I am looking at bitcoinity and I see
gox: 122.40
bitstamp: 117.86
btce: 116.21
campbx: 118.38
It appears that gox is an outlier and shows "wrong" exchange rate.
Does this mean the beginning of the end of gox dominance?
Does this mean healthier Bitcoin infrastructure?
I just look at this from a personal point of view. I can obviously buy BTC at one of the other exchanges, move the BTC to Mt.Gox, and sell them on Mt.Gox for the higher price. Easy.
Why am I not doing it? Because I do not want Mt.Gox USD. Others must feel the same way or the prices would become equal over time.
Arbitrage simply isn't as frictionless as you think it is, otherwise all exchange prices would be the same. The only true frictionless aspect is the movement of bitcoins from one exchange to another. Arbitrage involves many other steps and hidden costs.
I just did some calculations for arbitrage between Gox and Bitstamp. I am based in asia and do not use USD as my home currency
Wire transfer fees to bitstamp charged by my bank - about 25USD
Exchange rate charged by bank is a good 1.5% above market rates, their cut-throat margin, to get your currency to USD
Bitstamp also charges a 0.1% (min 10USD) to receive your wire transfer
So to get your money on bitstamp you're already out at least 35 USD and 1.5% of your seed money
You buy the bitcoins, pay 0.5% exchange fees
Send to Gox, pay the other 0.5%
Now it's 35US and 2.5%..at the very least
Finally you ask Gox to wire the money back
Gox charges some amount to wire you the money, I forget the amount, maybe around 30USD, maybe more. Not to mention it takes them weeks to wire you the money.
60USD and 2.5%
The money hits my home account and I get docked another 1.5% off market rates to change the USD back to home currency.
So it comes to about 60USD and 4% of seed money eaten up in fees
This not including any money skimmed by the bloodsucking intermediary banks during the wire transfer, since you cover all charges for your wire transfer from start point to end...in both directions.
And the significant time money gets tied up with the exchanges means opportunity cost, and most importantly, a high level of counterparty risk, since arbitragers will need to use large sums to make the whole thing worthwhile, tied up by being parked on an exchange waiting for the critical price differential to occur, or flying around in transfer from one vampire intermediary to the next.
I also have not included the slippage losses from trading large amounts on small exchanges (like all BTC exchanges other than Gox at the moment)
What I'm trying to get at is that for most people, arbitrage is not viable at current price differentials between exchanges. My personal guess is that as long as all prices stay within about 5-7% of each other, there will be little to no arbitrage taking place and price differentials will happily exist with no one trying to even out the situation.
