Basic beginner question: What happens to tokens you held when you withdraw...

[srs104x]

What happens to your tokens you held when you withdraw them to your bank account/paypal/etc from an exchange?

I never actually thought about this, nor do I think many have. What does the exchange do with the tokens you had in your exchange wallet when you withdraw them as dollars to your paypal/bank account/etc?

(my guess is they are burned forever?)






I tried asking this question word-for-word the same on a reddit crypto thread and the post was immediately auto deleted and my account banned for 7 days. Lol. What is WRONG with that site??
So I created an account here just to ask this question. I am curious about what the exchange actually does with the tokens you held in your wallet once you withdraw. Is it just as simple as it gets burned? Does the exchange re-appropriate it somehow else? It might be more complicated than most know. So I am curious if any experts really know.

[ecdsa123]

never buy tokens:)

why?  hmm tokens are made for foolish people by very smart people - because they are smart they want your money because you are dump:)

[srs104x]

Lol! Nice response. Thanks I guess?
I only use exchanges for one purpose. Well two. To initially buy my crypto aka onboard from fiat money from bank account. And then to move whatever token I've been hodling to USDT to hold once it's reached gains during a bitcoin (and consequently altcoin) rally. To hold the value of the gains until the next dip in the market, at which time will be to re-buy the dip.
I am not that dump

Although I have profited significantly over the last couple of years using this method, I have never actually withdrawn any crypto back to my bank account yet. (no need yet). But I'm sure it's a fairly straightforward process just like it is to buy crypto with fiat money. My question was only about the technical side of how exchanges work..... because I get too curious about things!

[jackg]

Whenever you do a trade, there's a taler and a maker for the transaction.

The tokens/coins just go to someone else if you exchange them for something else and that something else comes from them.

If it's a dex like uniswap, a similar thing happens but you're just interacting with a liquidity pool that takes your token and gives you a value for it at current rates.

[Bitcoin_Arena]

It depends on how you sell your tokens in exchange for the fiat

if you using the instant sell feature for fiat into your paypal or bank then that means, you will sell the tokens to an exchange who then act as a market maker (or place an order/sell order that a future buyer (market taker) might obtain tokens from when they are buying using fiat from a bank.

In other words for every token you sell, the exchange will place a sell order for future potential buyers to buy from and vise versa depending on the market liquidity and depth.

if it's a pro version, you mostly deal directly with other buy and sell traders.

[stomachgrowls]

What happens to your tokens you held when you withdraw them to your bank account/paypal/etc from an exchange?

I never actually thought about this, nor do I think many have. What does the exchange do with the tokens you had in your exchange wallet when you withdraw them as dollars to your paypal/bank account/etc?

(my guess is they are burned forever?)

Burned forever? NO.

Whenever you do make up decisions on selling your coin into USDT and would be later on to be withdrawn on fiat form or directly sell it on fiat conversion then those coins would really remain
into exchange platform because we know that sellers and buyers are present which means it is really just playing around in the hands of market makers.
Exchange are really just getting revenues out of those trading fees and commissions.

[Silberman]

What happens to your tokens you held when you withdraw them to your bank account/paypal/etc from an exchange?

I never actually thought about this, nor do I think many have. What does the exchange do with the tokens you had in your exchange wallet when you withdraw them as dollars to your paypal/bank account/etc?

(my guess is they are burned forever?)

Do not worry you are not going to get banned for something like this in this forum, now about your question, this is easy, exchanges are named like that for a reason, whenever you want to sell your coins you open a position in which you set a price for which you want to sell your tokens, then someone else decides to acquire the token and your coins are bought from you and exchanged for fiat, the exchange is just a facilitator of these transactions and obtains a small commission every time there is a transaction.

[cryptoaddictchie]

In my opinion its not burn usually this type of transaction within platform that directly converted into fiat also the same with trade execution, which possibly much lower in price selling since its an automated activity unlike selling on trading exchange since they use a feature for that. Those coins are pobably witheld too and will be used for supply in their platform in case some will buy too using that mode.

[Bobrox]

I think really basic question from OP about what happening with his token after withdrawing to be cash money, you will convert or trade your token to be BUSD or USDT depending exchange market support which one pair. All your token investing before buy the other people on their account exchange market. You withdraw after your coins have been sold exactly with BUSD to be your local currency money, usually Binance have support trade with several local currency pair like in my country have BUSD/BIDR.

