Explained: Cryptocurrency Exchanges, Markets and Order-Books
The cryptocurrency industry is going through a dark period right now.
Prices have slipped into a bear market, the market capitalization rate has erased about $1 trillion this year, and regulatory authorities worldwide are cracking down on the sector.
It makes sense that investor sentiment is not exactly bullish for crypto today.
However, this could be a buy-the-dip period for institutional and retail traders who are long on crypto and who missed the latest bull run. In other words, investors can take advantage of the discounts in a broad array of tokens, from Solana to Litecoin to Avalanche.
But if you are new to the industry, it is important to equip yourself with the various terms associated with cryptocurrency. First, let’s learn about cryptocurrency exchanges, crypto markets, and order books.
A cryptocurrency exchange is an online platform where you can buy, sell, trade, and hold digital tokens.The website can also be used to trade one currency for another, such as Bitcoin to Ether or Dogecoin to Doinkcoin.
All exchanges showcase the current market prices of the cryptocurrencies they offer to clients.
Indeed, exchanges have also evolved from the classic days of merely trading your fiat money for crypto. Today, there are three main types of crypto exchanges:
· Centralized Exchange:This is a web platform that allows buyers to engage with sellers in a centralized location where somebody manages their virtual tokens. Also known as CEXes, they will facilitate crypto-to-crypto and fiat-to-crypto trading (dollar to Cardano or euro to XRP).
· Decentralized Exchanges:A decentralized exchange is a substitute for CEX that lets buyers and sellers meet to exchange their tokens. Moreover, a DEX will utilize smart contracts and decentralized finance (DeFi) applications.
· Hybrid Exchanges:And then there is the hybrid cryptocurrency exchange that combines the features of both CEX and DEX, including security assistance, fast transactions, and easy-to-use interfaces.
A cryptocurrency market is merely the crypto industry that exists digitally, functioning similarly to the equities arena on the New YorkStock Exchange (NYSE) or Toronto Stock Exchange (TSX). The crypto market is not centralized and does not have a regulating authority hanging over its head. It is primarily a decentralized system that records transactions and issues new units of virtual tokens.
Cryptocurrencies trade much like other assets: prices are determined by supply and demand, there are buyers and sellers, and platform sexist to facilitate these transactions, whether crypto-to-crypto or fiat-to-crypto.
The ecosystem is split into two entities: protocols and digital currencies. The former has been developed to resolve problems in the industry or broader economy, while the latter has been designed to buy and sell goods with these tokens.
If you have watched any motion pictures about the stock market, you may have heard the term order books. These pieces of paper serve asa sort of behind-the-scenes look into the investment community, such as supply and demand, price imbalances, support and resistance zones, and even market manipulation.
In the finance sector, an order book is a digital list of buy and sell orders to securities or financial assets. The list will identify the number of shares that investors can bid on or what are being offered to others.
Order books also improve market transparency by providing valuable trading information that will lead to better investment decisions.
So, yes, this will apply to stocks and commodities. But it will also relate to cryptocurrencies.
A crypto order book will be similar to conventional order books. Traders will see four critical pieces of information for a crypto trade:bid, ask, amount, and price. At a time when many young digital currencies are prone to manipulation through pump and dump schemes, order books can be valuable tools to navigate the world of digital tokens.
The rise of cryptocurrency was fueled by many young tech-savvy individuals, optimistic about how digital tokens could save the world. Indeed, over the last decade, cryptocurrencies have matured into a trillion-dollar ecosystem, supported by a wide range of parties, be it Wall Street titans or 20-somethings with incredible acumen in the niche.
But now that the speculative bubble has deflated, this could lead to a generational buying opportunity.
And some industry insiders have long argued that winter blanketing crypto would be the best thing right now as it would allow the dumb money to flow to garbage cans and smart money to take over. Consider what Ethereum Vitalik Buterin averred earlier this year in an interview with Bloomberg:
“They welcome the bear market because when there are these long periods of prices moving up by huge amounts like it does — it does obviously make a lot of people happy — but it does also tend to invite a lot of very short-term speculative attention.”
Until then, build your knowledge of the realm, start developing positions, and wait for the next boom. If you’re ready to buy the dip, you can get started with digital currency quickly and easily through Bitbuy, Canada’s most secure exchange platform. In only three steps, you’ll be able to buy and sell crypto. Create your account, add funds, and start investing. It’s that easy.