Trading crypto assets is a widespread option to make money on the Internet but only for those knowing how this market works and comprehend all the risks connected with it. A crypto exchange takes the central place in all the processes in this market. It functions as a digital platform that empowers individuals to purchase, vend, and engage in trading assets. These exchanges operate as intermediaries, facilitating transactions between those who wish to buy and sell these digital assets. To answer the question, “How do crypto exchanges work?”, we need to take a look at the range of services they typically offer. So today will explain the principle of exchange work and the main things to know before starting.
Main Components of Working on a Cryptocurrency Exchange
Here are the basic concepts of crypto exchange:
- Account creation. To AML and KYC regulations, users are required to create an account on the platform. This involves providing personal information and completing a verification procedure.
- Wallets. Once registered, users are assigned a crypto wallet that is linked to their account. This wallet serves as a secure storage space for their digital assets.
- Deposits and withdrawals. Users can deposit cryptos into their wallets from external wallets or transfer funds from their bank accounts to buy assets.
- Trading. Exchanges offer users a user-friendly interface where they can conveniently place buy and sell orders for a diverse range of assets.
- Market and limit orders. Market orders are executed immediately at the relevant price, while limit orders allow users to set a particular value at which they wish to buy or sell assets. Limit orders are executed only when the market reaches the designated level.
- Order books. Exchanges maintain order books that display all active buy and sell orders for different assets. This valuable information assists users in analyzing the trends and making informed decisions.
- Exchanges charge commissions for executing trades, which can vary depending on the platform and trading volume.
- Security measures. Reputable platforms employ strong security mechanisms, 2FA, encryption, and cold storage.
Some platforms (for example, WhiteBIT and Coinbase) also allow users to borrow crypto, using their existing assets as collateral. It is called margin trading where traders take leverage to increase their initial sum and thus, receive bigger income from trade.
It is important to note that while borrowing funds can offer increased trading potential, it also comes with higher risks. Users should thoroughly understand the risks and potential consequences of margin trading before participating.
Join a user-friendly cryptocurrency exchange WhiteBIT to try different trading styles and enjoy its benefits. If you want to stay up-to-date with all the latest events in the crypto industry and don’t want to miss lucrative investment options and new promising projects in the field, welcome to the WhiteBIT blog.
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