what the heck triggered that spike?

[Grinder]

Depends on what "quickly" means to you. We've been waiting for arbitrage since other exchanges started to appear, which is what - more than a year now? Instead, they all simply follow MtG rates worldwide like a bunch of zombies. 

Quickly usually means as soon as the bots notice, which is what makes the exchanges follow MtGox. If you're trying to do it manually you'll usually be too slow and the trades will be too small to make it worthwhile.

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[420]

Depends on what "quickly" means to you. We've been waiting for arbitrage since other exchanges started to appear, which is what - more than a year now? Instead, they all simply follow MtG rates worldwide like a bunch of zombies. 

Quickly usually means as soon as the bots notice, which is what makes the exchanges follow MtGox. If you're trying to do it manually you'll usually be too slow and the trades will be too small to make it worthwhile.

so how do these bots run? custom software?

[molecular]

The B exchanges are a joke, because they all still follow MtG and its pumpNdump teams up and down. Pathetic!  

Any price difference leads to arbitrage, which traders will quickly take advantage of and close the price gap.

The problem with timely arbitrage is moving the FIAT from exchange to exchange.

[Grinder]

so how do these bots run? custom software?

Yes.

[BkkCoins]

The B exchanges are a joke, because they all still follow MtG and its pumpNdump teams up and down. Pathetic!  

Any price difference leads to arbitrage, which traders will quickly take advantage of and close the price gap.

The problem with timely arbitrage is moving the FIAT from exchange to exchange.

To do arbitrage you need to have sufficient funds on account at each exchange to allow for the time to move funds and rebalance accounts.

The following of exchanges is precisely why you know arbitrage is happening. That's what it does - it makes exchanges follow each other. The reason they follow MtGox is because it has the order depth. If another exchange moved away from MtGox and also had sufficient depth available then MtGox would follow it.

ie. If I sold a large amount of Bitcoin on exchange X, once I used up it's available buyers, arbitrage would bring more buyers who would then sell on MtGox and cause it's price to follow downwards. It's faster and cheaper to move the Bitcoins than the fiat currency so the response is asymmetrical.

[molecular]

The B exchanges are a joke, because they all still follow MtG and its pumpNdump teams up and down. Pathetic!  

Any price difference leads to arbitrage, which traders will quickly take advantage of and close the price gap.

The problem with timely arbitrage is moving the FIAT from exchange to exchange.

To do arbitrage you need to have sufficient funds on account at each exchange to allow for the time to move funds and rebalance accounts.

yes. and there is also cost associated with moving the moneys.

The following of exchanges is precisely why you know arbitrage is happening. That's what it does - it makes exchanges follow each other. The reason they follow MtGox is because it has the order depth. If another exchange moved away from MtGox and also had sufficient depth available then MtGox would follow it.

ie. If I sold a large amount of Bitcoin on exchange X, once I used up it's available buyers, arbitrage would bring more buyers who would then sell on MtGox and cause it's price to follow downwards. It's faster and cheaper to move the Bitcoins than the fiat currency so the response is asymmetrical.

arbitrage happening is not the only reason for the other exchanges following gox. Another one is everybody using gox as leading price.

[imanikin]

The problem with timely arbitrage is moving the FIAT from exchange to exchange.

arbitrage happening is not the only reason for the other exchanges following gox. Another one is everybody using gox as leading price.

+1 The arbitrage is a neat theory of the future, or the way things should be, which i also hoped would be true back when MtG was the only xchange...

I think it's not true, because we regularly see small 20-30 cent discounts at #2-3 exchanges, from which "the traders" don't "quickly take advantage of and close the price gap."
                                                   
So, we see tall mountains of discounted B there, which would be easy to move, and know from that "the traders" don't actually have even small fiat funds at those xchanges to move B for arbitrage...

When there is a juicy pump and dump going on at MtG, they simply follow that pump & dump's general price levels... 

So, it will be interesting to see which hypothesis is true, when Bitcoin is big enough for the regulators to move into the xchanges. 

(We'll then at least have some certainty that the xchanges are not adding a few zeros to their databases to trade with themselves in order to fleece their new-money "customers" in the consequent pump & dump waterfalls. And we might finally see the pump & dumpers bring us a p2p dark xchange, where they can continue their games... )

[Grinder]

I think it's not true, because we regularly see small 20-30 cent discounts at #2-3 exchanges, from which "the traders" don't "quickly take advantage of and close the price gap."

I doubt you'll see that very often if you compare the order book and not the last traded price, unless the volume is very small. Remember that you have to buy at the sell price on one exchange and sell at the bid price on the other. This spread will usually be too large or the order book too thin for there to be an actual arbitrage opportunity.

[BkkCoins]

I think it's not true, because we regularly see small 20-30 cent discounts at #2-3 exchanges, from which "the traders" don't "quickly take advantage of and close the price gap."

I doubt you'll see that very often if you compare the order book and not the last traded price, unless the volume is very small. Remember that you have to buy at the sell price on one exchange and sell at the bid price on the other. This spread will usually be too large or the order book too thin for there to be an actual arbitrage opportunity.

Not just that spread but also add the cost of moving fiat between exchanges. An arbitrageur is going to include all costs of doing any trade so there is no doubt a few percent for moving fiat to balance, and so anything within a few percent won't be jumped on, even if beyond the spread. I looked at doing this last year, and wrote some code to monitor a few exchanges using their apis, and then decided there was little opportunity even when seemingly reasonable variations happened between exchanges.

Spread + 2x trade fees + fiat transfer fees + opportunity cost on balances + risk of exchange hacking. I haven't followed anything recently so I don't know what's going on with the prices except a casual glance each day.

[genuise]

Here at bitcoin-analytics.com we provide exactly this tool which helps to see most (not all yet) arbitrage opportunities.

The key feature is that percentage and absolute value of potential profit depends not only on the best price but also on volume of funds you consider.

The arbitrage tool allows you to analyze a set of existing arbitrage opportunites depending on volume.


here is a small explanation

[imanikin]

Thanks! Looks like a nice tool for the traders!

So, assuming you guys are right, seems that the MtG pump & dumps - whether they are generated by MtG  trading with itself or not - will continue in the foreseeable future, because among other reasons at steadier rates "the arbitrage" is not profitable enough...

The non-"traders" and the merchants will just have to put up with the rate instability, and constantly pay exchanges and processors (aka "the traders"?) to convert back to fiat on both ends to avoid bigger losses...

And some of our members here will continue to wonder why they "can't give Bitcoin away" to their friends these days, or donate it to Wikipedia, or why widespread adoption hasn't happened yet... 

I guess, that's just life in the "truly free market".