Why do people prefer to buy and sell bitcoin on cryptocurrency exchanges?
Investors interested in bitcoin often fail to clearly understand the right way of buying this unusual asset. Meanwhile, beginners who invest in cryptocurrencies for the first time, consider various technical and financial complications as especially critical. In order to preserve interest in such a promising sphere of capital investments as cryptocurrencies, a novice should choose only the easiest and most reliable methods of bitcoin exchange for fiat money.
On the other hand, those who want to sell bitcoin, instead of buying it (for example, those mining bitcoin, or getting it from cloud mining/bitcoin faucets) may also encounter the problem of choosing the right place and course of action.
A rule of thumb tells that some first-time users try learning the ropes of investments into cryptocurrency by making simple search engine queries, such as “how to buy bitcoin”, and then following the first links in the search results. Not the best way, as there are no guarantees that the top search results are not a product of Black Hat SEO used by the owners. The top search results may contain links to fraudulent internet exchangers. These shell websites may copy the names and designs of trusted exchangers in order to seem more credible.
The situation is worsened by the fact that beginners have no habit of reading reviews of chosen services or checking the consistency of domain names to distinguish reliable exchangers from their “clones”. why those not willing to risk their money should look for ways more dependable than clicking random search results.
We recommend using the following ways:
1) Buying and selling bitcoin on reputed cryptocurrency exchanges with a few years of steady business record or going from positive reputation on dedicated cryptocurrency portals.
2) Buying and selling bitcoin on currency exchanger from a trusted list of a dedicated internet exchange monitoring service, issued upon your enquiry, rather than relying on search results.
The second method - buying/selling bitcoin on exchangers, is not as good for beginners as buying/selling on cryptocurrency exchanges. In order to understand the reasons behind one needs to consider the advantages of a reputable cryptocurrency exchange over an online exchanger.
Why is cryptocurrency exchange more suitable for buying and selling bitcoin than a simple online exchanger?
Let us see how bitcoin is bought and sold on exchanges and online exchangers as well as why our first method is better than the next one. We will note that only a reliable and convenient exchange with sufficient trade turnover and user-friendly interface, such as EXMO, may have all the advantages listed below.
A simple registration process will enable you to trade via an exchange and control your account balance as well. In order to buy bitcoin on an exchange you will have to make a deposit to one of your fiat accounts. The number of ways to do this depends on the exchange. You can usually replenish your account through online payment systems such as QIWI, Yandex.Money, Payeer, Okpay, AdvCash and others. Some exchanges with good reputation and legal status have an option of making a deposit to your account via a debit card or Wire Transfer.
After that you can access trading and create a purchase order to buy bitcoin for currency on your account. The way offered by the EXMO exchange is even more streamlined. You can buy bitcoin via the “Wallet”
interface. Your purchase will be made immediately and at the market price.
Note that if you want to buy a really large amount of bitcoin, the reserves of the exchangers may be insufficient for your order to be paid and even if they are, bitcoin is likely to be stored in “cold” wallets so you will have to negotiate the deal in advance and a certain period will be required for the reserves to become active. In case of a cryptocurrency exchanges, there can be dozens and hundreds of bitcoins ready for sale in the upper part of the order books (one can easily make an approximate visual estimate of their quantity).
Bitcoin that you’ve bought will be safely stored in “cold” wallets within the exchange unless, of course, you wish to transfer the bitcoin to your local or online bitcoin wallets. Thanks to the free 2FA system, your account and funds are 100% secure from unauthorized access and theft. This feature is available on most exchanges including EXMO.
In case of BTC transfer from your account to any other bitcoin wallet, the exchange will determine the service charge automatically. This is why the process of bitcoin withdrawal usually takes up to 10-20 minutes including the transaction.
In order to sell bitcoin on the exchange you should deposit it to your account. You can deposit BTC to your account manually by transferring it to the replenishment wallet generated by the exchange each time you make a transaction. On the other hand, in case you mine bitcoin, you may assign the mining wallet in the pool settings so that the funds are automatically transferred there.
