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Author Topic: What's Stopping Someone From Buying From one Exchange, Selling in Another?  (Read 3289 times)
eric7
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April 03, 2013, 02:22:13 AM
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This might be a silly (read: newbish) question, but what's stopping someone from buying a few Bitcoins from BTC-E at 87.849 USD per BTC, and then selling them at MtGox for 118.2 USD per BTC to make a profit?

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simonk83
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April 03, 2013, 02:22:48 AM
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Good luck getting USD in and out of BTC-E.  It's almost impossible.
eric7
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April 03, 2013, 02:24:05 AM
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Good luck getting USD in and out of BTC-E.  It's almost impossible.

Can you elaborate please? Smiley

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April 03, 2013, 02:24:30 AM
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This might be a silly (read: newbish) question, but what's stopping someone from buying a few Bitcoins from BTC-E at 87.849 USD per BTC, and then selling them at MtGox for 118.2 USD per BTC to make a profit?

Nothing. And you got the prices totally wrong. It's about 87 EURO / 1 BTC on BTC-E. If there were such a huge difference, people would have exploited it already.
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April 03, 2013, 02:25:55 AM
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Good luck getting USD in and out of BTC-E.  It's almost impossible.

Can you elaborate please? Smiley

Well the idea is sound, as the BTC price on BTC-E is always much lower than Gox, however I had some USD at Gox and wanted to get it over to BTC-E, but just couldn't find a reasonable way to do it.  Bitinstant would seem to be the way to go, but they've mysteriously stopped offering BTC-E as a deposit option and seem to refuse to want to explain why.

If you have a way to do it that doesn't gobble up too much in fees, I'm all ears.
eric7
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April 03, 2013, 02:28:21 AM
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This might be a silly (read: newbish) question, but what's stopping someone from buying a few Bitcoins from BTC-E at 87.849 USD per BTC, and then selling them at MtGox for 118.2 USD per BTC to make a profit?

Nothing. And you got the prices totally wrong. It's about 87 EURO / 1 BTC on BTC-E. If there were such a huge difference, people would have exploited it already.

Are you sure? I'm currently seeing BTC/USD = 87.849.

http://i.imgur.com/Bmqd4AF.png

If you found my post helpful and would like to leave a small tip, I'd really appreciate it! 19A4oQ4G3wuzbdXnV3bnpJ2a9gyh8EQuuX
eric7
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April 03, 2013, 02:29:47 AM
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Good luck getting USD in and out of BTC-E.  It's almost impossible.

Can you elaborate please? Smiley

Well the idea is sound, as the BTC price on BTC-E is always much lower than Gox, however I had some USD at Gox and wanted to get it over to BTC-E, but just couldn't find a reasonable way to do it.  Bitinstant would seem to be the way to go, but they've mysteriously stopped offering BTC-E as a deposit option and seem to refuse to want to explain why.

If you have a way to do it that doesn't gobble up too much in fees, I'm all ears.

Yeah the fees are really what's making me skeptical here. I was wondering what other users think, and if anybody has a more technical reason than "it just doesn't seem like it should work" Smiley.

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April 03, 2013, 02:30:00 AM
 #8

Good question. What you are thinking of is called arbitrage. It is mostly done by robots. It may involve multi-currency juggling as well (eur-usd-btc, for example).

Obviously, to do this you need at least
- markets with high enough liquidity
- ways of moving fiat between exchanges (and exchanging it in banks in case of mukti-currency arbitrage)
- price differences higher than the total fees you pay
- technical ability to write and maintain arbitrage robots

They're there, in their room.
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eric7
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April 03, 2013, 02:32:56 AM
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Good question. What you are thinking of is called arbitrage. It is mostly done by robots. It may involve multi-currency juggling as well (eur-usd-btc, for example).

Obviously, to do this you need at least
- markets with high enough liquidity
- ways of moving fiat between exchanges (and exchanging it in banks in case of mukti-currency arbitrage)
- price differences higher than the total fees you pay
- technical ability to write and maintain arbitrage robots

Ahhh, I could see why this sort of thing would be automated. Thanks for the informative reply!

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eric7
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April 03, 2013, 02:35:10 AM
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Of course just as I post this, BTC-E suddenly reflects MtGox. What the heck?

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dree12
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April 03, 2013, 02:35:45 AM
 #11

This might be a silly (read: newbish) question, but what's stopping someone from buying a few Bitcoins from BTC-E at 87.849 USD per BTC, and then selling them at MtGox for 118.2 USD per BTC to make a profit?

Nothing. And you got the prices totally wrong. It's about 87 EURO / 1 BTC on BTC-E. If there were such a huge difference, people would have exploited it already.

Are you sure? I'm currently seeing BTC/USD = 87.849.



