The owner paradox: Bitcoin exchange and the question to hold backcoins back
Since the value of Bitcoin continues to fluctuate wildly in recent years, one question remains the focus of the ecosystem of the digital currency: Bitcoin has the bitcoins with which you are dealing with? In this article we will deal with the subtleties of the operation of these stock exchanges and what happens if you give up an order for the purchase of Bitcoin.
** The basics: What is a Bitcoin exchange?
A cryptocurrency exchange is an online platform with which users can buy, sell or act cryptocurrencies such as Bitcoin. These exchanges act as an intermediary between buyers and sellers and enable transactions without keeping the underlying assets directly.
If you create an account with a Bitcoin exchange, set up a brokerage company in which you can hold and transfer your Bitcoin credit. This means that the stock exchange in its name maintains custody for your bitcoins and enables them to buy or sell them at affordable market prices.
hold backcoins back: the concept
Now let’s deal with the question of whether the stock exchanges have to keep enough bitcoins to cover all “purchase” transactions. In a way, this is true – an exchange must maintain sufficient stocks to ensure that orders can be met and customer requirements can meet without selling or transmitting their own bitcoins.
To illustrate this concept, imagine that you have given up the order to buy 1 million Bitcoin for 10,000 US dollars per coin. The exchange would have to keep about 10 million bitcoins (10,000 coins * 1000) in reserve in order to cover all potential transactions. This is known as a “stop request”.
How the exchange works
If a customer gives an order to buy Bitcoin on an exchange, the platform usually becomes:
- Check the customer identity : The exchange calls for the identification and review of the user’s account information.
- Calculate the purchase quantity
: Based on the market conditions, the exchange calculates how many coins you have to keep in reserve in order to meet the customer’s order (the maintenance requirement).
- Give the transaction from : As soon as the stock exchange has checked the identity of the customer and calculated the required holding amount, the trade is carried out and the Bitcoin is bought at an agreed price.
- Transfer the remoing bitcoins
: After fulfilling the order, the exchange transfers the remaining bitcoins to the new balance of the customer.
Are stock exchanges required to hold backcoins back?
The answer is no – stock exchanges are not required to hold back a certain amount of bitcoin for all transactions. The stop request is more of a question of the company directive and risk management than the requirements for regulatory or compliance.
In other words, stock exchanges can select your own guidelines regarding the holding requirements based on factors such as market volatility, customer demand and operational efficiency. This means that some exchanges may require customers to keep them in reserve compared to other more bitcoins and at the same time fulfill orders without having to sell or transmit their own assets.
Diploma
The relationship between Bitcoin and ownership of their trade bitcoins is complex, which are regulated more by the operational guidelines than the regulatory requirements. It is important to understand how the exchange works and what happens when you give up an order to buy Bitcoin, but it is also important to realize that thesis platforms are not obliged to hold all your own assets back.
As with any investment or asset, it is advisable to carry out thorough research, set clear expectations and carefully manage your risk before dealing with the trade in cryptocurrencies.