Normally you can't just purchase a crypto asset from your bank. Investors and crypto traders intending to buy Bitcoin, Ethereum, or another cryptocurrency need to create an account on a crypto trading platform to exchange your fiat currencies for these digital assets.
A digital currency exchange is a platform enabling consumers to trade crypto assets or digital currencies for other assets, such as other digital currencies or fiat money.
Virtually all crypto platforms are enabled for the buying and selling of Bitcoin and Ethereum, the flagship cryptocurrencies. However, there are many altcoins investors might want to be exposed to. As such, it’s advisable to stick with exchanges possessing a decent number of crypto assets.
Exchanges also act as an intermediary between a buyer and a seller and profiting through transaction fees and commissions.
They may accept credit card payments, wire transfers, or other forms of payment in exchange for digital currencies depending on the jurisdiction.
A cryptocurrency exchange can be a market maker that typically takes the bid-ask spreads as a transaction commission for its service or, as a matching platform, simply charges fees.
Crypto exchange fees can be fixed but are often a percentage of your transaction, though some exchanges charge fluctuating fees based on market volatility.
Unlike decentralized exchanges that do not permit the trading of fiat currencies for digital ones, a centralized crypto exchange permits people to transfer fiat money digitally.
In addition, a centralized crypto exchange usually offers an extra layer of reliability and security when it comes to executing transactions via fiat currencies.
A significant number of newbies also use crypto exchanges in storing their crypto assets within an online account with added security measures such as a username, password, and two-factor authentication offering higher levels of comfort.