price difference on various marketplaces - beginners question

[vlom]

Hi

before buying bitcoins i have a simple question.
while posting is the price per btc in $ is

on bitstamp: 241.51
on poloniex: 239.00
on hitbtc: 252.60.

please explain me why such big differences?

thank a lot

[Rumichbit]

There are a variety of variables that affect Bitcoin pricing on the exchanges. Some are:

Market size
Exchange volume
Price of entry

Market size: Relatively speaking, the market for Bitcoins is small. In April of 2013 it was about 1.2 billion USD, and a few days later dropped to below 750 million USD. That's a small market cap, which means, among other things, that there's less consensus on the price to the BTC. This is the capitalization for all mined bitcoins and includes coins that have been lost, so the real value is something smaller. Each exchange is a subset of the total market, so those markets are even smaller, which allows for greater variation.

Exchange Volume: For all the coins that have been mined, the quotes are only from online exchanges, which are a small set of the total coins that have been mined. If only a quarter or less are in play, then the swings can be pretty dramatic. Since the volume is limited, and people don't take full advantage or arbitrage, different prices can and will exist on the different exchanges.

This happens with foreign currency exchanges too. However, with professional traders, billions of dollars, and serious automated trading the differences are in fractions of a percent.

Price of entry: It's relatively cheap to enter the BTC market and cheap to trade. Furthermore, if you mined BTC when it was trading for fractions of a dollar, or even $30/BTC, there's no issue unloading it. With a low price of entry people are less serious about how the trade their BTC.

Fundamentally, BTC is a small, highly speculative, irrational market. Each exchange is a small, highly speculative, irrational market. That's why the spread is so great.
Hope helps.

[Za1n]

Plus I will point out that on Poloniex the price is actually quoted in USDT which is Tether (https://tether.to/). So while in theory it is worth the same as USD, due to Tether itself being a cryptocurrency, it seems to trade at slightly less than a dollar, along with the fees to exchange it into real currency, etc., means that trades against it, such as the BTC/USDT on Poloniex tend to be lower than exchanges trading against actual USD.

[coinableS]

Just like when you have 3 grocery stores nearby, they all carry apples but the prices are usually a little different. Different exchanges have different prices because they have different buyers and sellers. Each market is individual. Although they all tend to follow the same direction (up, or down) the actual price is usually a bit off by a few dollars.

[ikydesu]

@Rumichbit good explanation.

that helps. thank you.

but now the question is: buying in bitstamp and selling on hitbtc. and buying on bitstamp and ...

Actually you can take advantage on this condition, it's called arbitrage. Which in the world of economics and finance is a practice to take advantage of price differences that occur between the two financial markets.

[winspiral]

Just like when you have 3 grocery stores nearby, they all carry apples but the prices are usually a little different. Different exchanges have different prices because they have different buyers and sellers. Each market is individual. Although they all tend to follow the same direction (up, or down) the actual price is usually a bit off by a few dollars.

Right...
and you only talk about the price on 3 market places.
In fact we have 1000sands and 1000sands places where the price is different.

Take all the exchangers sites:
Each exchanger site is a little market.

When you buy or sell something with bitcoins...you are a micro market and you influence somewhere the price of bitcoin.

[Mickeyb]

@Rumichbit good explanation.

that helps. thank you.

but now the question is: buying in bitstamp and selling on hitbtc. and buying on bitstamp and ...

Actually you can take advantage on this condition, it's called arbitrage. Which in the world of economics and finance is a practice to take advantage of price differences that occur between the two financial markets.

You can take an advantage but it is a lot of work and it's not at all risk free. You have to be registered on all of the exchanges where you want to do arbitrage. This means verification processes, KYC, etc.. done on all of the exchanges.

Then you have to fund all of the exchanges with Fiat. Also note that some exchanges take big percentages on withdrawals of Fiat, for example btc-e.

When you did all of this, you have to be quick and if you are doing this it means that you are holding funds on the exchanges which is a big risk, you never know which one will go bust on you.

[countryfree]

You know what, if look for the price of a bottle of milk in the groceries stores around your place, you'll come up with different prices, too. Same with bread, beef, gasoline, cars, guns, drugs, prostitutes and about everything else.

[gentlemand]

Price can also be influenced by how difficult it is to get fiat in and out of certain exchanges. BTC-e goes through third party payment processors and the fees can often be pretty darned high. That's why their price is often a little lower and it's less liquid than elsewhere.

