My understanding of the price differential between mtgox and other exchanges is that it takes so freakin' long to withdraw USD from mtgox, and the size of the differential reflects the market's estimation of the probability that the USD currently with mtgox will be lost forever.
But I wonder whether the size of the differential is determined by a different variables, namely: 1) the upper limit of how fast USD can be deposited into various exchanges and 2) the estimated rise in price of btc over time.
Here's a thought experiment to illustrate my thought process:
Suppose an investor decided today to buy and hold a large amount of bitcoin, and wanted to put it all in as fast as possible. What would be the best way to go about it?
I haven't looked into this in a while but afaik (and really I could be wrong here), it's easier to get lots of money quickly into mtgox than into any other exchange. An exchange like coinbase, otoh, currently limits purchase of 50 btc per day to the level 2 users, and it takes a month to reach level 2. If you figure that btc price would be projected to increase by ~ 20 percent per month (which it has done over the last 3 years, once you smooth out the ups and downs), then every one month delay in converting $ into btc would be estimated to result in a 20 percent loss in the resulting value of your investment. So if you had to pick between using coinbase with its one month delay before you can buy as much as you want versus using mtgox where you can buy as much as you want right now, then you would be willing to tolerate up to but no more than a ~ 20% price elevation of mtgox over coinbase.
So here is the hypothesis: that the price differential between exchange A and exchange B is a function, not of how easy (or hard) it is to get USD out (in the case of mtgox), but rather a function of how quickly one can put money in. iow the faster you can deposit large sums of money into an exchange, the higher the price of bitcoin on that exchange.
Since more people are getting into bitcoin than are getting out, I might expect that limits on how fast USD can get deposited into the system would play a bigger role than limits on how fast USD can get withdrawn from the system.
What do ya'll think?
btw I haven't researched how quickly USD can get into / out of various exchanges so I don't really know whether the data fit my theory. Also, please forgive me if I'm just repeating a topic that is already out there -- it's been a while since I've been on the forums
