Cryptocurrency exchange

Almost every first bitcoin purchase happens at one of these companies, because they are where bank money meets a coin balance. Kraken has run since 2011 without losing customer funds, while FTX filed for Chapter 11 on November 11, 2022 with customer coins gone. Same product category, opposite outcomes, which is why what you do after the trade matters.

How it works

An exchange is three businesses stapled together, and only one of them ever touches bitcoin.

The first is a payments business. It pulls national currency in over bank rails: ACH and wires in the United States, SEPA in the euro area, cards almost everywhere, mobile money across much of Africa. The second is a matching engine, software that pairs the highest bid with the lowest offer thousands of times a second and writes down who owes what. The third is a custodian. Customer coins sit in a handful of large wallets the company controls, and your share of them is a row in an internal ledger.

That third part explains most of what confuses new buyers. When you press buy, no bitcoin moves. Your cash balance goes down, your coin balance goes up, and both numbers live in the company's own database. The blockchain only becomes involved at withdrawal, which is a genuine transaction that costs a genuine network fee.

Nearly every large venue runs two price surfaces over the same inventory. One is a simple buy button that quotes a single all-in number with the cost buried in a spread. The other is a professional order book that publishes maker and taker percentages. They sit inside the same account, and picking the wrong one is the most common avoidable cost in buying bitcoin.

Why this matters when you buy bitcoin

Which tab you click usually costs more than which company you signed up with.

Kraken Pro charges 0.25 percent maker and 0.40 percent taker below 10,000 dollars of 30 day volume; the Kraken Buy widget sells the same coins with a spread built into the quote. Coinbase splits its app and Advanced Trade the same way. Binance spot starts at 0.1 percent for both sides with a 25 percent discount for paying fees in BNB, while its card purchases add processing costs on top. The coins are identical in every case.

Custody is the larger decision, and it is decided by whether you withdraw. FTX creditors eventually recovered real money, but their claims were fixed in dollars at the November 11, 2022 petition date, when the estate valued bitcoin at 16,871 dollars per coin. Anyone whose coins were sitting on the platform therefore missed the run past 100,000 dollars in December 2024 entirely. Bankruptcy converts your bitcoin into a dollar claim on a failed company, which is a different asset with a different price.

Continuity is worth checking too, because exchanges retreat from markets far more often than they collapse. Of the 24 exchanges reviewed on this site, several have already closed, been absorbed by a larger brand, or pulled out of a region: Luno, for one, told European customers that euro withdrawals end on August 31, 2026 while its Nigerian, Kenyan and South African businesses carry on. Availability is also local in ways the marketing never mentions, and Kraken still excludes residents of New York and Washington state.

Finally, verify rather than trust. River publishes full proof of reserves and Kraken runs regular proof-of-reserves audits, which lets a customer check that the balance shown in the app is backed by coins the company actually holds. That check is not available at all 24, and its absence is information.

A deposit, a trade, and a withdrawal, step by step

Follow 1,000 dollars through a US exchange and the moving parts separate cleanly.

Day one, you link a bank account and start an ACH transfer. The cash arrives quickly on screen but is typically restricted for several business days, because ACH can be recalled and the exchange is carrying that risk. Day one, you also finish identity verification, which is a legal requirement for the exchange, not a preference.

Day four, the hold clears and you place the order. On Kraken Pro, at the 0.40 percent taker rate, the trade fee on 1,000 dollars is 4 dollars. Your account now shows a bitcoin balance. Nothing has been broadcast to any network, and the balance is an obligation the company owes you.

Day four, ten minutes later, you withdraw to a wallet whose keys you control. Now a transaction is built, signed by the exchange, and relayed to bitcoin nodes worldwide; it confirms in the next block or two, roughly ten to twenty minutes. From that moment the coins answer only to your keys, and the exchange's solvency stops being your problem.

Cryptocurrency exchange vs decentralized exchange

A cryptocurrency exchange takes custody and accepts bank money; a decentralized exchange does neither. A DEX is a smart contract that swaps tokens on one chain, which means it cannot accept a wire, cannot open an account for you, and cannot trade native bitcoin at all. In practice a DEX trades a tokenized claim on bitcoin issued by some custodian, so the trust you thought you removed has usually just moved somewhere less visible.

Cryptocurrency exchange vs peer-to-peer exchange

A cryptocurrency exchange is your counterparty; a peer-to-peer exchange only introduces you to one. On a centralized venue the company quotes the price, holds both sides of the trade, and absorbs the settlement risk. On a P2P marketplace another human sets the price, you pay them directly by bank transfer or mobile money, and the platform's job is limited to holding the coins in escrow and refereeing disputes. That distinction is why P2P survives in countries where exchanges cannot get bank accounts.

Cryptocurrency exchange vs OTC desk

A cryptocurrency exchange fills your order against a public book; an OTC desk quotes you one price for the whole size in private. For retail amounts the exchange is cheaper and instant. For a seven figure order the public book is the problem rather than the solution, because the order itself moves the price against you, which is exactly the service a desk is selling.