How do Bitcoin Exchange Rates Work?

What Affects the Cost of Trading Crypto
By 
Coin Cloud Team
, published on 
November 21, 2020
How do Bitcoin Exchange Rates Work?

When it comes to trading crypto, one of the most important factors for users is often price. How much will it cost me to trade this crypto? And how can I make this profitable?

There are two main factors that go into the cost of trading crypto. The first is what you use to trade the crypto, and the second is the price of the digital currency itself.

Types of Exchanges

If you’re going to buy or sell cryptocurrency, you pretty much need to use some type of exchange. There are basically three types of tools you can use to change fiat currency into cryptocurrency:

1. Third-party online exchanges 2. Peer-to-peer exchanges 3. Cryptocurrency kiosks

Some of the big names of crypto exchange websites include Binance, Kraken, and Coinbase. Exchanges like these make the process of trading Bitcoin a lot more versatile and often easier (not to mention less seedy) than peer-to-peer (P2P) trade, which requires you to deal directly with another person.

Cryptocurrency kiosks, also called Digital Currency Machines or Bitcoin ATMs, are physical machines that allow you to do the transaction in person, buying (and/or selling) crypto for cash. This includes Coin Cloud as well as some other brands, most of which primarily offer the ability to buy Bitcoin rather than cash it out … while every Coin Cloud machine lets you do both (and 30 altcoins as well).

Of course, the majority of crypto exchange sites and machines have a fee or exchange rate for using their services. This can add to how much it costs you to trade your Bitcoin, but they usually aren't too strenuous unless you are trading very large sums of crypto.

The Price of Security

So, you know how if you want a good lock for your front door, you need to pay for it … and it costs even more for a high-tech alarm system or state-of-the-art safe? Well, same goes for everything, really. You pay for security, safety, speed, quality and other benefits.

While it’s probably possible to find exchange sites that don't charge a fee at all, these options could potentially pose another threat: lack of security. When paying a fee at a Bitcoin exchange you are paying for both their efficiency and for the security they provide to you and your money.

This safety and security can come from a variety of encryption-based services they provide during your trade. These exchanges charge you because they are taking extra measures to protect your cash. Not only that, but exchanges that charge more often provide other services that free exchanges do not. For example, with Coin Cloud you get a wide range of altcoins, the ability to buy and sell, free education and daily phone or email support.

If an exchange does not have any fees, it is reasonable to question the degree of safety and security that’s involved in these transactions. Therefore, you’re probably willing to pay extra for the peace of mind that comes with knowing your crypto won’t get lost or stolen during the transaction.

The Value of Bitcoin

As you might expect, the actual value of Bitcoin at the time of trading also affects how much the transaction will cost. That’s kind of a no-brainer, since you know that almost everything fluctuates in price, and you pay more when the value is higher. That goes for cars, clothes, food, jewelry, technology and just about everything else.

The price of Bitcoin is determined by a variety of factors. The most obvious one is the market and the people trading it. Depending on how many people are using Bitcoin and the varying interest in it over time, this is one of the main factors that changes the value of the currency. News events, major announcements and other seemingly unrelated data can also have a surprising effect on its value.

But Bitcoin has a few constants that regulate its value as well. For example, because it’s finite with a decelerating rate of production, you can’t just create more Bitcoin like you can the United States Dollar (or any fiat currency, for that matter). Similar to natural resources like diamonds or gold, that makes Bitcoin theoretically more valuable than something with a higher or unending supply.

Disclaimer: The information and views supplied on the Coin Cloud blog are for educational and entertainment purposes only. We are not financial advisors, so please do your research and consult with a trusted financial specialist before investing your money.

What is Coin Cloud?

Founded in 2014 in Las Vegas, Nevada, Coin Cloud is the leading digital currency machine (DCM) operator. With over 4,500 locations nationwide, in 48 states and Brazil, Coin Cloud operates the world’s largest and fastest-growing network of 100% two-way DCMs, a more advanced version of the Bitcoin ATM. Every Coin Cloud DCM empowers you to quickly and easily buy and sell over 40 cryptocurrency options with cash.

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