BUYING AND SELLING BITCOINS
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Hello Steem Alliance Community |
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Today we will discuss about the process of exchange , buying and selling cryptocurrencies. So without any further wait let's dive into it .
Introduction |
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You can buy bitcoins from anyone who has it . Fortunately, there are several places where you can find a group of people willing to trade at competitive prices / exchanges. Just like a stock exchange, bitcoin or cryptocurrency exchanges are places that attract traders.
A cryptocurrency exchange is a website that allows people to buy and sell among themselves. The exchange itself is a place that brings buyers and sellers together and people go there because they know that they are likely to get the best price .
In financial services, the exchange is an order matching engine. It also acts as a central clearing counter party, thereby providing anonymity to clients. Finally, the exchange is the custodian of cash and assets. It controls clients' fiat money in its bank account and cryptocurrencies in its wallet.
Exchanges are located in different countries and support different fiat currencies and different cryptocurrencies. They all work almost the same and follow four steps:
| Create an account |
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Regulatory scrutiny on exchanges is increasing as they process large amounts of money. Top cryptocurrency exchanges buy and sell billions of dollars per day. Most legitimate exchanges follow an account opening process similar to banks, where new customers submit details and proof of their identity.
In a progressive risk-based approach, the documentation required can be more cumbersome in proportion to the value of the fiat or cryptocurrency you are transacting. Exchanges have now become big business and take these processes seriously. You can log in and the next step is to make a deposit.
| Make a deposit |
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This is similar to depositing funds into an account with a traditional broker before being allowed to buy traditional financial assets.
Exchanges have bank accounts and cryptocurrency wallets. To deposit funds into your account you click ‘Deposit’, then follow the instructions.
If you are depositing funds into your account from fiat currency, the exchange will display a bank account for you to transfer the currency to it . If you are depositing funds into your account from cryptocurrency, the exchange will display a cryptocurrency address for you to transfer .
When the exchange detects the transfer to its bank account or cryptocurrency address, the balance will appear in your ‘Account Balance’ on the exchange’s website, and you are ready to trade.
| Trade |
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You can now trade up to the amount you deposited.
For example, if you deposited USD 5,000, you can buy up to USD 5,000 worth of cryptocurrency. If you deposited 5 BTC, you can sell up to 5 BTC for fiat or another cryptocurrency that is available on that exchange.
Not all currencies can be traded for each other – it really depends on the exchange which pairs they enable.
For example you might see BTCUSD and BTCEUR as trading pairs, which means you can trade BTC with USD and BTC with EUR, but if you don't see EURUSD, you can't trade USD with EUR directly.
In that case, to convert USD into EUR, you'll need to sell USD into BTC and then buy EUR using BTC. You'll see a screen of other people's bids and offers. These are the prices they're willing to trade at, and how much they're willing to trade for at that price.
You can either decide to match their prices, resulting in a matched trade or submit your own orders which will stay in the order book until someone matches your price.
This is a financial market - this means the larger the quantity you want to buy or sell, the worse the prices will be. This is different to the supermarket where you get a discount if you buy in bulk. This may be confusing for some people initially, but it can be easily explained.
When you buy something on an exchange, the exchange will naturally match you with the person who is selling it at the cheapest price. When you have bought all that they are offering, you will have to find the next best price, which will be slightly higher.
The same logic is used in selling: when you sell something, the exchange will match you with the person who is willing to pay the highest price for it. When you have sold them what they are willing to buy, you will have to go to the next highest price which will be slightly lower.
You will get cryptocurrency address to simplify cryptocurrency transactions.
| Withdrawal |
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Cryptocurrency withdrawals are usually faster than fiat withdrawals to the exchange because most exchanges have 'hot wallets', as mentioned earlier. Which automate the process of sending small amounts of cryptocurrency back to users.
Conclusion |
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Cryptocurrency is equally safe and risky . One needs skills and sufficient catch on the market in order to gain profit. It is not very hard to trade in cryptocurrency market , it is just that a little patience , understanding and right knowledge is needed .
Thankyou |
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India, 25.04.2024
@moyeon
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