For a beginner, entering the world of cryptocurrencies can be exciting and exciting. Getting to know the intricacies of the technology behind currencies can be painful, albeit unnecessary if your needs are not that high.
Therefore, if you are looking to buy cryptocurrency, it is beneficial to understand how crypto exchanges and their instruments are related to investing, trading, security, work, etc.
So let’s talk about some of the things you need to know about crypto exchanges that you probably won’t hear from anyone. 2021 could bring more widespread adoption of cryptocurrencies, especially through more user-friendly platforms.
Difference between trading platform and exchange
At its core, there are two main types of cryptocurrency exchange services. There are exchanges where you can convert fiat money to cryptocurrencies and vice versa; and there are also more advanced trading platforms that you can trade on, usually with an additional layer of various sophisticated trading instruments where buyers and sellers set supply and demand. You can think of it as a virtual place, similar to the stock exchange (like the Nasdaq).
As you might expect, different types of exchanges satisfy different needs. Anyone who wants to buy cryptocurrency in a simple way for euros has different needs than someone who wants to trade and exchange one currency for another regularly.
To be fair, Kriptomat is not a trading platform, but an exchange. It could also be called a fiat gateway where you can use the Euro to buy or sell various cryptocurrencies directly. Perfect beginners can also enter the world of cryptocurrencies.
The problem and the enormous difference here is that trading platforms are usually complex and hard to use for newbies, whereas exchanges can have a more user-friendly interface. Keep in mind that when you see the order book, you are probably logged into the trading platform.
If you see buy/sell options on the platform without a trading book, you are most likely signed in to exchange.
Different prices for coins on various platforms
As you may have noticed, cryptocurrency prices can vary hugely from one exchange to another. Values also fluctuate among exchanges and trading platforms (such as Bitstamp, Kraken, etc.). Why is this so, you ask?
How the price is determined on the trading platform
Each trading platform is a separate island with its supply and demand, which ultimately sets the price of each cryptocurrency. They have an order book and the price is the value of the coin in the market. This price is defined as the intersection of the buy and sell orders. Some people have buy/sell orders at lower prices and some at higher prices.
Buyers who do not need bitcoins immediately are most interested in getting bitcoins at the lowest price. Sellers who don’t need cash right away are most interested in getting the highest possible price.
How the price on the exchange is determined
Exchanges usually have coin providers, which means they buy coins at a wholesale (market) price and then sell them at a higher (retail) price. They also add commission to the price. It is simply because they buy coins elsewhere and then resell them to their customers.
It is important to understand here that some exchanges then significantly increase the prices of bitcoins and other currencies. Let’s say you want to buy a bitcoin worth € 100. At the current market price (let’s forget about fees for now), you will receive around 0.026 BTC. Now let’s compare exchanges like Kriptomat, Indacoin, Coinmama, and Coinbase. At the time of this writing, the selling price of bitcoins was:
- Cryptomat: € 3.842 *,
- Indacoin: 4,784 euros *,
- Coinbase: € 3.864 *,
- Coinmama: € 4.092 *.
* Prices were taken directly from their websites on November 20, 2018.
Do you see the difference? This means that each exchange sets its retail price. And judging from what we’ve seen so far, Kriptomat is now one of the lowest in the forex market.
As stated, this is the price you pay for your coins on different exchanges. Kriptomat aims to set the price that users will receive on the originating marketplace or trading platform. As you can see, there is not only a commission that determines how many coins a buyer will receive. But we have just shown you that price is also an important element.
“People mistakenly assume that the prices shown on cryptocurrency comparison sites are original market prices, when in fact they more or less simply interpret the average price from different exchanges.
It means that prices on exchanges will always differ slightly from prices shown on cryptocurrency comparison sites. However, so far Kriptomat is among the companies with the lowest selling prices.
