Bitcoin rate using different sites

[Yurkov]

So I know about MtGox and how it works and all that, but i'm using VirWoX instead of MtGox to buy my bitcoins and whatnot. Now my question is if VirWoX still affects the economy by exchanging the currencies on that, or other sites?

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[notme]

So I know about MtGox and how it works and all that, but i'm using VirWoX instead of MtGox to buy my bitcoins and whatnot. Now my question is if VirWoX still affects the economy by exchanging the currencies on that, or other sites?

Yes. If the price gets far enough away from the other markets to cover the fees involved, someone will equalize the pricing and take their cut. Of course, this means other people are losing money compared to trading on those other sites, but sometimes it is worth it.

[rebuilder]

Even without arbitrage, a bitcoin sold off gox is a bitcoin not sold on gox, reducing supply on the gox side.

[BitcoinScholar]

Prices will stabilize across markets. If prices get comparatively cheaper on one market more purchases will occur leading to higher demands, more scarcity and more value. If prices were to get comparatively high more selling would occur on that market, more supply, less scarcity and less value.

I was interested in this phenomenon myself. In financial markets there exists something called an arbitrageur. An arbitrageur takes advantage of price differentials in different markets. An example would be someone purchasing a boat in one country to only sail the boat to another market and sell it at a higher rate. Since the individual would be taking advantage of price differentials by profiting they would be an arbitrageur.

I wondered if anyone could act as a Bitcoin arbitrageur by taking advantages of momentary price differentials in Bitcoin exchange markets. This would be difficult because markets tend to balance out with the macro Bitcoin market quickly. It is possible to make some money put because of the balancing factor it wouldn't be much. The highest likelihood would be an arbitrageur that sells exclusively to individuals (two people can make a market). Arbitrageurs help to balance price differences in markets by working with principles of supply and demand.

[notme]

Prices will stabilize across markets. If prices get comparatively cheaper on one market more purchases will occur leading to higher demands, more scarcity and more value. If prices were to get comparatively high more selling would occur on that market, more supply, less scarcity and less value.

I was interested in this phenomenon myself. In financial markets there exists something called an arbitrageur. An arbitrageur takes advantage of price differentials in different markets. An example would be someone purchasing a boat in one country to only sail the boat to another market and sell it at a higher rate. Since the individual would be taking advantage of price differentials by profiting they would be an arbitrageur.

I wondered if anyone could act as a Bitcoin arbitrageur by taking advantages of momentary price differentials in Bitcoin exchange markets. This would be difficult because markets tend to balance out with the macro Bitcoin market quickly. It is possible to make some money put because of the balancing factor it wouldn't be much. The highest likelihood would be an arbitrageur that sells exclusively to individuals (two people can make a market). Arbitrageurs help to balance price differences in markets by working with principles of supply and demand.

Unless you can program and have plenty of capital to keep on all the exchanges, you should leave bitcoin arbitrage to those that do.

[Peter Lambert]

Prices will stabilize across markets. If prices get comparatively cheaper on one market more purchases will occur leading to higher demands, more scarcity and more value. If prices were to get comparatively high more selling would occur on that market, more supply, less scarcity and less value.

The key point to take from this paragraph is that there is not nescesarily one person who is buying/selling on different markets to level the price. People who have money on the higher exchange will be more likely to sell, and people who already have money on the lower exchange will be more likely to buy.

You could try to do the arbitrage yourself, but between the fees and the time to move capital between exchanges, you will never make enough money for the effort to be worth it.

[genuise]

Just some usfeul illustration for the discussion http://bitcoin-analytics.com/#arbitrage last 24h arbitrage opportunities accross major markets.

[darkmethod]

Wouldn't arbitrage require a rebalancing of the funds at some point.

If I were to simultaneously purchase BTC on one market and then USD on the other for a profit overall, then I wouldn't be able to take advantage of the situation again until the markets fluctuate to the point where the exact opposite position provides a favorable outcome.

I apologize for my lack of understanding. I'm truly trying to wrap my head around what happens after the initial simultaneous sales have completed.

[Peter Lambert]

Wouldn't arbitrage require a rebalancing of the funds at some point.

If I were to simultaneously purchase BTC on one market and then USD on the other for a profit overall, then I wouldn't be able to take advantage of the situation again until the markets fluctuate to the point where the exact opposite position provides a favorable outcome.

I apologize for my lack of understanding. I'm truly trying to wrap my head around what happens after the initial simultaneous sales have completed.

It depends on the nature of the markets. If market A is ALWAYS higher price than market B, then yes, you will have to transfer currency between the two markets. If the price difference is fleeting and varies over time with sometimes A and sometimes B being higher, then you could just leave your money where it is and arbitrage the opposite direction when the price balance switches.

I have been thinking that as the Ripple system grows, it will allow people to move various currencies from one exchange to another, making arbitrage easier. Right now it is easy to move btc from one exchange to another, but harder (higher fees and wait times) to move USD between exchanges.

[darkmethod]

Wouldn't arbitrage require a rebalancing of the funds at some point.

If I were to simultaneously purchase BTC on one market and then USD on the other for a profit overall, then I wouldn't be able to take advantage of the situation again until the markets fluctuate to the point where the exact opposite position provides a favorable outcome.

I apologize for my lack of understanding. I'm truly trying to wrap my head around what happens after the initial simultaneous sales have completed.

It depends on the nature of the markets. If market A is ALWAYS higher price than market B, then yes, you will have to transfer currency between the two markets. If the price difference is fleeting and varies over time with sometimes A and sometimes B being higher, then you could just leave your money where it is and arbitrage the opposite direction when the price balance switches.

I have been thinking that as the Ripple system grows, it will allow people to move various currencies from one exchange to another, making arbitrage easier. Right now it is easy to move btc from one exchange to another, but harder (higher fees and wait times) to move USD between exchanges.

Thanks. That makes sense to me. I appreciate it.