, they have to be very careful and make sure that the platform is trustworthy and that the users they deal with are highly qualified.

Another tip is that before doing any type of trading consult the market prices in Coinmarketcap to have a basis on the real price of the asset at that time.

Cryptocurrency Brokers: These are akin to airport currency exchange locations. On these platforms, clients can buy and sell cryptocurrencies at the price that is set, which is usually the market price plus a small premium. Being an option that can perhaps be seen as more unadorned and, therefore, is more sought after by users who want to enter the world of cryptocurrencies, the commissions that are charged in this are usually slightly higher than those found on a traditional exchange. As an example, we could mention Coinbase.

Cryptocurrency Funds: They are a set of professionally managed cryptocurrency assets that allows users to buy cryptocurrencies through the fund. The curious thing about this platform is that both if we buy and if we sell, we will not have the need to store them. What happens is that we are acquiring a part of the fund that. So you have cryptocurrencies.

[Also Read: What is Blockchain Technology? A complete guide about Blockchain]

Leave a Reply

Your email address will not be published. Required fields are marked *