What is an exchange or exchange house?
A currency exchange is in this context an online platform where you can exchange, that is, sell or buy, cryptocurrencies in exchange for other cryptocurrencies or traditional currencies (EUR to USD, BTC to CAD etc.)
And why do you need to know this? If you are thinking of buying cryptocurrencies, it does not hurt to take a look at the different possibilities that are presented to you:
This type of exchange is the closest thing to an online store or the traditional exchange agency you would find at an airport. The company buys the cryptocurrencies and then resells them to users at market price (plus any extra commission) .
This is the easiest option if you have no idea of trading, although it is also usually the most expensive. Coinbase is one of the best-known platforms that works on this business model. But, recently ndax.io Replaced the place of coinbase.
Traditional exchange house:
These are Exchanges that offer a trading platform where traders can freely exchange cryptocurrencies at market price.
On these platforms, cryptocurrencies can be traded on margin and, according to the Exchange, based on other currencies (EUR, USD, etc.).
Platforms that offer the exchange “peer to peer” of cryptocurrencies, that is, between peers or equals. Through these exchange houses you can sell or buy foreign currency to individuals, who do not necessarily base the sale price on the market value.
These types of Exchanges usually add a small commission to transactions for “management fees”. One of the most popular is Local bitcoins.
All exchange houses, whatever their type, act as intermediaries. That is why in the end you will have to pay some type of commission.
What types of expenses you have to pay?
- Commissions according to the payment method
Although Exchanges do not usually charge this type of commission, the payment issuer does. So that both when buying cryptocurrencies, as when depositing money in your wallet account etc. you will probably have to pay X commissions. To these will have to add the costs for currency exchange, for example: when buying Bitcoins with Euros.
- Commissions for each transaction
This is basically the spread or commissions that are earned from each transaction. They are calculated according to the volume traded and can be fixed or variable (depending on market prices).
- Commissions when withdrawing the balance
As it happens when depositing money in your account or buying cryptocurrencies, when withdrawing your balance from the Exchange you will surely have to assume two commissions: the first according to the payment method (if you prefer to receive the balance at your bank account, PayPal, debit card, etc.); the second, by currency exchange (in case of receiving, for example, your Bitcoins in Euros).
When buying cryptocurrencies or depositing your money in an exchange house, you will be able to choose between different payment methods:
- Credit and debit card: it is usually one of the most expensive options, with commissions of around 3%.
- PayPal: like card payments, PayPal is one of the most expensive options, around 3-4% commissions.
- Bank transfer: without a doubt one of the most popular and widespread methods, around 1% of commissions.
- Deposit in cryptocurrencies: if you are looking to buy cryptocurrencies from scratch, this option does not work for you. However, if you already have some digital currencies and want to exchange them for others or deposit them in an Exchange, you can generally do it with 0% commissions.
Wrapping up, I want to suggest you NDAX.IO, which is one of the best cryptocurrency exchangers in the cryptocurrency market.