Where comes and how exchanges gets the bitcoins that I buy?

[Scripture]

When you buy bitcoin on an exchange, you actually buy bitcoin from other users, not the exchange itself.

This may not be a true picture of the whole scenario as we know that exchanges also provide liquidity when starting up and use bots to trade and interact with real traders for buy or sell transactions. It's a general expectation for people to get skeptical depositing their funds into new exchanges until they begin to notice increase in trading volume on the exchange.

Exchanges also have their own funds to provide liquidity, this is very necessary to every exchanges since not all exchanges have a huge users that’s why they still need to provide liquidity especially on fiat pairs. Buyers and sellers will meet up later, but seriously this should be the problem of exchanges anymore, so better not to stress yourself about this one.

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[FanEagle]

Maybe someone who asks this question should be avoiding getting into crypto right away? I would highly suggest to advice OP to stay away from crypto until he learns more about it. We promote learning how to trade, whereas we are telling a person where money in the trading comes from, in TRADING. With maybe like a year worth of hardcore studying, even OP could become a great trader in crypto, you could start earlier but it takes time to be great.

However, that is not right now, anyone who asks such a simple question should stop everything and start learning how trading works and when to buy and when to sell type of things in very in depth details before they start.

[yhiaali3]

It is quite simply that the exchange acts as the intermediary, you deposit money in the exchange to buy bitcoin and someone else deposits bitcoin in the same exchange to sell it, you place a buy order at a certain price and if someone else places an order to sell at the same price then the transaction is done, you get the bitcoin and the other person gets fiat and the exchange gets a fee from both parties in exchange for securing and guaranteeing the deal, after which you can withdraw the bitcoin and the other person can withdraw the fiat.

[so98nn]

Though all the above answers are true and up to the mark, I would like to add up that today’s exchanges have evolved a lot and now they have started to have own back up deposits by means of “holding” the coins and giving our APY% to the users for this staking or hodling activity. Though this might be one of the ways to earn money for us but this is actual forms the liquidity pool for the Exchangers so that they can stabilise the exchanger, it’s earning and pool requirements.

It’s really big stuff that goes around it so in modern exchanger it’s more than just peer to peer exchange!

[Findingnemo]

Hello! I am so sorry if this is in the wrong topic, or if this question is so dumb, but, this caught me:

when I buy some Bitcoin/cripto from one exchange (like Binance, CoinBase...), how does they use my fiat money to get my BTC's? From where they get it?

Didn't found any related doubt, so, if you know how this works, would be awesome to share your answer here!

Thanks!

I deposit Bitcoin to an exchange and you are requesting to buy bitcoin from exchange so its like a marketplace to sell our assets and charge fee for every completed trade.

No exchange is making bitcoin they simply created an interface for people to create trade orders and when one matches with others then trade is done.

[tvplus006]

...Because of hacks, exchanges have to separate their funds into hot and cold wallets. They have to use hot wallets to approve and process withdrawals from users and hot wallets must be topped off regularly. However, they don't store all their fund in hot wallets because when hacks happen, they will lose all exchange treasury...

Participants of trading on a centralized exchange trade in numbers that they see on monitors, since the cryptocurrency is stored on the wallets of the exchange, to which traders do not have access. To ensure security, exchanges must store cryptocurrency on cold wallets, leaving a small portion on hot wallets to ensure uninterrupted withdrawal of funds from the exchange.

[RealMalatesta]

Maybe someone who asks this question should be avoiding getting into crypto right away? I would highly suggest to advice OP to stay away from crypto until he learns more about it. We promote learning how to trade, whereas we are telling a person where money in the trading comes from, in TRADING. With maybe like a year worth of hardcore studying, even OP could become a great trader in crypto, you could start earlier but it takes time to be great.

However, that is not right now, anyone who asks such a simple question should stop everything and start learning how trading works and when to buy and when to sell type of things in very in depth details before they start.

Yea, that’s right. It is clear that the OP doesn’t really know much about how cryptocurrency trading works, or even how the exchanges that facilitates the trade works. It would be good for him to go for a serious study to learn everything about cryptocurrency trading , because if he should go into trading and investment without having the required knowledge, then it is clear that he is just going to end up losing his money. But, it is not bad that he asks this question, as asking question is also part of learning.

If there is something that he doesn’t really understand, then it is good that he asked questions so that those who knows it would explain to him better. I have seen so many comments here and they all explained and answered this question in different ways, so I believe that no matter what, he must have gotten an answer that is very satisfying to him.

[adaseb]

It’s an open market. When you buy on an exchange you don’t get it from Binance but you get it from someone else who is selling while you are buying and your orders are matched.

When you make a market order, most likely you are not trading with a human but basically some market maker. Most maker trades are market makers and bots.

However those market makers got those BTC from someone else who sold it to them on the market. And the cycle repeats over and over again.

[beerlover]

The basic concept of an exchange is to bring together people who wants to sell and buy cryptocurrency. You can take a decentralized exchange as an example: when you create an account on a decentralized exchange and you want to sell your Bitcoin, the exchange pairs you with another trader who wants to buy Bitcoin, and that is how the exchange happens. So, while you are looking to sell your bitcoins, there are also so many other people out there who wants to buy it from you.


Then as for centralized exchanges such as coinbase.com and binance.com as you have mentioned, what these exchanges do is also the same thing, but what makes it different now is that these exchanges are centralized and they try to make it safe for traders by handling these transactions themselves. Which means that your sell goes to the exchange itself and not like the decentralized exchanges where it goes directly to the buyer, so this way it is much safer. I believe that answers your question.