I was curious how Bitcoin is bought and sold on exchanges. As in who buys my Bitcoin when I sell? Who am I buying from when I make a purchase?

This led me to discover what a market order is. I'm pasting the reply from

Chat GPT here for those who are curious:

When you buy Bitcoin on Coinbase or a similar exchange without placing a limit order, you are likely using a market order. A market order is an instruction to buy or sell an asset immediately at the best available price. In this case, you are not specifying the price you want to pay, but rather you are accepting the current market price determined by the exchange's order book.

Here's how it works:

Market order: When you place a market order, you're instructing the exchange to execute the trade as quickly as possible at the best available price. This means you're buying from the lowest-priced sell orders (asks) in the order book.

Order book: The order book is a list of all buy and sell orders placed by users on the exchange. Sell orders are sorted in ascending order, with the lowest ask price at the top of the list.

Trade execution: When you place a market order, the exchange's matching engine will automatically fill your order by matching it with one or more sell orders in the order book, starting from the lowest ask price. The price you pay will be the weighted average of the ask prices for the amount of Bitcoin you are buying.

Price determination: The specific price you pay for Bitcoin when using a market order comes from the existing sell orders in the order book. The more liquid the market, the less likely your market order will cause a significant change in the price.

It's important to note that market orders can be subject to slippage, which is when the price you end up paying is different from the price you saw when you placed the order. Slippage can occur if the market moves quickly or if there isn't enough liquidity to fill your order at the displayed price. For this reason, some traders prefer to use limit orders, which allow them to specify the maximum price they're willing to pay when buying or the minimum price they're willing to accept when selling.