Several factors contribute to the rate you receive when you transfer between CoinJar accounts of different currencies. The following sections explain these factors.
When you make a transfer within CoinJar (e.g. from your Cash Account to your Everyday Bitcoin account, and back again) you will encounter two sets of prices; a 'buy price' and a 'sell price'. These prices are determined by CoinJar, and regularly adjusted, based on market conditions.
It's important to be aware that prices quoted within CoinJar exist in a set. This set is referred to as a ‘spread’ and is what makes it possible for us to provide instant and seamless transfers between accounts of different currencies. Spread is different from fees or commission, which may be applied in addition for certain transfers.
The spread is a core function that allows CoinJar to be a 'market maker', explained further below.
The 'spot price' can be thought of as the average of the buy and sell price, or 'spread', for a particular currency pair. 'Spot price' is used throughout CoinJar to provide a point-in-time estimate of the value of each account, in a currency you feel most familiar with.
You may set a familiar 'reference currency' from within the Settings page. As an example, if you set your 'reference currency' to Australian dollars, you will see an estimate of the Australian dollar equivalent value for your Everyday Bitcoin account just underneath the account's actual bitcoin balance.
CoinJar allows you to transfer between accounts and currencies instantly and seamlessly. For example, when you transfer from your Cash Account to your Everyday Bitcoin account you're essentially buying bitcoin. Using CoinJar, you don’t have to find another willing trader to sell that bitcoin to you; the trade happens with just a click (or a tap).
In order to do this, CoinJar plays the role of both the buyer and seller simultaneously. This is known as being a 'market maker'.
Paraphrasing from a document published by the UK Government (Minimum obligations of market makers):
[A market maker] is not much different than a grocer except she buys and sells [bitcoin] instead of vegetables. Without grocers, consumers of vegetables would have to buy directly from farmers. What if the farmer isn’t selling when consumers are buying or vice versa?
If there are lots of consumers and farmers in an area then the timing problem is mitigated. Otherwise a grocer can solve the timing problem by providing immediacy for both the farmer and consumer. Similar to a grocer a [bitcoin] market maker buys stock from sellers by bidding for them and sells to buyer by offering to sell to them. As with vegetables, if there are lots of buyers and sellers of stocks then a market maker is not necessary.
Market makers have existed for as long as stocks have been continuously traded.
Updated: 18 Feb 2016 (AS)
Reviewed: 18 Feb 2016 (AS)