Exchanges are vital to the Bitcoin economy because they remain the primary way of obtaining value from one’s Bitcoins, since merchant acceptance of Bitcoin is still quite low. Though eCommerce is relatively eager to adopt cryptocurrency as a payment solution, like in the case of Alibaba or Overstock, brick and mortar is still slow on the uptake. Unfortunately, many people still patronize physical stores and shops where cash or credit cards are infinitely easier to use.

Naturally, a place to turn your Bitcoin into cash becomes an extremely in-demand service. Though it gives people an easy way to grasp the value of their Bitcoin, it also opens the market for speculation. Coinbase and other early exchanges created a relationship between fiat currencies and Bitcoin and changed the name of the game forever. No longer was it about creating a new banking system, or an easier way to trade. It was about hitting the “moon,” “hodling” and making the coin’s price its only measure of success.

The Power of Exchanges
Because exchanges are an avenue to Bitcoin trading, they also have a lot of influence on the price of Bitcoin itself. Many understand that when an exchange adds an altcoin for Bitcoin pair trading, the price of that coin is likely to rise significantly due to a new source of volume. Early buyers of altcoins like NEO have petitioned the world’s exchanges to accept NEO as a tradeable coin, and it’s largely working. In turn for listing popular coins, the exchanges profit from fees (if they even impose them) and the spread.