What is a Cryptocurrency Marketplace?

Cryptocurrencies are not available to purchase from banks or investment companies. If you want to acquire some digital currency, such as Bitcoin (BTC) or Tether (USDT), you have to register with a cryptocurrency marketplace. All new registrants to these platforms have to undergo verification checks to confirm their identity. Once your identify is verified, an account will be opened in your name and you can transfer fiat currency, like US dollars, into this account to be exchanged for virtual assets.

Cryptocurrency marketplaces (or exchanges) can be used to trade one digital currency for another — converting Ethereum (ETH) into Dogecoin (DOGE), for instance. Exchanges display up to date market prices for all the cryptocurrencies they list. You can convert cryptocurrency back into US dollars on these marketplaces too. Then, these funds can be withdrawn to your normal bank account, or left inside your exchange account for trading in future.

There are costs involved with making withdrawals and deposits on cryptocurrency marketplaces. These depend on the method of payment used for transferring funds. Payment methods that have a greater risk of chargebacks incur higher fees. Wiring cash or using a bank draft to fund your account has a lower chargeback risk than sending money with a debit/credit card or PayPal. With the latter two options, users can instruct their bank to reverse the transferal of cash and return it to them.

A cryptocurrency marketplace works in a similar manner to a normal stock exchange, in that traders buy or sell digital currency by entering limit orders or market orders. With limit orders, traders direct the marketplace to trade crypto for a higher price than the current bid, or a lower price than the current ask – based on whether they are selling or buying. When market orders are chosen, traders authorize the platform to trade crypto for the best price available in the virtual marketplace.

All cryptocurrency marketplaces charge transaction fees for the buy and sell orders completed on their platform. The amount they charge varies, depending on the transaction volume. As well as transaction and fund transfer fees, traders might be charged for currency conversion — based on which currencies the marketplace accepts. If users transfer US dollars to a platform that only accepts Euros, for instance, the platform or the bank will charge a fee to convert the USD to EUR. For this reason, it is best to transact with a marketplace that deals with your native currency.

Supply and demand governs the movement of cryptocurrency markets, however these markets are decentralized – so they are not backed or issued by central authorities like governments. Rather, they operate across a computer network. This means that they are often unaffected by the political and economic factors that impact regular currencies. Although much uncertainty still exists with regards to cryptocurrencies, the variables listed below can greatly influence their price:

-Market Capitalization: The current value of the coins and how they are believed to be progressing

-Supply: The quantity of coins in circulation and how quickly they are destroyed, lost or released

-Utility: How easily the cryptocurrency integrates into infrastructure, like ecommerce payment gateways

-Media: How the press portrays the cryptocurrency and whether it attracts much attention

-Major events: Key events like security breaches, economic setbacks and regulatory updates

In contrast to regular currencies, cryptocurrencies exist on a digital shared register of recorded information, known as a blockchain. Blockchains work by recording \’blocks\’ of crypto transactions, then adding new blocks to the chain at the front. Transactions are not classed as complete until they are authenticated and placed on the blockchain, via a process known as mining.

Whether you intend to keep your cryptocurrency on an exchange, or just leave it there temporarily before transferring it to a crypto wallet, the security of the marketplace should be your key concern. Although exchanges have to facilitate trading by keeping a certain amount of crypto active, it is better if they keep most of their holdings offline – where it is harder for scammers to reach. To give you peace of mind, some crypto marketplaces are insured, so that — in the event of any fraudulent activity – the digital currency you hold on the platform is protected.

If you want to invest in a well known coin, like Ethereum (ETH) or Bitcoin (BTC), you are likely to find it on most crypto marketplaces. However, to trade meme coins, altcoins or coins with a small market capitalization, you might have to shop around for a suitable exchange. Be mindful that this type of cryptocurrency is a riskier proposition than the more popular coins, which are highly volatile themselves. This is why experts often advise people to stick with established cryptocurrencies. Whichever coins you want to purchase though, only ever spend money that you can afford to lose.

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