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

[FarmerGreene]

Making a profit off of the price difference between markets is called Arbitrage.  Nothing stops you from doing it, and you can make some coin.  Remember to take into account the transaction fees on each exchange when you do the maths.

[1713996715]

1713996715

[keatonatron]

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

Nothing

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

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.

It's because people are outbidding each other. They only need to add (subtract) $0.01 to(from) their price to be the most attractive offer. So if 100 people outbid each other by $0.01 each, the price will move $1. People aren't outbidding each other by a percentages, which is why (in general) the movement speed isn't affecte by price (aside from driving more people to try to participate in the bidding war).

[jrlichtman]

I've been thinking about the arbitrage problem for a bit now (please excuse unintentional pun).

It would actually help if people did this, so that the exchanges would (over time) get closer in value to each other.

One additional problem that I've noticed would be the need to keep additional excess funds on hand at each exchange, in order to be able to capitalize on differences.

Right now I'm seeing (CAD$):
Virtex - $136
LibertyBit - $149.99
MyGox - $138.93

So in theory, I could sell at LibertyBit (assuming I had an account with BTC there, or that I could move BTC over quickly enough), and buy at either of the two, and hopefully still make something after transaction fees. I would need to keep fiat currency on hand at all of them though, because there are fees associated with moving money in and out, which would reduce my profit margin too much. I'm not sure that I trust all of these exchanges sufficiently to want to keep large amounts of money there long-term though....

[keatonatron]

Right now I'm seeing (CAD$):
Virtex - $136
LibertyBit - $149.99
MyGox - $138.93

So in theory, I could sell at LibertyBit (assuming I had an account with BTC there, or that I could move BTC over quickly enough), and buy at either of the two, and hopefully still make something after transaction fees.

The numbers look attractive, but looking at LibertyBit's page, the last transaction was 54 minutes ago.... and there have only been 6 transactions within the past 4 hours. Doesn't sound like the kind of exchange I'd want to work with...

If you were dealing with $4 bit coins (as I already mentioned!) I'd say take the risk, but when losing one bitcoin means losing $130+ you might want to be more selective 

[jrlichtman]

Right now I'm seeing (CAD$):
Virtex - $136
LibertyBit - $149.99
MyGox - $138.93

So in theory, I could sell at LibertyBit (assuming I had an account with BTC there, or that I could move BTC over quickly enough), and buy at either of the two, and hopefully still make something after transaction fees.

The numbers look attractive, but looking at LibertyBit's page, the last transaction was 54 minutes ago.... and there have only been 6 transactions within the past 4 hours. Doesn't sound like the kind of exchange I'd want to work with...

If you were dealing with $4 bit coins (as I already mentioned!) I'd say take the risk, but when losing one bitcoin means losing $130+ you might want to be more selective 

I wrote an article on my blog (not going to link here, but I'm easy to find online) that looks at this in a bit more detail.

Liquidity on smaller exchanges is definitely one risk factor here.

[PachucoBro]

Not to mention when even the BIG exchange (MtGox) gets DDoS'd and you can't even get to your BTC or money.

[jrlichtman]

Right. You wouldn't execute trades at that point in time though.

The key would be to have two screens open at once - or even better just automate the process, with testing for latency.

[bOberr]

One more thing.
Send money from bank to BTC-E, buy bitcoins there, send bitcoins to MtGox, sell there, withdraw money to bank. Repeat.
But withdrawing funds from MtGox takes weeks, isn't it? Now you can make more money just with exchange rate fluctuations. Without freezing money for a long time

[keatonatron]

Also BTC-E's options for depositing money appear to be shrinking?  I have both USD in an American bank and Euros in a German bank, yet I can't find any way to get money into BTC-E unless I use some russian virtual payment site--none of which take bank transfers 

[nebulus]

Nothing but you got to do so much hussling that at the end of the day it ain't worth it.

[PachucoBro]

Nothing but you got to do so much hussling that at the end of the day it ain't worth it.

I agree... I am in the US and I finally got a Dwolla account setup and a bank transfer to it cleared after 5 business days (7 calendar days). I am going to transfer it to my MtGOX account, but I was slow in getting them the scan of my ID. I finally did it this weekend and the status message now says, "Your account verification request has been received, and will be reviewed within the next 10 business days. "

HOLY CRAP! 10 business days?! that's 2 weeks from now... *throws hands up in the air*

I have $5,000 I want to put into BitCoins and the only other working alternative I have used is BitInstant and that limits me to $500 per transaction (4% + $3.95 fee) and is limited to $2,000 per day. Not so good for large sums of money.

[jrlichtman]

I've been using virtex in Canada.

Took me about 3-4 days to get setup, verified and to move money into my account. I think you can use it from the US as well.

[PachucoBro]

Also noticed another bit of information... I submitted my ID scan yesterday afternoon and today it says, "Your Position in the Verification Queue 13720."

WTF?