Afterwards, you may sell your bitcoin either on the trading page, or, when it comes to EXMO, via an intuitive “Wallet” interface. The funds held in your exchange account can be withdrawn either to online wallets (including PayPal
on some exchanges), or to a bank card/account.
Some exchanges have developed a special internal exchange currency or the so-called "codes". A convenient instrument for controlling assets on the user’s account. You can create codes in any currency available on the exchange by setting a nominal of each code at your own discretion. The purpose of codes is to transfer assets beyond the exchanges. For example, you can diversify the ways to withdraw the assets from your exchange account, or to deposit them thereto. You can use codes as a supplementary means of holding funds on the respective exchange as well. EX-CODE of the EXMO exchange
can serve as a great example of turning this idea into life. More than 20 online exchangers already support EX-CODE technology in different variations, confirming its dazzling success.
Compared to exchangers, the exchanges often give their users access to the API, a program interface with a wide variety of capabilities, which can be used for automation of trading, as well as for the automatic control of funds held in your account (this functionality is also supported by some exchangers). Thus, EXMO exchange offers the free use of its API
This has been the rundown of how bitcoin is traded on currency exchanges.
Trading cryptocurrencies on exchangers
The case of the exchanger is a bit more convoluted. First of all, you will have to manually choose the necessary direction in exchange monitoring tables every time, as well as selecting the exchanger based on exchange rates and reputation, and then send the sold bitcoin to the address generated by the exchanger. If you are not very experienced in handling bitcoin wallets, each manual operation of that kind will run a risk of certain mistakes.
For example, your payment might “get stuck” in the bitcoin network for several days due to incorrect service charge. If the amount to be transferred is set up inaccurately, the exchanger won’t be able to process your transfer automatically and the operation will be delayed for an indefinite period; moreover, in case you make a typo in the address, you will lose your bitcoin irreversibly and get nothing in return. This is why a miner should consider setting up the dispatch of mined bitcoin to their exchange account in the pool settings. The bitcoin will transfer to the account automatically. Even though you will have to occasionally change addresses of the deposit wallets, the exchange will certainly warn you about such events taking place beforehand. Usually, this may occur once in several years. By the way, if you want to buy bitcoin via an exchanger but not sell any, you will have to create an online bitcoin wallet or install a local one and learn how it works.
The bitcoin prices on exchanges are established by the market via balance of supply and demand. The price of bitcoin in a particular exchanger is established by its administration, based on prices of the largest exchanges and increased by its own floating extra charge. Hence, an exchanger that had the best bitcoin exchange rates yesterday (among all other exchangers in the monitoring) may offer an average rate today, and make it absolutely cost-prohibitive tomorrow. This is why it’s unreasonable to repeatedly use the same exchanger all the time, and so you have to constantly choose a new one for better rates. However, the real problem occurs within periods of uncertainty. For example at explosive bitcoin price growth. The rate at which exchangers offer to buy becomes unreasonable in all of them. The same effect may be observed when bitcoin is sold in conditions of panic or fall of prices (the prices of your bitcoin become lowered in all the exchangers). In general, when the market is unstable, owners of exchangers tend to increase their extra charges and they often do that collectively.
One more aspect that would be relevant for those who want to sell a small amount of bitcoin. It’s quite tricky to do that with exchangers as they usually establish a minimum sum for exchange ranging from 0.01-0.03 to 0.10 BTC. No wonder that people who like gathering satoshi from bitcoin faucets encounter great difficulties when trying to sell small amounts of currency in exchangers. The problem grows all the worse the higher the rate of bitcoin and the lower the rewards of faucets. This is why exchanges are quite attractive to those who deal with faucets as they usually have relatively small minimum limits for BTC deposit (for example, 0.001 BTC on EXMO). It is important, however, to stay away from entering the amounts below the minimum deposit threshold as such mistake would likely lead to the loss of funds.
As you can see, buying and selling bitcoin on a good exchange has a number of advantages, however they are not exclusively financial. Ease and reliability of cryptocurrency investments along with convenience of storage and withdrawal lead both the beginners and professional investors to use exchanges.
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