Here’s a common question. So if someone looks up the price of Bitcoin on one exchange and it’s listed at let’s say $28,450, but on another it’s $28,125, what is going on?
Don’t worry, not to fear, it’s not unusual and there’s no need to feel like something shady is going on. This is due to “price arbitrage” and it’s quite common in the crypto business.
In general, the price of Bitcoin and other cryptos can and will fluctuate from exchange to exchange. Get used to it.
And here’s why this happens:
- Liquidity: Those exchanges with higher liquidity often have prices closer to the global average. Smaller or less liquid exchanges may have wider spreads leading to price discrepancies.
- Market Demand: The demand for Bitcoin and other cryptos can vary between different regions, countries and exchanges based on a host of factors. And high demand on a specific exchange can lead to a premium in a crypto price compared to others.
- Geographical Restrictions: Some exchanges may be restricted in certain countries. That leads to less competition and potentially higher prices due to limited access to crypto in those regions.
- Trading Volume: Exchanges with higher trading volumes are more likely to have prices closer to the global average because more participants are buying and selling at competitive prices. More buyers and sellers the more flush the market.
- Withdrawal and Deposit Fees: Don’t forget that some exchanges charge higher fees for deposits and withdrawals affecting the effective price of Bitcoin for users.
- Market Manipulation: Sadly, in the cryptocurrency market, especially on smaller exchanges, there can be instances of price manipulation that temporarily drive prices away from the overall average price.
- Network Congestion: Bitcoin transactions can sometimes face communication issues causing delays with transfers.
If you are good, really good, you can make some good Bitcoin buying on the low from one exchange and selling on the high on another.