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Cryptocurrency and its increasing popularity have been driving conversations over the last few years, and it seems to be ready to hit another peak as it becomes more mainstream with Bitcoin and other crypto coins.
As you may know, cryptocurrency is an alternative value holder aiming to either supplant or supplement the use of traditional government-regulated currencies. The decentralized nature of the currency takes the power out of those in position of it, and in the hands of the market.
This comes with both benefits and risks, with the upside seemingly being more well-known at the moment.
All of these news may have speculative investors considering getting into the crypto market, and also wondering where to get started with buying and selling these assets. Cryptocurrencies normal origin of purchase takes places on a crypto exchange, and here you’ll take a look at just how these things work.
The Crypto Exchange Process
Cryptocurrency is bought and sold first on exchanges unless, of course you’re a miner. An exchange is a place where you can purchase the rights to certain amounts of crypto coins and ‘hold’ them on the platform, or even become what’s termed a ‘hodler’ if you want to hold long-term.
Crypto exchanges serve as the intermediary, or the middle man, between buyers and sellers on the markets. Much like a stock exchange, they determine and update prices for coins and alt coins available for purchase on their platform.
Some crypto exchanges, but not all, will allow their users to make use of market and limit orders too, making them even more like a brokerage account. Whether or not your account allows this depends on the exchange you use and their requirements. Coinbase, for example, does not offer this on their classic platform but does so on a separate pro app.
The crypto exchange you invest with does matter, and you’ll want to make sure you look at the best crypto exchanges available in your country before deciding which one is right for you.
Each different exchange will allow for different payment methods, with most accepting debit and credit cards, wire transfers, direct bank transfers, third party payment apps like PayPal and others, bank drafts, and even in some cases money orders, too.
Decentralized Exchanges
A decentralized crypto coin exchange is one that operates without any central authority to keep it in check or control it. On the surface, this may seem like a rather strange and unsustainable idea, but it actually does bring some unique appeal to the table.
They typically require less information from users which appeals to the privacy aspect of investor's needs. They also reduce the threat of potential hacks by not needing to transfer assets through the exchange in order to facilitate trades between investors. On top of this, not having a central authority to process and validate all transactions can and will reduce the fees added to any given transaction.
Decentralized exchanges will also inevitably be less susceptible and prone to undermining tactics like price manipulation, hedge fund moves, and other actions that can influence the platform in a big way.
These are of course less popular than your more well-known crypto exchanges that stand on the front lines of the market, and because of that it can be tough for these decentralized options to maintain the levels of interest required to keep up operations in some cases, and very few have been successful in doing so.
Crypto Exchanges Vs Comparative Investment Accounts
Your typical investments are conducted through what? Yeah, you guessed it, a brokerage account. A brokerage account is just your run of the mill account type used for the purchasing and selling of various assets and equities, with no special tax advantages or anything like its IRA and Roth IRA counterparts.
Take note of the normal investing account and use it as a reference point, because this is the comparison to start with. A crypto exchange can be considered most similar to your classical brokerage account as far as its intended purpose and tax regulations.
Also worth noting is the fact that you can also buy and sell cryptocurrencies through certain brokerages who’ve opened this service too. Signing up for a brokerage account is a bit different than an exchange, though.
Wrapping Up
Having prior investment experience with your aforementioned traditional investment accounts like brokerage and retirement options will of course serve as a helpful guide in picking the right crypto exchange just like you did with your brokerage of choice before, but it isn’t a requirement. government
Cryptocurrency can potentially become a valuable investment for both a newcomer and a veteran, and picking the right exchange to begin your trading on is just the first step.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.