Arbitrage

[drdops]

Hi folks

Only been following bitcoin for the last few months.
I am now in the process of opening accounts at bitstamp and mtgox. Been wondering about the price differences between the various exchanges- seems there is regularly $5/6 variation between bitstamp and mtgox.
Why are there price differences?
Is it related to liquidity?
What are the possibilities for buying on one exchange and selling on another?
Do fees and transaction times make it too difficult?

Anyone care to share their experiences and advice?

[andylondon]

I looked at this with Bitstamp and Mt Gox, where the price difference can be 7-8 USD. This has happened on the last two weekends, and will probably only last while Mt Gox has issues with USD withdraw. Maybe this will be resolved soon as they have registered in the US as a money transfer business.

E.g.

1. Buy BTC at say $100 at Bitstamp, transfer the Bitcoin to Mt Gox, sell at $110.
2. Now wait 2 weeks for Mt Gox to transfer your fiat funds, so you can repeat the process.

After accounting for bank transfer fees, currency conversion fees (your profit is in USD but I have a GBP bank account), the return would be less than 5% per transaction I guess. Break out a spreadsheet.

Andy.

https://support.mtgox.com/entries/21649594-Withdrawals-and-Deposits now says 3 weeks for SEPA withdraw.

Some working out with a spreadsheet shows that in a 100 buy at Bitstamp / 105 sell at Mt Gox arb, accounting for exchange fees and the 1% SEPA withdraw fee at Mt Gox, the net would be $3.83. If you did this arb with 10K USD then it might be worth it.

There is also a step 3. Move fiat funds back to Bitstamp, and there will be a bank transfer fee here as well.





 

[DrGregMulhauser]

Yes, the Mt Gox USD/BTC has been out of whack since they announced a two-week temporary closure of the USD withdrawal facility on 20 June -- artificially increasing the USD-based demand for BTC, which faces no such restrictions.

As for arbitrage between exchanges, Seal had a pretty good go at it via an automated bot, with reportedly great results:

https://bitcointalk.org/index.php?topic=114351.0

I think the opportunities in this space have been reduced somewhat by auto-routing to the best price exchange, such as that available on Bitfinex, but no doubt if there's still money to be made via inter-exchange arbitrage, someone will do it. In my view, though, it would not be remotely worth a human's time to do it manually, when machines can do it so much more efficiently.