Using Bitcoin exchanges

Bitcoin trading is generally done on an exchange. Since Bitcoins can be traded from individual to individual, it is also possible to trade them outside of exchange. We should warn you, however, that your chances of being ripped off will greatly increase. And as we have already mentioned, if someone rips you off, it can be very difficult to recover your money or Bitcoins.

Like wallets, there are many exchanges. The most popular exchange is by far Mt. Gox. In a sense, you could think of Mt. Gox as the equivalent of the New York Stock exchange. The exchange is highly influential in determining Bitcoin prices across the globe and on the few times it has shut down service, Bitcoin values have plummeted. In a very real sense, if Mt. Gox were to collapse, Bitcoin itself might collapse or enter a sort of “Depression.”

When selecting an exchange you have to consider the stability of the exchange in fast changing markets, and also security measures. It may be possible, for example, for a computer hacker to raid an exchange and figure out a way to either manipulate prices or to steal Bitcoins outright. Also, because Bitcoin prices can swing wildly in a short period of time, there is a serious risk that exchanges can destabilize under the wild price swings.

For these reasons, Mt. Gox may be the best exchange to work with. It is the largest and oldest still running exchange. At any given time Mt. Gox accounts for more than half of all Bitcoin transactions. The exchange has been attacked by hackers, and ridden through tough markets on numerous occasions. So far the management and security teams at Mt. Gox have been able to keep the exchange stable, though they have had to temporarily close the exchange for short periods of time on a few separate occasions. We encourage you to examine other exchanges of course, but we will outline how to sign up for Mt. Gox. The lessons learned here can be applied to other exchanges.

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