This image is from March 30. The current price is $119/BTC.
eric7
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April 03, 2013, 02:55:49 AM
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This might be a silly (read: newbish) question, but what's stopping someone from buying a few Bitcoins from BTC-E at 87.849 USD per BTC, and then selling them at MtGox for 118.2 USD per BTC to make a profit?

Nothing. And you got the prices totally wrong. It's about 87 EURO / 1 BTC on BTC-E. If there were such a huge difference, people would have exploited it already.

Are you sure? I'm currently seeing BTC/USD = 87.849.

http://i.imgur.com/Bmqd4AF.png

This image is from March 30. The current price is $119/BTC.

That's so odd. For me it's been quoting at lower prices (the same prices, maybe?) for the past few days. Perhaps some sort of caching bug or something...

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PachucoBro
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April 03, 2013, 03:01:40 AM
 #13

Trading between exchanges is feasible if there is a big enough spread to overcome any fees(i.e. MtGOX charges 0.6% per transaction).

someone above mentioned LIQUIDITY... meaning there has to be enough people trading in volume to make it work. ABC exchange could be selling BTC @ $80 and you buy 10 BTC. XYZ Exchange is buying BTC @ $100, but they are buying quatities of 0.005 BTC. So you will be waiting a long time to try and sell those 10 BTC and meanwhile the price will begin to change.

The biggest hurdles right now is the ease of moving USD and BTC in and out of accounts and the unpredictable movement of the price... though it only seems to go UP at this point. It is scary to think WHEN is it going to CHANGE?Huh

keatonatron
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April 03, 2013, 04:01:25 AM
 #14

"What's Stopping Someone From Buying From one Exchange, Selling in Another?"

Nothing Smiley

Although, as others have mentioned, the high price of coins now has made the fees enough to kill any profit potential.

Back when coins were $4 each, you'd only incur a fee of less than $0.03 per transfer, which means buying at $4 (anywhere) and selling for $5 (anywhere) would make a nice profit. But at $120/coin (at the time of writing this) you will incure a fee of $0.72 per coin per transaction, which means you'd need a gap of more than $1.50 between your buying and selling prices to see any return. It's possible to find a gap that large over time, but not between exchanges with an immediate buy-sell maneuver Smiley

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additionalpylons
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April 03, 2013, 05:57:36 PM
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"What's Stopping Someone From Buying From one Exchange, Selling in Another?"

Nothing Smiley

Although, as others have mentioned, the high price of coins now has made the fees enough to kill any profit potential.

Back when coins were $4 each, you'd only incur a fee of less than $0.03 per transfer, which means buying at $4 (anywhere) and selling for $5 (anywhere) would make a nice profit. But at $120/coin (at the time of writing this) you will incure a fee of $0.72 per coin per transaction, which means you'd need a gap of more than $1.50 between your buying and selling prices to see any return. It's possible to find a gap that large over time, but not between exchanges with an immediate buy-sell maneuver Smiley

Shouldn't the BTC/USD price fluctuate more? Going from $4 to $5 is a 25% increase. A 25% increase from $120/BTC would be $150/BTC.
enmaku
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April 03, 2013, 06:01:36 PM
 #16

Absolutely nothing
jrlichtman
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April 03, 2013, 06:06:17 PM
 #17

I've seen differences of $10 CAD between Mt Gox and Virtex in the past week, for periods of up to an hour.

The slow speed of moving things between accounts would make it very difficult to capitalize on that though. I looked into it in some detail.
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April 03, 2013, 06:49:05 PM
 #18

Arbitrage is a natural and legal practice that can be used in any market.
My question is:
how do we know that the buyer and seller is not the same person?
If BTC is trading at $100 and someone puts in a sell bid for $105, what stops that same person from also being the buyer with a different account?
this practice could be carried out for a long time and artificially drive the price up or down.
Am i missing something?
jrlichtman
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April 03, 2013, 06:55:07 PM
 #19

Exchanges typically charge a few percentage per transaction.

You would need to make the transaction larger than that difference. I think it only works if you keep decreasing the quantity traded each time, until at some point the transaction fees make it no longer worthwhile.

The other issue is that you're relying on other people not trading the exchange rate down at the same time!

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April 03, 2013, 09:51:55 PM
 #20


The price on btc-e is very frequently a few dollars less than the other exchanges.  Even taking into account deposit and transaction fees, the price difference is often more than the charges.

Right now mtgox is $116 and btc-e is $109 = $7
Charges/transaction fees 3% of $109= $3.27
Profit $7 - $3.27 = $3.73 / unit

There are other factors to take into consideration, such as the risk that the market price might have changed while waiting for the transfer on the other exchange.  This particular risk could be mitigated if you could convince someone on the selling exchange to loan you the coins.  Also, you might have to wait 5 minutes to execute your order on mtgox, which is more risk...


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