[addy boy]

bitcoin price is defined my demand and supply in a market or we can say the amount of buying and selling by the peoples/users in the market will define its price and as we know different market has different demand and supply so bitcoin price is different in each market

[pooya87]

that helps. thank you.

but now the question is: buying in bitstamp and selling on hitbtc. and buying on bitstamp and ...

what you are explaining is called arbitrage trading , and it is a financial term. https://en.wikipedia.org/wiki/Arbitrage

in bitcoin market a lot of others are doing it but you need to have a strong coded bot to do this and be fast about it or lose the opportunity of getting profit.
on the other hand the big bitcoin exchangers have large volumes and usually are at the same price level at all times so the profit that you can get from trading with this method would be minimal, and sometimes even less than the fees you have to pay.

[ikydesu]

@Rumichbit good explanation.

that helps. thank you.

but now the question is: buying in bitstamp and selling on hitbtc. and buying on bitstamp and ...

Actually you can take advantage on this condition, it's called arbitrage. Which in the world of economics and finance is a practice to take advantage of price differences that occur between the two financial markets.

You can take an advantage but it is a lot of work and it's not at all risk free. You have to be registered on all of the exchanges where you want to do arbitrage. This means verification processes, KYC, etc.. done on all of the exchanges.

Then you have to fund all of the exchanges with Fiat. Also note that some exchanges take big percentages on withdrawals of Fiat, for example btc-e.

When you did all of this, you have to be quick and if you are doing this it means that you are holding funds on the exchanges which is a big risk, you never know which one will go bust on you.

You right. People who wants to take a big risk, they will earn big profit from it.

For beginners use an altcoin exchanger to learn arbitrage.

[Kagekatsu]

Never made arbitrage among exchanges, I think it's something for real professional trader, or anyway for someone with a good experience, I won't say to a newbie to try it, not at his very begins in crypto, and not with bitcoin. Maybe with some altcoin in minor exchange, with faster confirmation and taking less risk.

[Amph]

Never made arbitrage among exchanges, I think it's something for real professional trader, or anyway for someone with a good experience, I won't say to a newbie to try it, not at his very begins in crypto, and not with bitcoin. Maybe with some altcoin in minor exchange, with faster confirmation and taking less risk.

you don't do it manually usually those thing are done with a bot, therefore there is no need to be very experienced, the bot will do everything for you

there re a good profit to be made with enough volume, if you have one of those bot

[Bardman]

I always wondered if someone could make profit from the different prices on different markets, im not sure if the price in LTC/BTC ratio change that much between exchanges because you could really make profit from it with large amounts of money, right?

[gentlemand]

I always wondered if someone could make profit from the different prices on different markets, im not sure if the price in LTC/BTC ratio change that much between exchanges because you could really make profit from it with large amounts of money, right?

Yup. It happens in all areas of finance. It's effectively free money so investment banks have whole departments devoted to nothing but.

[Kagekatsu]

Never made arbitrage among exchanges, I think it's something for real professional trader, or anyway for someone with a good experience, I won't say to a newbie to try it, not at his very begins in crypto, and not with bitcoin. Maybe with some altcoin in minor exchange, with faster confirmation and taking less risk.

you don't do it manually usually those thing are done with a bot, therefore there is no need to be very experienced, the bot will do everything for you

there re a good profit to be made with enough volume, if you have one of those bot

I didn't think about bots, never used that, but I think is an investment that has to be done soon or later.

[Mickeyb]

Never made arbitrage among exchanges, I think it's something for real professional trader, or anyway for someone with a good experience, I won't say to a newbie to try it, not at his very begins in crypto, and not with bitcoin. Maybe with some altcoin in minor exchange, with faster confirmation and taking less risk.

you don't do it manually usually those thing are done with a bot, therefore there is no need to be very experienced, the bot will do everything for you

there re a good profit to be made with enough volume, if you have one of those bot

I didn't think about bots, never used that, but I think is an investment that has to be done soon or later.

Bots are OK if they are quality made (well coded) and if you know how to set them up and use them effectively. I have seen threads on this forum where people claim to be making 4-9% of the bots.

The thing is that these are custom made bots, and if somebody makes a good custom bot, he will sure as hell not sell him, he will just keep it for himself, why would you sell and make yourself a competition.

So majority of saleable bots are crap. This is if you are newbie and you are looking to buy bot. If you know how to make a good, quality one, there is money to be made.