Buying and selling bitcoin - why such a difference in both these prices?

[donnashim]

ok I'm trying to work out how I can make some money from selling BTC at a high price and then buying in at lower (and then selling again at higher) but the exchanges are messing with my head! BTC price fluctuates £100s every minute but I can't find a way to buy in and sell and make any money.

For example on localbitcoins.com lets say 1 BTC is valued at £8500. If selling 1 BTC you can get £8550 (best price) and to buy 1 BTC is £8900 (at the same time). So there is £350 difference in buying/selling price and buy price is £400 above actual BTC value.

If 1 BTC then dropped to £8400, BTC buy rate would be £8800 (so more than what I sold for at £8500!). So I really then need to wait for BTC to drop to £8000 to make £100?

Thanks in advance (btc newbie)

[LtMotioN]

Its because this is a supply and demand economy, there will always be some difference in price across exchanges.
Say someone  sells 1000 BTC in one shot on exchange A, The price was 12000 USD on exchange A before he sold and is now 11200 after he sold. Lets say that coinmarketcap  reports an average of 12000 also before the sale.
Exchange B will not be impacted by this sell, a few minutes later if coinmarketcap updates with a new average price (lets say to 11800) then people at other exchanges will follow suit if BTC is worth 12000 on theirs.

Not sure how else to explain this, but since its seperate markets  there will always be a price difference, just trade on one exchange and it doesnt really make a difference to you

[bitperson]

In addition, even assuming zero volatility, the price at which an exchange buys a coin would always be lower than the price at which the exchange sells the coin. That’s how the exchange makes its profit.

[nitinkp47]

I have noticed the same trend. I think its just that exchange are trying to make profits in between.
At coinbase the difference is maximum. Thats why I use gemini to buy BTC. The rate at Gemini I found very close to actual value.

[HabBear]

Its because this is a supply and demand economy, there will always be some difference in price across exchanges.

This isn't the answer. The OP is not talking about difference in price between exchanges.

For example on localbitcoins.com lets say 1 BTC is valued at £8500. If selling 1 BTC you can get £8550 (best price) and to buy 1 BTC is £8900 (at the same time). So there is £350 difference in buying/selling price and buy price is £400 above actual BTC value.

The difference you're seeing is called "the spread" and it's the amount of price difference that the exchange gets to keep, as income, for making a market in the investment. In this example it's Bitcoin, but the spread exists in every investment market (including gambling!)

So, long story short: This is normal.

Now you can try to find an exchange that offers a very narrow (small) spread. Although it may not always be consistent. Local Bitcoins probably has the worst prices because the market isn't very efficient. Just my opinion.

[ankurguta87]

Technically its because of supply and demand economy but I feel exchanges are playing games as well due to lack of regulation. Buy this way exchanges are making huge profit.