page title icon Understanding Cryptocurrency Exchanges

  • Cryptographic currency or cryptocurrency is a digital currency for buying, selling, and purchasing
  • There are over 1600 cryptocurrencies available; the most popular are bitcoin and ethereum
  • Blockchains are ledgers that track cryptocurrency transactions influence the worth of a particular cryptocurrency
  • Speculative value, or perceived value, or a cryptocurrency also influences the worth of a particular currency
  • Technological and regulation changes can also cause cryptocurrency value to fluctuate
  • The advantages of trading cryptocurrency are reduced reliance on government regulations, convenience, and potential worth
  • Regulations for cryptocurrency exchange vary greatly with nation and state trading laws
  • Cryptocurrency is bought, sold, and exchanged on exchange platforms like Coinbase
  • Cryptocurrency is also exchanged through peer-to-peer transactions where personal identification isn’t required
  • The “makers” in a crypto market create liquidation for a cryptocurrency
  • The “takers” in a crypto market buy currencies at a set price and sell at a set price
  • Some exchanges suit newer investors better, and some suit more veteran investors better
  • It is crucial to read and understand the fine details of any crypto exchange before partaking in one
  • Investors can exchange cryptocurrencies for fiat money or other cryptocurrencies
  • Since it is a relatively new form of exchange, not every country accepts cryptocurrency

What is a Cryptocurrency Exchange?

  • A cryptocurrency exchange is a platform where investors can buy, sell, and trade cryptocurrencies for fiat currency or other digital coins
  • Unlike typical stock exchanges, cryptocurrency exchanges have less centralized regulation because the regulations change from country to country and state to state
  • Crypto exchanges are online platforms where people can trade using the platform or can also do peer-to-peer transactions
  • Cryptocurrencies like bitcoin can exchange into a government-backed currency like the US dollar
  • These online assets are legal, but the regulations for them depend on the online exchange platform and under whose government they exist under

In some ways, the cryptocurrency exchange platform can seem like a standard stock market exchange platform. Investors can perform transactions using their digital currencies. There are some key differences that investors should be aware of.

These platforms do have varying transaction and subscription fees, but they also have different regulations. Also, the value of cryptocurrencies has what is called speculative value from platform to platform. This means the value of a cryptocurrency doesn’t depend solely on the market price, but it also depends on the investor’s perceived value.

The most popular cryptocurrency exchanges are Coinbase, BitMEX, Binance, and OKEx. These sites have varying levels of regulation, different amounts of traded coins, and compliance with different countries’ legislation. It is always best for newer investors to read the details and agreements with every cryptocurrency exchange before transacting with them.

Apart from these popular platforms, there are also platforms where traders can do peer-to-peer transactions. These involve the buying and selling of coins but do not always require the two individual investors in the trade to indicate their personal information.

How Does a Cryptocurrency Exchange Work?

Several factors indicate the exchange rate for a cryptocurrency. These factors include speculative value, government regulation, technological changes, and a coin’s blockchain. It is essential to note cryptocurrency values can fluctuate significantly given these factors.

On a cryptocurrency exchange, there is a “maker-taker” model. Makers either own a large stock of cryptocurrency or have the means to get a large inventory of it to sell. Makers create liquidation for the cryptocurrencies they use. Then, there are “takers” on the exchange who will buy the cryptocurrency at the makers’ exchange rate.

Like in a typical stock exchange, the currency price will fluctuate, but in the case of crypto, the prices can soar or plummet significantly in a short time. The bought and sold digital assets can exchange into real currency or another cryptocurrency, depending on the exchange.

Peer-to-peer exchanges, as well as Crypto brokerages, offer alternatives to cryptocurrency exchanges. Brokerages offer different features to investors who use them.

The Difference Between Crypto Exchange and Crypto Brokerage

Trading for cryptocurrencies also occurs on crypto brokerages. Between crypto exchanges and crypto brokerages, there are some significant differences:

Crypto Brokerages

  • Uses a dealer network
  • Locates buyers and sellers and brings them together
  • Offers tools for investors to strategize trades
  • Better for larger trades

Exchanges have a centralized regulation and are a platform for takers looking to buy crypto at a set price from makers. Crypto brokerages bring buyers and sellers who have larger amounts of cryptocurrencies for transactions and bring them together. Brokerage platforms have smaller transaction fees and also have an over-the-counter market system where the broker has their own rules to follow.

An investor will open a trade on an exchange and look at the price chart on the platform. From there, the investor buys and sells orders of cryptocurrencies. Brokerage investors have comparatively more features open to them, including analysis tools that help them manage risks. Trades on brokerages usually have tighter spreads too, and so prices on cryptocurrencies are usually more stable. 

Choosing the Right Crypto Exchange

When choosing the right crypto exchange, an investor has to consider a few things. These are the liquidation of the currency they want to trade, the exchange regulations, and finally, security.


There are 1600 different kinds of cryptocurrencies on the market today, so investors must choose which ones they want to begin investing in. The most popular cryptocurrencies to date are bitcoin and ethereum. Since these are the most well-known, they have the most liquidation in the market and have a higher speculative value.

When an investor chooses an exchange, they should consider the liquidation of the crypto coins they want to use. Some platforms do not exchange every kind of cryptocurrency, so traders need to ensure the platform they use also exchanges their currency. These factors go hand-in-hand when considering the market price of the cryptocurrency. 


Government regulations have a hand in determining the cryptocurrency price and exchange rate. Investors should look at which government or state the platform they want to use will follow. Taxes, fees, and transaction costs will fluctuate depending on these regulations too. These can add up and make trading more expensive.

Some platforms are more friendly towards beginner investors, while others are better for those who are more experienced in the crypto market. Beginning investors should do their research to find the exchanges they are more comfortable exchanging digital assets with and suit their skill level.


Exchange platforms have varying levels of security. Some trades can occur without either trader disclosing their personal information. It’s up to the investor to determine how safe or risky a platform is. They should do their research, look up reviews, and understand how the platform handles its transactions.

Since exchanges might not disclose personal information in a trade, it can make things difficult for investors if something goes wrong. If a transaction is fraudulent or does not follow the agreed-upon terms, an exchange’s pseudonymity makes tracking down the perpetrator more time-consuming.

Using Crypto Exchange

Like cryptocurrencies themselves, crypto exchanges are a relatively new marketplace for investors. Currently, those involved with crypto now are still the pioneers of the trade. Newer traders should look into currencies that are higher in liquidation. They should also use exchanges that favor newer investors with adequate security and fair transaction costs.

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