The concept of cryptocurrency is pretty much invalidated if it can not be converted to real-world value. Converting cryptocurrency into local currency, whether cash or wire transfer is the basis of the cryptocurrency exchange. Exchange can be a physical business venture where crypto coins are exchanged for a payment by traditional means. The trading can also be done virtually by online money transfer. Digital transfers are often time the most common exchange trade you’d come in contact with. This is because they are subject to fewer regulations.
In our last article, however, we discussed Cryptocurrency Mining Basics for Beginners
Exchanges still retain accounts all over the world to better facilitate payouts in various currencies. Exchanges can be done by direct cryptocurrency debit into another crypto wallet. Prepaid cards can be used also when they are loaded anonymously. These cards can be used all over the world. Some digital currencies are backed by gold or other such materials in the real time. Cryptocurrency exchange simply deals with the trade of cryptocurrencies.
Digital Currency Providers
A Digital Currency Providers DCP are businesses set up for the purpose of monitoring accounts. DCPs hardly issue currency to their customers, but merely maintain accounts. A customer trades on the exchange and the value of their transaction is deducted or added to their DCP account. A few exchanges are subsidiary businesses of DCP. Creators of cryptocurrency have no direct effect on cryptocurrency exchange.
With over 1500 cryptocurrencies playing around in the market, investors have taken a lot of notice of this market. According to CoinMarketCap, the Cryptocurrency market has a combined market value of about $289 billion. With such market strength, its no wonder that a wide range of investors need trading platforms to help them provide much-needed structure in the digital currency sphere. This is where the exchanges come in strong.
Exchanges can include both cryptocurrency and fiat currency. Different exchanges are used for trading different crypto coins. Some coins can only be traded by bitcoin since they are still quite new and can’t be traded directly by fiat currency.
Exchanges are also suited to fit into different levels of trading. The functions and variety of these exchanges can be likened to brokerage firms. A different type of exchange meets the needs of full-time trading and quite distinct from that for less-experienced investors and traders. Regulations on these trading platforms also vary greatly with the location of the exchange. In November ’17 Chinese exchanges were clamped down on and had to either move their trading outside the country or shut down operations. In the United States, various state by state regulations and federal laws determine the extent an exchange can transact.
As earlier stated, there is quite a number of different exchanges with a wide array of offerings and options. Differences come in terms of securities, coin offerings, fees and trading features. There are over 200 cryptocurrency exchanges currently in business. It is quite imperative to read the fine print of any exchange before venturing to do business with them. The online sites might be a bit riskier, therefore, a potential investor should look out for website security as the first measure of safety.