I think all your coins when trading buy the other people around the world when using global exchange market like Binance, but if you use local exchange market for trading usually your people coming from the same country have buy your coins. The same when you success trade or buy several altcoin you have taking other person who sell their coins before withdrawing to cash money.

[srs104x]

Thanks for the all the replies! Makes more sense now.

Now a follow-up question. What if everyone on an exchange wanted to withdraw all of their money from a certain token (lets say all bitcoin, wants to immediately be withdrawn by everyone) to their bank accounts. And no one has any buy orders on the exchange for bitcoin. So it's all just selling action and all bitcoin on the exchange wants to be withdrawn as fiat money to banks. What happens to the exchange then? To the bitcoin tokens? Where would they go.

I guess the term for this in banking world is called a "bank run". The bank only has 10% or so of the money actually available at any given time. So 90% of customers would be completed f****d in this scenario trying to withdraw their money. But what happens to crypto in this case?

[Review Master]

Thanks for the all the replies! Makes more sense now.

Now a follow-up question. What if everyone on an exchange wanted to withdraw all of their money from a certain token (lets say all bitcoin, wants to immediately be withdrawn by everyone) to their bank accounts. And no one has any buy orders on the exchange for bitcoin. So it's all just selling action and all bitcoin on the exchange wants to be withdrawn as fiat money to banks. What happens to the exchange then? To the bitcoin tokens? Where would they go.

I guess the term for this in banking world is called a "bank run". The bank only has 10% or so of the money actually available at any given time. So 90% of customers would be completed f****d in this scenario trying to withdraw their money. But what happens to crypto in this case?

First of all, you need to understand about MM (Market Maker) as MM provides liquidity on both side of buy and sell option in every exchanges. So there will be buy or sell order even everyone wants to withdraw fiat into their bank account. Not only that, exchanges have fee for both maker and taker in every trade. As a result, they got so much reserve funds in their cold wallet. As you are learning about these things, i would suggest you to google or search on youtube regarding cold & hot wallet in the meantime.

So exchanges won't face any problem in such situation, however market will be more volatile. Also long term hodler might take that chance to buy more if that's kind of situation occurs in worst case scenario.

[merekamo]

Well, first let's see what happens when you have a normal cryptocurrency exchange (no fiat support) like Bittrex, Poloniex or Binance. The obvious answer is that those companies are not banks so they can't just hold the tokens for you.

You need to know what blockchain the token is on, where is the market to sell it, and how to buy "gas" for transaction fees.

Once it reaches your personal wallet, these new tokens can be sent wherever you want such as your bank account, or you can send tokens to other exchanges.

[jrrsparkles]

What happens to your tokens you held when you withdraw them to your bank account/paypal/etc from an exchange?

I never actually thought about this, nor do I think many have. What does the exchange do with the tokens you had in your exchange wallet when you withdraw them as dollars to your paypal/bank account/etc?

(my guess is they are burned forever?)

You can't actually withdraw your tokens to bank account or wallets like paypal, you can only withdraw the Fiat balance of your exchange to bank account but if you have tokens with value then you can trade them for fiat in the exchange then you can withdraw it.

If you withdraw tokens to wrong wallet address or the wallet which doesn't support your tokens then you can consider its burned forever.

[srs104x]

Thanks for the replies. I'm understanding more about how exchanges actually work now! It's very interesting. And very different from how I imagined.
Thanks again to all who replied.

[vv181]

Now a follow-up question. What if everyone on an exchange wanted to withdraw all of their money from a certain token (lets say all bitcoin, wants to immediately be withdrawn by everyone) to their bank accounts. And no one has any buy orders on the exchange for bitcoin. So it's all just selling action and all bitcoin on the exchange wants to be withdrawn as fiat money to banks. What happens to the exchange then? To the bitcoin tokens? Where would they go.

I guess the term for this in banking world is called a "bank run". The bank only has 10% or so of the money actually available at any given time. So 90% of customers would be completed f****d in this scenario trying to withdraw their money. But what happens to crypto in this case?

You are misrepresenting the number on the exchange is an imaginary number or can be printed as they wish. Regulated centralized cryptocurrency exchange and a bank are different. The most likely scenario in cryptocurrency is when the exchange itself is a scam, thus they run with all of the customer cryptocurrencies.

But let's say, I follow your hypothetical scenario, if there are no buy orders, then simply the bitcoin that everyone had will not move a.k.a not being sold, thus they can't have any FIAT. And the bitcoin is frozen because there isn't any activity. Let's say even if in one exchange the selling pressure is way bigger than the buy, well the market will reach its own equilibrium because there is an arbitrage opportunity.