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How does the exchange work?

The Coindirect exchange is a platform that connects potential buyers with potential sellers. It allows them to exchange various digital currencies.

On the one side of the exchange, you have a seller who has e.g. 1 BTC in their wallet and they’d like to sell that BTC at a particular price (usually at a price higher than what they bought it at). They would like to get ETH in exchange for their BTC, so they would choose to sell on the BTC-ETH market. The seller would create a limit sell order saying: “I want to get 0.08 ETH for my 1 BTC.”  This is called market making, since they are making an order and adding liquidity to the exchange.

On the other side of the exchange, you have a potential buyer. The buyer has ETH in their wallet and they’d like to buy BTC at a particular price. The buyer can choose to either fill an existing order by paying 0.08 ETH for the seller’s BTC above, or they can create a new limit buy order saying: “I only want to pay 0.07 ETH to buy 1 BTC.” If the buyer goes with the second option, they are also seen as market makers, since they are adding liquidity to the exchange in the form of the quoted currency.

We now have two orders on the exchange (visible in the order book), one saying they want to sell their 1 BTC for 0.08 ETH and one saying they want to buy 1 BTC for 0.07 ETH. In this case, the market hasn’t met, since the buyer and seller don’t agree on the price.

More buyers and sellers will then go to the market and create their own orders, at prices higher or lower than the previous orders. Eventually, the point will come where the market meets, where there is a buyer and a seller that agrees on a price. In that case, the order will be completed and filled and will be removed from the order book. The order will then be viewable in the trade history.