How Bitcoin exchange works – Cryptomartez

Cryptocurrency – Tech Talk
How Bitcoin exchange works – Cryptomartez

Just like the stock that can’t be purchased in the shopping mall or just anywhere but in the stock market and has someone – stockbroker – who buys and sells it for clients, Bitcoin also has a special market – Bitcoin exchange – which is an organized market where people meet to buy and sell the digital currency. This exchange enables customers to convert fiat currencies into cryptocurrencies and vice versa, and sometimes other digital currencies into Bitcoin.

Bitcoin exchange is where bitcoin buyers and sellers conduct their business. For instance, a Bitcoin seller deposits Bitcoin with the exchange’s address. He can then use his positive Bitcoin balance in the exchange to sell his Bitcoin fiat currency or other coins. Likewise, a Bitcoin buyer deposits fiat currency USD with the exchange and then use the balance to buy Bitcoin from sellers.

Real Bitcoin exchange acts as a medium between bitcoin traders. Traders can set limit orders to buy or sell bitcoins at a certain price cap. The exchange would then match buyers and sellers when their conditions are met.


The Beginner’s Guide to Choosing a Bitcoin Exchange

Essentially, two types of orders exist in the Bitcoin exchange, these are the limit orders and market orders. Limit orders enable a seller to sell bitcoins higher than the current price or a buyer to buy Bitcoin at a price lower than the current price. However, limit orders can only be carried out once another user accepts them.

Whereas, market orders find the best matching limit order probably at prevalent prices. For example, if the last trading Bitcoin price is 5000$ and two traders want to sell their bitcoins though not for 5000$. If one sets a limit order for 5100 and the other sets 5150. The best price to buy bitcoins is then 5100$. When a buyer places a buying market order, it will look for the best available price, hence, it will buy from the seller that sets 5100$. However, if the buyer chooses to buy more Bitcoins, he will continue with taking the next lowest available prices. This is exactly how Bitcoin exchange works.

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