Exchanges. The crypto trading platforms

For those who want to start buying/selling cryptocurrencies it is not easy to do so given the entry barriers that can exist related the understanding and managing the platforms that serve as bridges between the traditional economy and the crypto economy.

For those who do not have computer skills at the end-user level, it is even more difficult because even for those who are computer literate it is difficult at first.

“Exchange” is the term we use when we are going to buy international currencies such as American Dollar, British Pound or Yen. We have to go to some exchange offices, which are usually at street level where they can sell us the currencies for a higher price than the market one constituting their trade margin, which works as a surcharge, and likewise when we want to sell those currencies again they buy them from us at a lower price and their margin works as a discount.

When it comes to buy/sell crypto-currencies the procedure is the same although in this case we have to be the one who does a more or less complicated registration process and that works as a psychological entry barrier because it is necessary to understand the process.

The cryptocurrency exchanges are digital platforms that work as independent markets where we can create an account by performing a registration process and identity verification, and where we can make a deposit using a bank transfer or a card charge as though it were a purchase. We deposit our local fiat currency funds and then within minutes we can make the first cryptocurrency purchase.

When a cryptocurrency purchase is done, we have two options, either to stock or accumulate crypto balances in the platforms' wallets or we can use those crypto balances to buy or exchange them for other cryptos or then sell them back to get again our local currency when we estimate that we have had some profit or because we simply want to convert crypto into our local currency.

The supply of crypto-coins is increasing and it can be very difficult to select what type of them are more attractive at least at the beginning when we are not familiar with them, but it is obvious that the bitcoin is the best known cryptocurrency and is always a good option when making the first purchase.

The List of Criptocurrencies in CoinMarketCap

Before listing and introduce the most representative exchanges, it is necessary to know that there is a cryptocurrency index, just like there are stock market indexes in which certain financial values are grouped together such as S&P 500 in the USA, the DAX in Germany or the Nikkei in Japan, in the sector of cryptocurrencies we have the CoinMarketCap, as an index or ranking list of the first 100 cryptocurrencies ordered by capitalization (the amount of funds that are invested in each of them).

Visiting the web coinmarketcap.com as it can be seen below these 100 cryptocurrencies within a classification list by capitalization where we can check all its variables out apart from how much is invested in each of them, it showed its current price, its trend in the last day, the volume in the last 24 hours, the currency supply and a graph in which you can select the history by hours, days, weeks, months, years and even from the beginning of its launch.

Next, we see how the most important website in the cryptocurrency industry looks like in its frontpage, and the first thing we highlight using a dark red rectangle is the number of cryptcurrencies have been launched, 5,685 so far, that are offered in 22,783 markets, (exchanges), with a global capitalization of more than 261 billion dollars, with a trading volume in the last 24 hours of more than 58 billion dollars and a BTC predominance of 64.4%. 

As it can be seen after the cryptocurrencies tab, there is an Exchanges tab where we will see which are the exchanges that are listed in this reference website in which certain number of cryptocurrencies can be acquired by the user.

The CoinMarketCap List of Exchanges

Next we can see a ranking of the 307 most important exchanges ordered by transaction volume in the last 24 hours, their average settlement, the number of markets they contain, understanding that markets are considered “the active parities” or coin pairs for example, BTC/ETH, BTC/USD or BTC/USDT, ETH/USDT, etc.

Here you can see the ranking of the 10 most important exchanges according to the CoinMarketCap:

As it can be seen, Binance is in the leader of the industry since it has the highest number of markets or parities, trading volume and average liquidity but what the most important factor to be on the top  is the Web Traffic Factor, whose data comes from web traffic metrics that give a score between 0 and 1000.

Other exchanges which are very popular among them is Kraken (which has a very friendly environment, it is easy to register, verify identity and deposit funds in official currencies to get started in the crypto world and in trading), Bitfinex and Bittrex.

Below we show the interfaces in Binance and Kraken, so that the reader can make a first visual comparison and appreciate their differences at first sight.

Exchanges such as Binance and Kraken, are exchange platforms where buyers and sellers of interested in cryptocurrencies meet digitally so that they can trade and make their purchases and sales in search of a profit. Some of these exchanges have included official currencies to further facilitate exchanges, this is the case of Kraken.

The different general procedures we can perform within each exchange are the following:

  • Firstly, the registration, the complexity will depend on the requirements of each exchange.
  • Secondly, the identity verification or KYC: "Know Your Customer", where the platform  normally asks to upload data and identification documents and a picture taken for the purpose.
  • Deposits: in fiat currency or in bitcoins mainly if we have them previously. 
  • Open and/or close operations of purchase and/or sale: for which it is necessary to access the subsection of trading within each platform, where the most used parities/markets are showed to be selected, there we can see the parities: bitcoins with fiat currencies and bitcoins with the classic altcoins.
  • Settlement and withdrawals: in which purchases of cryptos are converted into fiat currencies and withdrawals can be made to be transferred to our bank account.

A simple exchange classification

Finally, we can classify the exchanges in CEX or DEX, the centralized ones (CEX) controlled by a central authority that monitors the operations but it charges higher commissions with a higher level of security, and the Decentralized ones (DEX) that are those that carry out P2P operations, person to person that have less commissions or margins but less security and responsibility. Most exchanges are centralized and very secure having a private insurance in case of hacking or data loss.

Also many exchanges have a more simplified and a more professional (PRO) version such as Coinbase, which offers crypto wallet services and easy exchanges between them in addition to a more professional exchange for those who want to trade more regularly and continuously and want to launch more buy/sell orders.

As a conclusion, we can say that the exchanges are shown as independent markets that set the prices of the cryptos according to the supply and demand factors and those prices differ from one exchange to another, becoming an opportunity to trade using different exchanges taking advantage of those differences. Experts in crypto trading know this very well and they work with many exchanges to maximize the possibilities of obtaining very attractive profits.

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