Bitcoin Forum

What is there to prevent me from setting up my own bitcoin exchange, slowing fiat and/or bitcoin withdrawals to a crawl, and then profiting off the arbitrage once prices start to diverge from other exchanges?

If I understand correctly, bitcoins on Mt. Gox were initially more expensive than that of other exchanges because it was more difficult to withdraw fiat from Mt. Gox. So people were willing to pay a premium to withdraw bitcoins instead of waiting weeks/months for fiat withdrawals to be processed. That is, until the February crisis. Then the opposite happened and people sold off their bitcoins and turned to the safety of fiat even though Mt. Gox wasn't processing withdrawals for either fiat nor BTC at the time.

Had Mt. Gox been solvent during the February crisis, there would have been a massive arbitrage opportunity for its owners. Mark could have bought GoxBTC for ~$100 and sold them on BTC-e for five times that amount. Then once enough profit was made, he could start honoring withdrawals again and it would be like nothing had ever happened and business would be back to normal.

Only technical and marketing ability (and possibly legal repercussions depending on where you are located).

If you happen to be in the U.S., one of the biggest hurdles you are likely to encounter will be finding a bank that is willing to work with you (somewhere to receive and store the fiat that is sent to your exchange).

If you can figure out how to get an exchange up and running (and can avoid any legal repercussions), there is currently nothing preventing the ideas you present.